What Anthropic's 900% retention rate actually means ahead of its IPO

Video Transcript

Ahead of the IPO, net revenue retention, basically how long are they keeping customers getting them to spend more, at 900%, that is good. Their adjusted gross margin at 85%, that is good.

Well it sounds like a lot of people were focusing on the idea that it seems like the revenue growth slowed.

Yes, exactly. If you if you average out and kind of back into these numbers from the analysts doing these estimates, if you back into the projections, it looks like quarter over quarter growth has actually slowed down. That gets to that chart we were showing with the token spend going flat. And so the problem is Anthropic is so highly leveraged to all of this. They've spent so much money on the compute, so many people have spent money on them.

They are kind of seen as one of the leading uh, you know, indicators for this trade. If their growth is slowing down, A, what does that do for the IPO? But then B, what does it signal for the rest of this trade?

And by the way, did you see this morning, um New York City Comptroller Mark was on CNBC.

Yes. CNBC getting that, yeah.

And he said that Anthropic should pause its IPO and I I guess sent a letter to Dario Amadei saying that that they should pause the IPO because of It's right.

concerns over that's more safety concerns obviously, not the financial stuff that we're talking about.

That's more safety concerns, right.

But it's still it gets to the push back.

Just throw that in the in the mix.

And that comes as Anthropic--

That can go on the updated risk factors.

Yeah yes, it can. And of course comes as reporting shows that Anthropic is looking to run that IPO before Thanksgiving, uh potentially starting the marketing the week of November 9th.

Yes, exactly.

Which is you know, not that far away.

No.

Some interesting stats here. I mean, on the positive side, just on the positive side, the reporting of various people at CNBC and others talking about what they saw in this in these reports, somebody revenue net revenue retention, right, measures its ability to keep its existing customers and increase spending over time was 900%.

Right, people who get locked in are like, they start buying more, they start using it more.

Yep.

Wait, net revenue retention measures essentially how successful you are at keeping your customers and then keeping them spending money. But how can that number be 900%? What does that even measure?

So it's it's like if if if you spent like 10 bucks a month and then you start spending 100 bucks a month, right? That's what, 10x, right?

Your your spend. It's ability to keep its existing customer to increase their spending over time.

Tell me how much the revenue is growing. Tell me how much the business is losing. Like all of this ARR stuff, net retention, all of that stuff.

Well, this is what I was going to say. Right, how about this, how about this, how about this?

How much are they spending and how much are they bringing in? That's what I want to know.

You don't know what it means because nobody else reports it like this.

Exactly.

So then compute margin, right? Or revenue leftover after subtracting the cost of computing power and other infrastructure is more than 40%. Some people said. So I'm noting these interesting stats. There's a lot of adjusted stuff happening, right? We haven't seen the numbers ourselves. We haven't seen that actual document.

Okay, so that margin is 40%, great. That would mean they were profitable except they have other expenses also.

That's right. And this comes back to the numbers we got out of Reuters a couple weeks ago on that leaked prospectus that shows, sure you're making money, you're also spending an absurd amount higher.

It it it's it's like, how do you, it's a different type of business, right? That's one of the questions that we are that we're dealing with, is how do you