# Anthropic IPO Valuation Faces Skepticism Amid Rising Costs and Slowing Growth Analysts warn that Anthropic's ambitious valuation targets may not align with current financial performance metrics. - **Source:** [Fortune | FORTUNE](https://brifing.si/source/769282ef-327a-4454-909a-3c7936216004) - **Published:** 2026-11-03 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/1e391208-255c-4183-bf31-723bf29d07dd ## IPO Valuation Hurdles Anthropic is targeting a valuation between $1.5 trillion and $2 trillion for its upcoming IPO. However, analysts suggest this range is overly optimistic given the company's recent third-quarter performance. Institutional investors are reportedly pushing for pricing at the lower end of this range to mitigate potential risks for future public market participants. ## Revenue and Expense Disparity Third-quarter results revealed a concerning trend where expenses are climbing faster than revenue growth. Revenue rose nearly 47% quarter-over-quarter, yet compute and infrastructure costs surged by 77% to $9.9 billion. This imbalance forced the adjusted operating margin to decline from 19% to 15%, signaling significant pressure on the company's core profitability. ## The Cost of Compute Approximately $5 billion of the recent compute expenditure stemmed from purchasing expensive short-term capacity. While Anthropic typically plans compute needs 12 to 18 months in advance, unexpected research demands force these costly spot-market acquisitions. This reliance on short-term capacity creates volatility in operating margins that investors must carefully monitor moving forward. ## Historical IPO Precedents Jay Ritter’s research indicates that valuations above $1.41 trillion require a price-to-sales ratio exceeding 40. Historically, only 14 out of 4,110 IPOs between 1980 and 2024 achieved such multiples. These specific companies typically delivered returns 15.4% lower than the broader market, suggesting that paying a premium for such growth is historically risky. ## Profitability Benchmarks Required To justify a valuation exceeding $1.4 trillion, Anthropic must establish a clear path toward $100 billion in annual after-tax profits. Currently, only a handful of global giants like Apple, Nvidia, and Microsoft reach this profit threshold. Analysts remain skeptical that Anthropic can scale its operations to match these elite financial performance levels. ## Debt and Liquidity Outlook Anthropic holds $131.8 billion in cash and short-term investments, providing a buffer for continued research spending. However, experts like Tony Trzcinka note that the company may struggle to secure low-interest debt compared to investment-grade firms. Any future borrowing to fund infrastructure will likely be expensive, further weighing on the company’s long-term operating margins. ## Strategic Spending Rationales Despite margin pressures, some researchers argue that high compute spending is a rational strategy for AI labs. By reaching product thresholds first, companies can command premium prices for frontier models. Maintaining high gross margins, currently at 85%, suggests that the underlying business model remains robust even while heavy research investments continue. ## Long-term Valuation Perspective Aswath Damodaran’s intrinsic valuation model, which projects revenue to $1 trillion by 2036, aligns with the lower end of the company's target range. He maintains that the third-quarter results were largely anticipated and do not necessitate a revision. Success depends on flawless execution to support such an exceptionally high valuation. ## Sources covering this story - https://fortune.com/2026/11/03/anthropics-third-quarter-results-mean-ipo-math-and-history-are-not-on-its-side-analysts-say/ — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._