The Journal. - A Sneak Peek Into Anthropic’s Business

Episode Date: October 21, 2026

Anthropic is preparing for what could be one of the biggest IPOs in history. WSJ's Anissa Gardizy got a look at a draft of the company's S-1. It reveals soaring revenue, a business heavily reliant on a few customers and a long list of risk factors, including the possibility of a catastrophic AI incident. Ryan Knutson hosts. Further Listening: - The Great AI Freakout Has Begun - A Data Center Offered $26 Million for Her Land. She Said No. Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

There's a lot of excitement and anxiety about how AI companies are doing. Are they a gold mine for investors or approaching a bubble? One of the biggest AI companies, Anthropic, the company behind Claude, is preparing to go public as soon as November. The Anthropic IPO is probably the most highly anticipated IPO of the year. That's our colleague in Nisa Gardisi. Investors are extremely excited about Anthropics. going public as the first AI lab to be a public company.

And like it's going to be one of the biggest IPOs in history when it happens. That's exactly right. Right now the numbers that they're talking about are that Anthropic could raise around $100 billion at an up to $2 trillion valuation. So it's quite unprecedented. Yeah, it's a whopper. Anisa got a chance to look inside Anthropics business by pouring over a massive document. that details the company's finances.

It's known as an S-1. An S-1 is this long document that private companies have to file with the SEC before they go public. Ideally, it contains all of the answers to questions that investors might have, and it brings up all of the risks and concerns that the company has.

So it's kind of the company for the first time being an open book about its finances and its vision for the future. Normally, this document is publicly available to investors a few. weeks before an IPO. But Anisa was able to take a look at an early version before its release. Anthropag declined to comment on the contents of the draft S-1. So this document is obviously a draft and things could change. But the reason that these numbers matter and the reason that right now

is a pretty opportune time to look at them is that there is a lot of question on the AI trade in general. That's always sort of been the case that investors are wondering how long things can keep going and if there's ever going to be a slowdown and who's going to be impacted, is the bubble going to burst? These are questions that are constantly coming up as we talk about AI companies. And so understanding these numbers really helps us understand how anthropic fits into that broader moment. Welcome to The Journal, our show about money, business, and power. I'm Ryan Canoeson. It's Wednesday, October 21st. Coming up on the show, let's take a peek Under the hood of Anthropic.

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the first day, not someday. All on a single platform that's easy to manage industry-ready and designed to scale with your business. Bring it with SAP Grow. AICloud ERP for any size business. SAP.com So let's talk about the financial picture that the S-1 painted. And let's start with revenue. What can we see about where this company is making money and how much is it making? So Anthropic makes money primarily from selling access to its sophisticated AI models. And what we saw in the draft S-1 was that in the first half of 2026, they brought in around $16 billion in revenue. And that's compared with about a billion dollars in the same period last year.

And the company separately outside of this draft S-1 has indicated that revenue for the third quarter of 2026 is around $16 billion. So that's pretty significant revenue growth right there. Yeah, they're on pace for crazy revenue growth this year. And that is the main reason that people are excited about the company. What were you able to learn about who Anthropics customers are? Who's actually paying them this money? Anthropics said 20% of its revenue in the first half of the year came from two customers. Wow.

And they said that for the foreseeable future, they expect just a handful of customers to make up the most of their revenue. That, to me, was quite shocking. And investors are going to focus on that disclosure. Which are the two companies that are the customers, do you know? Androvic didn't disclose the names of the companies, so it's up to us to guess or to figure out. All right, I'm going to put you on that. Why is so much of Anthropics revenue coming from only a few customers? Well, if you think about just the revenue that they're...

reporting, how big these numbers are. There aren't that many companies that can help them get to $16 billion in revenue. The big question in AI circles right now is, will big companies pay, will consumers pay? And so there's a chance, you know, we don't know that there are only a few types of large companies that feel like spending billions of dollars on anthropic tools make sense for their business. This is one of the many risks that it's a lot of, Denise saw on the S-1. Not only is Anthropic relying on a handful of massive customers, those customers can switch to a rival AI company at any time.

And so that will be something that maybe gives people pause, because as we see in the AI market in general, when a new model comes out, everyone gets really excited about it and switches up which model they use. So I'll just say if Open AI comes out with a new model, would one of those top two customers switch to Open AI overnight, or in a couple of weeks. Anthropic is saying it actually doesn't know

and can't prevent that from happening. All right, now let's talk about costs. What did this document say about how much Anthropic is spending? And what are they spending it on? We saw that compute and infrastructure costs are by far the largest cost that the business faces. That means money it spends to rent chips or money it spends to buy chips,

which they use to train new models or to serve their product to customers. And we saw that in just the first half of 26, they spent around $9 billion on compute. And that is more than they spent in all of 2025. Can you remind us why computing power is so important? Compute is important because it is the only way that Anthropic can't sustain its business. Every business needs compute. So we need compute to do this call right now, and people need compute.

to access their email and websites and store photos, but for the frontier AI labs, compute kind of takes on this new importance. It's the thing they need to train their models. And so, Anthropic has gotten to the point where it's one of the biggest spenders on compute in the world, actually. And they've indicated that unless they can continue accessing greater and greater amounts of compute,

it's going to impact their business growth and their ability to sustain their lead. In order to sustain its growth, Anthropic needs tons of computing power. But according to the S-1, it's having trouble getting enough. Currently, Anthropic is mainly paying cloud computing providers like Google and Amazon. But in the document, Anthropic said it tried to access more computing power than, quote, those partners were willing to provide.

The problem is that they've hit their limit on how much they can get from those companies, which, by the way, is quite crazy and they need to pursue a different strategy for accessing their future compute. So we're seeing them work with smaller cloud providers who have a little bit less experience, and we're seeing them try to develop their own infrastructure themselves.

Anthropic is starting to have to put down massive amounts of money to secure future capacity. And that's taking a risk that they're betting they're going to need this and they're putting down the money now, but no one really knows. They even say they don't know how to predict. future demand. Right. It is a sort of, they have to build it and hope the customers will come. Right now, it looks like the customers are coming because they can't even keep up right now with

the amount of demand that there is. But they need an enormous amount of compute and a compute is very expensive. Yeah, and getting this wrong, either way would be bad. If they have too much compute and no one's using it, then they're overpaying for something that isn't being used. And then they say if they don't secure enough compute, then their revenue growth will be limited and customers might flock to other models. So it's a tricky situation no matter what happens with AI demand. And while Anthropics customers can switch any time, Anthropic doesn't have that same flexibility with the companies it's paying for compute power. So with their deals with cloud providers where they rent chips from other companies, they're on the hook to pay around $450 billion

over the next seven to 10 years. And most of those commitments are not cancelable. They cited this term that they're going to pay for this compute regardless of actual usage. In all, Anthropic has signaled it could spend around $750 billion in the coming years on computing power, including deals that's still negotiating. And I understand that one of the most eye-popping figures you found in this S-1 was that Anthropic posted an $80.7 billion loss in just the first six months of this year. Can you explain that? That seems like an enormous amount of money. It's enormous.

80 billion is quite incredible. Now, one thing that's really important to know about that number is that that number is their net loss. And $72 billion of that $80 billion was actually an accounting adjustment that the company had to make. And that doesn't mean it's free money and that it doesn't matter. But it does mean that that wasn't money going out the door on compute spend. The accounting charge comes from one of the ways Anthropic raised money. In the past, the company promised some of its shares in return for loans. But since then, the value of those shares has increased,

and that difference shows up in the books. So that $81 billion figure does not mean it spent that money during those six months, but it did have to account for these liabilities that it has, and the liabilities are directly tied to Anthropics' valuation. One of the unusual things about this S-1 is that roughly a third of it is just about risk. risk to investors, and risks to humanity. That's next. Unlock unlimited free grocery delivery with PC Express Pass.

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Consumer Reports does not endorse products or services. Risk factors are something that every company lists in its prospectus, but Anthropic is an unusual company. You can kind of get chills reading some of the risk factors because Anthropics talking about this future world of dangerous AI that it can't control necessarily. So, you know, if the company making the models and selling the models is basically saying, we don't know if we can make sure that these models don't cause harm. In the S-1, Anthropics said it sees damages caused by AI as a giant financial risk.

The company said AI models can show what they called self-preserving qualities, and that in test scenarios, they've even generated blackmail-type responses to keep humans from shutting them down. In some cases, Anthropics said it could bear liability if its AI does certain harmful behaviors. And this kind of harm they could cause could take many different forms. Some of the most alarming forums are sophisticated cyber attacks. They said that there could be some sort of...

of a catastrophic AI-related incident. And they said it could be so large and it could cause so much damage that all of the insurance policies couldn't cover the potential damages. Not the kind of line that you normally see in an investor prospectus. Did Anthropic in the risk factors

or anywhere else in the perspective talk about how it's going to try to prevent that from happening? The company, you know, says very infatiously that it takes model safety very seriously. it might delay the release of models in order to make sure that it's not releasing something, you know, that could be harmful, but it also doesn't know. So I think Anthropic is taking the safety thing seriously, and they're dedicating time to it, resources to it,

they test their models before they come out. Another thing that could hold back Anthropics growth is nationwide opposition to data centers. Backlash to data centers has really picked up in the past six months. And I think that's why it's why it's, made it into the risk factors. So we talked about why they need all this compute. Well, they might actually not be able to get that compute given growing resistance to data centers, specifically in the U.S. So that's where they're getting most of their computing infrastructure in the United States. And Anthropics said that they're looking to obtain data center capacity

outside of the U.S. just to have a more diverse base of compute in case there was some sort of regulatory issue that specifically impacted the United States. But I suppose another risk of that also is like this is fundamental like an increase costs for this company as it needs to try to build out all this compute. Yes. And the increased costs are coming from Anthropic having to offer more incentives when it builds a data center. So they talked about having these voluntary payments that they're making to sort of make people feel better about their data centers. And that's all making things more expensive and everything in the data center industry is getting more expensive. So,

you know, we could see some of those large numbers get even bigger, but not for more compute, just to alleviate concerns about them being in someone's neighborhood. So given the explosive growth in revenue that we're saying, but also like the enormous need to spend money on building out compute, how do you think investors are going to think about or digest the information that they're learning from this S-1. I think that investors are going to really want Anthropic to talk more and share more information about who they think is going to be buying their products in the future and why they're going to continue buying it from Anthropic.

Having a few large customers who are really excited and have billions of dollars sitting around to spend on your products is great. But unless Anthropic turns out around into multi-year commitments or something a little bit more stable. The customer concentration is potentially the part that might give people pause because, you know, there's major questions on whether there's enough money in the world to sustain that pace. Even if people really like AI, do they have the money to keep paying for it? I think it's a big open question. That's all for today. Wednesday, October 21st. The journal is a co-production of Spotify and the Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your

podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow. Unlock unlimited free grocery delivery with PC Express Pass. Shop online and get the same low no frills prices delivered. Get your first year of PC Express Pass for just $2.50 a month. Learn more at nofrills.ca. For most of the history of professional sports, there was a wall between the game and gambling. Then suddenly it was everywhere. is all in on sports betting. Make every moment more with band do. But that wasn't supposed to include the players themselves.

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