‘Dean Of Valuation’ Aswath Damodaran Trims His Anthropic IPO View, Flags ‘Fragility’ Of $1-Trillion Revenue Target

Damodaran said that the expectation that Anthropic will achieve $1 trillion in revenue in 10 years is the weakest link in its IPO story.

• Damodaran now estimates Anthropic's equity value at $1.45 trillion, slightly down from his previous estimate of $1.475 trillion.
• Falling short on revenue growth would compress profit margins, leave hundreds of billions of dollars in contractual compute commitments sitting idle, and elevate Anthropic's ultimate risk of default, Damodaran said.
• Some institutional investors recently advised Anthropic to value the company around $1.5 trillion to $1.6 trillion in its upcoming IPO, well below the $2 trillion figures in recent months.

Valuation expert and New York University professor Aswath Damodaran on Tuesday trimmed his view on Anthropic’s initial public offering (IPO) valuation after the AI startup updated its S-1 with third-quarter earnings figures.

Damodaran now estimates Anthropic's equity value at $1.45 trillion, slightly down from his previous estimate of $1.475 trillion, though he admitted the quarterly performance does not materially change his thesis or the $100 billion revenue projection for the coming 12 months.

"If I were forced to pick one variable around which my valuation revolves the most, it is my estimate of the target revenues for Anthropic, which I estimate to reach a trillion dollars in ten years," Damodaran wrote in a blog post on Tuesday.

"The fragility of the target revenue assumption comes from it being susceptible to any of the parts failing, and if a part fails... that, in turn, will have ripple effects on the other parts of your story."

Achieving that feat would place Anthropic alongside giants like Amazon and Walmart, but with a critical difference. Anthropic must retain software-style operating margins, and to do that it must dominate the premium AI market with strong pricing power and create "sticky" AI agents, Damodran said.

He also added that failing to meet target revenues would trigger a cascade of operational breakdowns, threatening the business of several companies whose revenue relies on Anthropic.

Falling short on revenue growth would compress profit margins, leave hundreds of billions of dollars in contractual compute commitments sitting idle, and elevate the company's ultimate risk of default, Damodran said.

Investors Push Lower IPO Valuation For Anthropic

Earlier this week, The Wall Street Journal reported some institutional investors had advised Anthropic to value the company around $1.5 trillion to $1.6 trillion in its upcoming IPO, well below the $2 trillion figures in recent months.

Investors reportedly cited a list of concerning factors, including choppy markets, overexposure to AI bets, political backlash to data centers, and uncertainty around how soon hyperscalers such as Amazon and Meta Platforms could show AI-related profits, for their view. 

Democrats’ Midterms Sweep Triggers Tech Rout

Tech stocks fell sharply on Wednesday, as Democrats won control of Congress, flipping Senate seats in Kansas, Iowa, Texas, Ohio, Maine, North Carolina and South Carolina, and gaining more than two dozen House seats.

Analysts and investors fear a major Democratic win could strengthen the growing nationwide push for data center restrictions, which is central to the AI boom driving profits and record valuations across chips, AI infrastructure, and software companies.

Anthropic’s Current Financial Position

According to its S-1 update published last month, Anthropic generated roughly $17 billion in third-quarter revenue. 

While up about 1,127% from the same quarter last year, revenue growth has slowed quarter over quarter. Sales rose 47% sequentially, a steep drop from 144% growth in Q2 and 132% in Q1.

Anthropic disclosed spending commitments totaling $895.4 billion, which stretch as far as 2045. The company is due to spend nearly half of that amount by December 2030, including about $69.8 billion in the 12 months following Sept. 30 this year. Anthropic said it has $146.6 billion in cash on hand and other liquid assets.

Anthropic reported a net loss of $23.29 billion during its third quarter. It reported an operating loss of $567 million compared to a $974 million operating profit in Q2.

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