Anthropic's valuation outlook under pressure: revenue growth is slowing, and some investors are shifting their focus to the $1.5 trillion mark.
According to media reports, Anthropic's Q3 revenue grew 45% quarter over quarter, far below the more than 140% growth seen in Q2. Some investors believe underwriters should lower the IPO valuation, which could fall below $1.5 trillion, whereas certain investment banks had previously discussed a level of around $2 trillion in private conversations. Jefferies analysts note that Wall Street may be projecting Anthropic's annualized revenue to reach at least $80 billion and expects it to exceed $105 billion by year-end.
Anthropic's third-quarter revenue continued to grow at a rapid pace, but the rate of growth has slowed markedly, prompting some potential IPO investors to reassess their valuation expectations for the AI company. Against a backdrop of subdued AI‑related deal activity and rising financing costs, market skepticism is mounting over whether high growth can sustain lofty valuations.
According to a report by The Information, Anthropic disclosed at an investor conference in San Francisco on Wednesday that its third-quarter revenue reached $16.8 billion, up roughly 45% quarter over quarter—slower than the more than 140% growth seen in the second quarter.
Industry competition is intensifying, with OpenAI bolstering its enterprise‑grade AI offerings and competing through lower pricing; meanwhile, new models from companies like Google and Meta, along with open‑source models, are also putting pressure on Anthropic.
The slowdown in Anthropic's growth adds another layer of uncertainty to AI‑related investments, which are already under pressure from inflation and rising interest rates. Markets are no longer focusing solely on the revenue scale of AI companies; they are also assessing whether growth expectations can be met and whether the substantial spending on chips and infrastructure will deliver commensurate returns.
Revenue growth has slowed markedly, and growth expectations are under scrutiny.
Anthropic's third-quarter revenue rose to $16.8 billion, up from $11.6 billion in the second quarter and continuing its sharp increase from $4.7 billion in the first quarter. However, the factors that previously drove the company's rapid revenue growth are now shifting.
Second-quarter revenue grew by more than 140% quarter over quarter, driven primarily by a surge in demand for Claude Code; in the third quarter, the quarter-over-quarter growth rate moderated to around 45%. Although revenue continues to expand rapidly, this deceleration could influence investors' assessment of the company's future growth trajectory.
The revenue mix has also shifted. Anthropic estimates that revenue from model distillation accounts for roughly 5% to 7% of total revenue, and the company expects this segment to decline in the current quarter, continuing to weigh on overall earnings. Model distillation refers to other companies leveraging the outputs of existing AI models to train their own models.
Anthropic has posted adjusted profitability for two consecutive quarters, and its third-quarter cash flow has also turned positive. The company reported an adjusted operating margin of 11% for the year, though this metric excludes significant expenses such as stock-based compensation.
Some investors are reassessing IPO valuations.
Slowing revenue growth is putting pressure on Anthropic's IPO valuation expectations.
Some potential investors were disappointed with the latest financial data, arguing that underwriters should lower their valuation expectations. Discussions among certain investors suggest a valuation as low as $1.5 trillion, below the roughly $2 trillion previously floated privately by some investment banks.
This shift reflects a renewed debate among investors over valuation and does not signify that Anthropic has formally lowered its IPO pricing. For prospective investors, the key question is whether the company can sustain revenue growth fast enough to justify its previously lofty valuation expectations.
Jeffrey Favuzza, an analyst at Jefferies, said Wall Street likely expects Anthropic's annualized revenue run rate to reach at least $80 billion and aims for it to surpass $105 billion by year-end. With market expectations for growth already very high, even continued revenue expansion could trigger valuation pressure if the company fails to meet those projections.
Massive infrastructure investment is intensifying pressure on returns.
In addition to revenue growth and improved profitability, Anthropic must also contend with substantial infrastructure investments. Earlier reports indicated that Anthropic plans to invest more than $500 billion over the next decade in chips, data centers, and other infrastructure.
With investment at this scale, whether revenue growth can be sustainably translated into cash flow and profitability has become a key focus in valuation discussions. In an environment of rising financing costs, investors are increasingly concerned with whether AI companies can scale their operations at reasonable costs, rather than simply chasing revenue growth.
As Anthropic's financial disclosures have drawn market attention, AI-related assets are already under broader pressure. Investors are concerned about the financial health of AI cloud service provider CoreWeave, and South Korean memory chip stocks have also posted sharp declines. Meanwhile, the market is still digesting the risks posed by hotter-than-expected inflation data and the possibility that interest rates will remain elevated.
These factors do not signal a broad-based decline in AI demand, but they are reshaping how the market evaluates AI companies. For firms that require sustained, substantial capital investment, the relationship among financing costs, revenue growth, and return on investment is now under closer scrutiny.
Editor/Liam