Anthropic's revenue surge will help its IPO, but is unlikely to save the entire AI sector, experts say
Anthropic's third-quarter operating results showed that its AI development is beginning to pay off
A month before its IPO, Anthropic is trying to convince investors that its massive expenses are worthwhile / Photo: Algi Febri Sugita / Shutterstock.com
Anthropic’s third-quarter results, which were leaked to the press, may spark interest in the company’s upcoming IPO, but are unlikely to restore optimism across the entire AI sector, according to Bloomberg. At an event in San Francisco, the startup told potential investors that from July to September, it nearly doubled its revenue compared with the previous quarter and generated positive free cash flow (FCF). However, according to sources cited by the Financial Times, the growth rates disappointed some of Anthropic’s investors. Experts surveyed by Bloomberg fear that it will become increasingly expensive to sustain the company.
Anna Wu, founder of Floodlines Research, expects interest in Anthropic’s IPO but believes the startup’s financial results still need to be tested for sustainability. “These metrics won’t lift the entire sector the way they might have a year or two ago, because investors now take good news for granted,” Bloomberg quotes her as saying.
Gary Tan, a portfolio manager at Allspring Global Investments, describes Anthropic’s quarterly growth rates as exceptional, though he notes that they have slowed compared to the second quarter. As a result, the focus is shifting from revenue size to revenue quality and business profitability, as well as whether Anthropic’s costs associated with its commitments will pay off, he explains. According to him, “investors are increasingly demanding proof that spending on computing power can translate into sustainable profits.”
Heibei Chen, a senior analyst at Vantage Global Prime, notes that persistent inflation is keeping borrowing costs high. In her view, the question is how much it will cost companies to remain profitable. Wu of Floodlines Research
cites the sell-off of CoreWeave’s debt as an example: “Anthropic’s success supports demand for CoreWeave’s services, but it doesn’t solve the financing issue.”
Charu Chanana, Chief Investment Strategist at Saxo Markets, believes that the results strengthen Anthropic’s position ahead of its IPO, though its valuation will remain the main point of contention. “At a valuation of over $2 trillion, the company’s value would be roughly 30 times its annualized quarterly revenue,” she notes. And this is despite the fact that Anthropic will have to spend enormous sums on infrastructure, the analyst points out.
Context
At a meeting with potential investors on October 14, Anthropic reported a 45% increase in revenue for the previous quarter—to $16.8 billion, according to two attendees who spoke to Reuters.
According to the agency, the AI giant plans to go public after the November midterm elections in the U.S. and is aiming for a valuation of over $2 trillion. It has also committed to spending at least $518 billion over the next decade on cloud services, computing power, and infrastructure.
This article was AI-translated and verified by a human editor
