Run the Numbers
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.
00:32:41 · CJ Gustafson
Cash looks better at about 3,400,000,000 of free cash flow in the first half, but they're telling you margins will dip every time a big chunk of new compute comes online and the IPO kicks off 23,700,000,000 of stock comp over about two years, which will hit the p and l. That's roughly 11,000,000,000 a year against an operating profit running around 4,000,000,000. Makes money on cash today, but gap probably goes back into the red until revenue catches up. Will the use cases keep on growing as fast as the costs are dropping? Let's check out the flywheel they got going here because this part is rather counterintuitive. Claude Opus five point five cut customer cost per task by about 40% compared to Opus five. And their argument is that cheaper tasks make people use more of it, not less. Quote, lower cost per task drive greater usage, which in turn drives broader diffusion of Claude. Our compute efficiency allows us to deliver these reductions while preserving our margins. My number one question is whether the use cases keep growing as fast as the model costs are dropping. Adoption curves are never an even path and they're buying compute twelve to eighteen months ahead of a fixed cost. So if prices fall faster than people find new shit to do with it, the compute build does not shrink with the revenue. Optimization we have found waits for no man. You gotta ask yourself if use cases keep growing once we hit a point where the models are just smart enough for everything we do today. I mean, hell, we need to actually start inventing stuff to do with AI. So to their credit, the letter says that, hey, that's the plan and they'll spend less effort protecting what they already sell. Quote, AI chatbots became viable around 2022 and AI coding agents around 2025. AI agents for general knowledge, work, scientific discovery are gradually becoming viable in 2026. So you will have a lot more science use cases. They launched, 250 new model versions, platform features, applications in the first nine months of 2026, and models released in the prior six months made up over 80% of q three revenue. So customers move over to whatever is new almost immediately. They wanna drive the Ferrari. Right? Nobody wants yesterday's newspaper. The flip side is that the newest stuff is agentic and agents chew through much more compute per interaction than a simple chat.
00:34:56 · CJ Gustafson
And the risk factor says agentic work grows, the compute needed to serve customers, quote, could increase disproportionately relative to the associated revenue. Womp on. So weird question. Is it actually in their favor to not let the models drop too much at a rate faster than we can diffuse them into our lives? How much wallet share is left to these big customers? So over 50% of the Fortune five hundred already spent $100,000 or more a year with them, but that spend is less than... This is crazy, point 1% of those companies' total expenses on average. Even the top 10 fortune 500 companies spend less than 1% of their total expenses on Anthropic, which is still eight times the average. That was kind of mind blowing to me. Is there such a thing as having too many people at the party here? Like Amazon, Google, Broadcom, their investors, suppliers, lenders, and the filing spells out how tangled it gets. They say quote, Amazon, Google, Microsoft through their respective affiliates have made significant equity investments in our company. These CSPs are also our customers purchasing our intelligence service for internal use for their own products and services. So they're also competitors, by the way, since all three sell their own AI models on the same clouds that resell Claude. The filing says that being on their platforms gives them visibility into our pricing in commercial terms. As far as counterparties go, there are large notes to Amazon Broadcom, Google, and Amazon. They hold billions of dollars of convertible notes. I mean, you'd normally wanna diversify your counterparty risk, but like when does having too many counterparties hurt you with the others? Or do they just not give a shit because Anthropic is the biggest counterparty? Does it get to the point where if you work with everybody, you can do whatever to anyone? It's both leverage and cost because 48% of first half revenue ran through these cloud marketplaces, which also makes up 58% of receivables. And the risk factors admit that they've sought quantities of compute from CSPs in excess of what those partners were willing to provide. So being on all three major clouds is the biggest benefit to the go to market. Now they've started to vertically integrate and build out their own compute on top of that.
00:37:08 · CJ Gustafson
The total purchase commitments and lease agreements are blank here, and I'd hate to be the least accounting person at that company. T's and p's. Potential red flag. So the risk section is... I'm not gonna lie. It is robust. My dog's even growling. It's so robust. So here are the five that I would pay attention to. I'll try to do in plain English for you. The first one, everything is connected to everything. So quote, many of the risks we face are interconnected and may compound or trigger cascading adverse effects across our business, which could amplify their overall impact. That is scary. So it's like a vortex of hell. Their own example, a bad copyright ruling forces them to retrain or limit their models, which hurts revenue, which makes it harder to pay for compute, which could trip covenants on their credit facility and trigger cross defaults elsewhere, like the broader US economy. Have you seen the big short? That was a good movie. Quote, because these and other risks may interact in complex and unpredictable ways, we may not be able to foresee or effectively manage all potential consequences. Two, the chips come from Taiwan and the power comes from regulators. So it's pretty nuts to me that an island about the size of Maryland and Delaware combined is like the linch pin for the AI economic engine. By most estimates, TSMC makes about 90% of the world's most advanced chips in the filing lists, the exposure and how earthquakes and typhoons and tensions with China and all that stuff could really impact the supply chain. And they say efforts to build capacity elsewhere remain in early stages on power. By the way, they need deals with utilities and grid operators plus sign off from public utility commissions. Not in my backyard. Three, the bills show up before the buildings do so quote large upfront investments and long term payment commitments must be made months before facilities become fully operational. It's like building a big ass house. Most of the big compute deals are non cancelable by the way. So if you're in for a penny, you're in for a pound. And they left that part blank. Thank you. Number four, copyright is still alive. Why you? There was this case, Anthropic spent millions of dollars buying print books. They ripped off the bindings and cut out the pages and scan them one by one then threw the originals away.
00:39:23 · CJ Gustafson
So picture like a first edition of The Great Gatsby going under the paper cutter. That would truly make my second grade librarian, Mrs. Walters, weep. The judge actually said the scanning was totally cool, but wasteful. This 1,500,000,000 they paid to settle with Bart's in 2025 was actually for the pirated books they downloaded virtually. The bigger risk now is fair use not holding up for AI training in other cases and that spiraling down and forcing them to change their models. Number five, your vote does not really count for much. So the long term benefit trust, the LTBT, elects a majority of the board and the founders hold 50.1% of the vote. The filing says the structure may effectively eliminate the ability of holders of our class a common stock to influence important decisions, including a change in control. So nobody is pulling a Kendall Roy here and overthrowing the board. Some honorable mentions. Quote, we have a limited history selling consumption based access, says the largest usage based company in the history of the world. Free tiers might not convert and users may choose to use our free offerings indefinitely. Like my friend, Kyle Poyer, give him shit if you talk to him. He doesn't pay for any chatty, petty, or Anthropic. He's cheap. Next, they flag unfavorable media coverage as a risk. So, yeah, I mean, give me a TBPN deal and I'll make CFOs fucking love you. Good news though. They get the green light on the following. No material weaknesses in internal controls, no going concern language, nearly 132,000,000,000 of cash and short term investments, and no single customer over 10% of their revenue. Cap table. There are five classes of common stock. Two of them are a single share. I've... I don't think I've ever seen that. Class a, that's what you're gonna buy in the IPO if you want it. One vote per share that doesn't really count. Class n, same economics as class a, but no vote held mostly by strategic partners like Amazon and Google, that makes sense. Converts the class a when sold to someone unaffiliated. This is also stock that funds the 5% public benefit fund. Class t, one share held by the LTBT Alexa majority of the board. They did a one for 1,000 reverse split to get it down to exactly one share. Class f, one share held by an LLC owned by the seven co founders. That someone that carries 50.1% of the vote. That doesn't seem to be permanent.