Run the Numbers
00:19:19 · CJ Gustafson
So keep that in mind for the valuation portion. If I'm being honest, I like the old school version of run rate revenue better where you take your last quarter and multiply it by four because you have three months in there to smooth any sort of seasonality out. So if you do that with q two, you get around 46,000,000,000, which is right in line with that 47,000,000,000 they announced in May, and the roughly 16,700,000,000 in q three. I can back into that. I'll show you in a minute how I do the wizardry, do the math in here. And if you multiply that out, you get the 67,000,000,000 or close to the 65,000,000,000 at Bloomberg reported in July. Net net, I think gap revenue is a much more honest view of what they can actually do than this run rate kabuki. Usage revenue moves around a lot. For example, during the two weeks ended January 2, they said total customer spend dropped about 20% compared to the two weeks before because developer commits slow down during holidays and all the retail companies do code freezes. Quote, run rate revenue is not a substitute for revenue prepared in accordance with GAAP or a forecast of revenue. I feel like they listened to me. Did I influence them? They also say recent run rate growth was driven in part by rapid initial customer adoption and expansion often characteristic of an early adoption period, and that they expect the growth rate to decline possibly significantly and more rapidly than we anticipate. I still bet dollars to donuts that we start hearing a lot more about ninety day averages when that starts to slow down. You can go back and forth on revenue growth expectations, but you can't argue with the revenue efficiency. These are the highest efficiency numbers I have ever seen for a company. Net revenue retention is about 900%, meaning customers who were spending a year ago are now spending about nine times as much. Snowflake was at 158% when it filed, and GitLab was at 152. People thought that those numbers were crazy. This is this is multiples more. Some of this is admittedly a feature. It's not a bug because of their pricing model. So AI is pretty much synonymous with usage based pricing at this point, and 80% of Anthropic's revenue is consumption. So revenue go up as long as customers use more. Well, I don't think this figure will stay at 900% forever even if it is cut to 300% that would be s tier.
00:21:35 · CJ Gustafson
Also, it's crazy how they can both have 900% ndr and like also be a commodity product with little to no switching costs. How how can both of those things be true? Oh, and revenue per employee, 6,800,000. I would love to have that in my company, up from 1,400,000 a year ago. My rule of thumb for a public company is 450 k to 500 k is the median. TTM revenue here grew about 1200% over the past year, while headcount growth grew about a 170% from roughly 940 to the 5,300 today. I know I just said that everyone was talking about revenue too much, you can kinda back into the revenue as of September, which they don't disclose using the revenue per employee in the employee count. They say TTM revenue per employee was over 6,600,000 as of September 30. It was approximately 5,300 people working there, which puts trailing twelve month revenue at roughly 35,000,000,000. So if you subtract the three quarters, we do have q four twenty five through q two twenty six, about 18,300,000,000 comes out, and q three twenty six comes out to roughly 16,700,000,000 up from 11,600,000,000 in q two. I love math. I wanna take you through four drivers because they interestingly have four different time horizons. Okay. So the filing lays out the company's financial model. It's important to outline these four. So one, adoption of Claude. Each new model version brings in new customers and pushes existing ones into new workflows and revenue growth. Two, compute efficiency. More intelligence and more revenue out of every dollar of compute. Three, operating efficiency, talent density and efficient go to market in their own teams using cloud, which shows up in operating margin and revenue per employee. Fourth, compute investments, the big checks. So the first three have all been moving up very, very fast. But the fourth one that I mentioned, the compute investment that lags. So they say compute is procured and committed in advance and the expense is incurred as it is brought online and added to our fungible pool, often in large discrete steps. They typically commit to compute twelve to eighteen ish months before it's available. And once it comes online, the expense hits the p and l whether or not the revenue it's meant to support has shown up yet. So every time a big tranche lands, margins will take a step down and they tell us that directly.
00:23:50 · CJ Gustafson
They say we expect operating margin and adjusted operating margin may compress in those periods. So when demand outruns their long term capacity, they also buy short term compute, which costs more per unit, and they expect to lean on more of it in the near term. Here's capital allocation for compute one on one. They say, we manage compute as a single fungible pool for multiple strategic partners, and we dynamically direct available compute between workloads based on where the marginal unit is expected to be most productive at any given time. Net net, it's one pool covering research, model development, serving customers, and internal use of Claude. They're using their resources for the best marginal use case. By the way, revenue per dollar of compute, I think it's a really cool stat that companies should try to adopt internally. Their headline version is that q two revenue grew 1368% year over year, while compute and infrastructure expense grew 300%. If you run it quarterly off their p and l, you can kind of see the lag. And that's a 5.2 x improvement in compute efficiency over five quarters because, yeah, why not? Give us a weird ass number of periods, but it looks great. And to my point above in q four twenty five compute expense jumped 44% from the prior quarter, as new capacity came online, then revenue caught up and then the next 0.5, it doubled and tripled. So it's kind of like slow, slow than everything at once. I know you've been waiting for this question. Are they actually profitable? In my revenue crimes piece I wrote, I asked whether they were still selling a buck for 60¢, or maybe a, maybe it's a dollar for 75¢ now. In q two, they spent 10,600,000,000 of total operating expenses to bring 11,600,000,000 of revenue, which actually works out to about 92¢ per dollar, 974,000,000 of operating income. That's an 8% margin. And it was actually the only profitable quarter in the filing. But if you zoom out to the first full half, they are still 693,000,000 in the hole and every full year, by the way, before that big losses too. So they got the results from operations in there. It's interesting if you take a look. And the 80,700,000,000 net loss for the first half is kind of noise from a cash perspective because 72,400,000,000 of it is marking up convertible notes because the company got more awesome and more valuable.
00:26:05 · CJ Gustafson
Another 8,800,000,000 is mostly fair value charges and the note purchase agreements with their partners like the Amazons and Googles of the world. Like, their stake is worth more too. So adjusted net income was a positive 2,700,000,000. If you adjust, adjust, adjust. It's the same thing I pointed out when the 2025 numbers leaked when they had this 34,000,000,000 of the 42,000,000,000 of loss that was non cash revaluation of financing. If there is a gross margin, I will find it. So they pulled gross margin off the income statement last year when they switched to grouping expenses by type. They got it now bucketed by compute, personnel, sales, and marketing. But the footnotes still break out cost of revenue the old way. So in the first half, was 2,400,000,000 against 16,300,000,000 of revenue, which is about 85% gross margin, up from only 40% in 2025 and negative 95% in 2024. Two major caveats. The free tier compute in the cloud partners cut both sit in sales and marketing. So it's gotta be lower than 85% because channel partner fees went up about 2,700,000,000 year on year in the first half, and the compute behind free usage is somewhere inside the remaining sales and marketing line. Okay? That's how they acquire their customers by giving away their product for free, which caps it at roughly 600,000,000. So if you load those back in, it's more like the high sixties, maybe low sixties. And since they book cloud marketplace sales gross, the top line includes the cut that goes to the cloud providers. So the first half is closer to 13,600,000,000 than 16,300,000,000 net of it. So either way, you book it as an expense in COGS or you just reduce the revenue, it's the, same circle to square there. You are what your gross margin says you are. Sorry. My kids are tired of hearing me yell that at the kitchen table. Dad, I'm two. I don't know what cloud costs are. Well, I do. And cloud infrastructure is the second largest line on most tech P and Ls. And yet, most finance leaders couldn't tell you how it's priced. And as a CFO, I understand there's a non linear impact your company's evaluation when you improve your gross margin and the path of least resistance is through your AWS or GCP bill. Because like anything you buy, cloud gets cheaper when you buy in bulk. In fact, you can get the rate down by 20%, 30%, even 60% in some cases.
00:28:20 · CJ Gustafson
The flip side is getting saddled with a bunch of capacity you never touch. Happened to me once, I think I still got some megawatts in the kitchen cupboard somewhere. That's exactly what Cloud Capital solves. Cloud Capital underwrites the risk so you can realize the same savings of a deep long term commitment sends the downside. Oh, and it takes no engineering work. Bingo. I've known Edward since back when he's just starting the biz, and it's incredible how much they've saved customers on their cloud bills. That could be you too. So head over to cloudcapital.co. That's cloudcapital.co and find out how much you could save. Every decision a company makes is inherently a financial decision. Folks, I've been trying to tell you that for 300 episodes. So it's wild that most finance teams have to spend the week on what already happened. While my favorite movie is Back to the Future, we'd be living in the past. Speaking of movies, here's a terrible plot. Tired accountant chases down a receipt from March and then police is a $20 Anthropic subscription, starring the accountant, Ben Affleck. So stop living it. You don't have to play defense on what already happened if you get your system sorted. And Brex's intelligent finance platform clears the backward looking work. Policy enforced at the point of sale, receipts matched instantly, close shortened to days, not weeks. What's left is the forward looking part. Where to deploy capital? How fast you can move? What next quarter actually needs? Because the defense is handled by Brex. It's time for finance to go play offense. Throw the ball deep. Thousands of companies including Anthropic, Coinbase, and DoorDash already run on Brex. Head to brex.com/metrics to join them. That's brex.com/metrics. If you work in finance, you know what time of year it is. I'll give you a hint. It's our Super Bowl. Budget season is here. Woo hoo. So how many versions do you think you'll get up to this year? I once got to v 147 in the good old Excel days. Beat that. Actually, please don't. This is when your planning software should earn its keep. You don't have to choose between either Excel or an inflexible ballooning platform that takes a consultant to change. Abacum brings you the dynamic capabilities you love from Excel while preserving the rigor and governance of an enterprise suite.
00:30:33 · CJ Gustafson
I met Abacum's founder and CEO, Julio Martinez, more than three years ago. He and his cofounder, Jorge, came out of finance, and they built a planning platform that can run a complex business without becoming another system that requires a babysitter. Abacum puts your actuals, forecasts, models, and business context in one place. So you can update the plan, run scenarios, and answer, why did this change? In fact, you can even ask it in plain English. You might not even have to spell it right thanks to AI. That's why I'm so excited about Abacum. Go to abacum.ai/mostlymetrics. That's abacum.ai/mostlymetrics. Or just tell Julio that CJ sent you. That'll probably work too. Cash is getting better. They generated 3,900,000,000 of operating cash flow in the first half compared to burning 1,500,000,000 a year earlier, and CapEx was under 500,000,000. So call it about 3,400,000,000 of free cash flow. Some of that is working capital timing since they collect the cash upfront from customers and took longer to pay vendors, partly offset by a 5,000,000,000 jump in receivables. Wouldn't that be nice? And keep in mind here, the stock comp hasn't hit yet. If you read our aura ring breakdown, they didn't end up IPOing, but it still did it. This is the same setup. So most of their RSUs need two triggers to vest, which are time served and a liquidity event. And until the IPO is effective, they can't book the expense because the IPO isn't considered probable. Quote, if this offering had been completed on 06/30/2026, we would have recorded 2,900,000,000 of cumulative stock based compensation expense related to the RSUs on that date, and an additional 23,700,000,000 of unrecognized stock based compensation expense related to the RSUs, which would be recognized over a weighted average period of approximately two point one years. Oh, Oh, and there's another 3,100,000,000 of other awards on top of that, and they're using the accelerated method, which front loads it. Part of the IPO proceeds is also going to cover that tax bill when those RSUs settle. So TLDR, I know I gave you a lot there. Are they profitable? Tell them what he's won, Johnny. For one quarter, yes, with 974,000,000 of operating income in q two.