AI’s Biggest IPO Yet? Inside Anthropic’s Massive Wall Street Gamble

Anthropic has officially filed to go public, setting the stage for one of the most closely watched IPOs in tech history, especially as massive AI infrastructure costs raise big questions about how investors should value the tech giant ahead of the IPO. Joining us now to unpack all of this and more is Jim Neeson, managing partner and founding executive at Connor Group. Thank you so much for being here, Jim. Justine, thank you so much. Great to connect today. Yeah, of course. I mean, a lot of people have been talking about this, have so many questions about this on all of our minds. So what stands out most to you when it comes to this IPO and why is it such a significant moment for the AI industry? Yeah. I mean, you know, this is a monumental transaction, right? This is a company that has been around for six years and already has an incredible business that is scaling rapidly, transformative in the AI space, and is also poised to be the largest IPO in the history of mankind. And those aren't just superlatives. I mean, these are the numbers behind it. It kind of reminds me of like. Someone who's a tuxedo, but wearing high top sneakers at the same time, right? The tuxedo is this business that is quite vibrant. 16 billion in first half revenue, operating profits when they're adjusted, 45% margins, a cash war chest of $131 billion. That's the tuxedo, right? But then the high top sneakers is kind of this fun side of the growth and the opportunity of the business. 1,500% growth. Year over year, you have this $20 trillion AI marketplace that they're going into and being at the ground floor of a megatrend decade. This is things that we're all looking forward to. I love that analogy of the tuxedo and the sneakers. It's so true. So much real business there and also so much excitement about all of that opportunity. As you look through what Anthropic is reporting here, $16.3 billion in revenue for the first half of 2026, up from $1.2 billion a year earlier. How much of that growth can it really sustain? And what do you think investors should be looking for beyond the headline numbers when it comes to the growth side of things? Yeah, you know, if you really look deep in the S-1, they actually give a lot of clues about the sustainability on it. So I think the first thing is, right, you have sort of their consumption business, which is 80% of it, subscription is 20%. Um, customers actually increase their spend 900% every year. I know at our firm as well. We work with Claude. Once you get it in your business and everyone's working on it, we have 700 people. Then all of a sudden it takes off. That is a big part of the sustainability. I think there's also some numbers in here that I haven't heard any reported, but there were two numbers that really jumped out to me, 90% and 80%. The 90% is each Claude model. 90% of it, Claude actually writes on its own. So you think about it, you've got this flywheel, like they're designing the next Claude with their own tools. The 80%, 80% of the revenue at the end of Q3 was on models that were developed this year, the most recent models. So they're building it with Claude, and then all of a sudden, customers are getting on the next model. That is a flywheel that you look for in software companies that have 80, 90% margins. So I think this is a, the revenue side will scale. The second is the compute costs. Right now, 55%, I'm sorry, for every dollar of revenue, 55 cents is compute costs. In 2023, that was $10. So you see they're working down the curve of costs. They have a line of sight to have a massively profitable business. Yeah, it's very exciting to think about all of these numbers that you're mentioning, all of the sustainability, all of this excitement and growth around the company. But there also are these massive losses, right? An $80.7 billion net loss, much of it tied to a non-cash accounting charge. How should investors really interpret that number? And what does it tell us about Anthropic underlying financial health, especially when we know that throughout this AI build-out, these numbers are not that out of the ordinary when it comes to people just spending so much on? Yeah, you know, I think one big surprise looking through the rest one was they actually have an adjusted operating income, right? You mentioned sort of you take out this non-cash charge, their core business is profitable. And that was the Q2 numbers. The Q3 numbers are actually expected to be even better. So I think it's a really important piece of they've actually got this flywheel moving in terms of how they're going to get to profitability and even improve from there. I think the other number that really jumped out in the S1 is they have $600 billion of future commitments around compute costs. And I think, you know, they have $130 billion of cash in the bank. So you're like, wait a minute, they're actually, you know, sort of net negative on that. The reason they're doing that from a business perspective is sort of like stocking the shelves for Christmas, right? You know, there's gonna be a lot of demand and you want to make sure that people can actually get the products that they want. That's what they're doing on the compute costs. If you can lock it in at a low cost and make sure it's available, you can have a lot more comfort that you can scale the business into 2728. So I think for a lot of people, that $600 billion number isn't fearful, but that is a risk in this S1, no doubt. Yeah, it's important to keep looking at really all of these different pieces of the puzzle that we're seeing come out in that S1. And as we're looking forward, I mean, Reports have put Anthropic's potential IPO valuation between $1.5 trillion to $1 trillion. What has to be true about its future revenue and profitability for that kind of valuation to really make sense? Are we seeing those numbers here that would make that valuation make sense? Yeah, you know, I think the best litmus test is SpaceX because we just went through this in June. And this was the whole discussion around their $1.75 trillion valuation. Now they're valued at $2 trillion. SpaceX, if you remember, 90% of their TAM was on AI. So now you have this pure play company. And if you look at sort of three key metrics when you value a company, I would argue Anthropic is actually even a better IPO candidate. Number one is revenue multiples. Right now, Anthropic will be about 40x. SpaceX was about 60x. So it's actually better just from that perspective. Second is growth rate, right? Reported at 15x, but it'll moderate down. Let's just say it's 5 to 10x. SpaceX is doubling every year. So Anthropic has a beat on the growth rate side. And then the third is the TAM, right? This is a pure play AI company. SpaceX had four businesses all brought together. So if the market has shown and saying that SpaceX is a true $2 trillion company, and we're now, what, five months after the IPO, One could argue that Anthropic not only is that, but even has a better future play potential. Not a locked in one by any means, but if you're a retail investor, this is a decade long play as well, right? This is something that you want to sort of get into. And there is a lot of power in being the first market mover. They have that over OpenAI. This is a really historic IPO opportunity to jump into. Yeah, it's so true that this is really that excitement just starting out now and we'll see what happens again with OpenAI or any of these other companies as we move forward. But right now when it comes to Anthropic, there is this momentum and this kind of push there behind them. When we look at Anthropic, depending on, you know, major cloud partners like Amazon and Google, but then also having investors and competitors in AI as well with them, how does that relationship really affect its business risks and really its attractiveness to public market investors When you're looking at these kind of changing dynamics. Yeah. It's this fascinating dynamic of collaboration and competition. I don't think we've ever seen this before in capitalism because you're absolutely right. There is a dependency, especially on compute, right? You know, to have those data centers, to have sort of. Spreading out the capital risk to be able to deliver to customers. And also a lot of these companies are developing their own AI models. What I would say is that because there are multiple hyperscaler options out there and other firms that, you know, Anthropic can work with, there is a bit of a diversity of suppliers out there. You know, you can have a constraint on chips. So I think that's one thing that's going to be important to watch because we've had that before, even the past one to two years. But I would say that the collaboration piece is going to be important because all those companies you mentioned, SpaceX, Microsoft, Google, Broadcom, they're making expectations to their investors that this is revenue that can be relied upon. So I would say for them, there is a strong incentive to not only get into these contracts, but to deliver that compute. Yeah, exactly. I mean, there's that kind of mix of the competition and collaboration so important as we move forward to keep our eye on. Also, I wanted to ask you, you know, Anthropic's five largest customers really account for a significant share of its revenue. How concerning is that concentration? And also, what happens if a few major customers reduce their AI spending? Yeah. So I think number one is what was promising from the S-1 is sort of the decreasing reliance on customer concentration. So as you noted, there is some, but really, they have, what, 12,000 customers that are over 100K and nearly 2,000 customers that are over a million. The enterprise piece of this business is absolutely scaling. So I think that is only going to get better. The other thing that was interesting is 80% of their business is U.S. 20% is international and international is increasing as well. So I think there's ways that they can absolutely diversify this. Your point is a really good one. There is a pressure, and I see it in a lot of our cognitive clients. We work with a thousand companies to manage your AI spend because it can get a bit out of control if it's open for everyone to use whatever models they want, whatever sort of computation time they want. So I think that is absolutely true. There is an awareness in large companies that you need to manage this. I think that's a natural and healthy dynamic. Yeah, I think you're right. I think it definitely is. And something that we'll all be looking at as we move forward here with this and all the other AI models that we're all starting to integrate into our daily lives here. Lastly, I just wanted to ask, you know, for investors who are trying to separate AI hype from this kind of long term business value, what are the most important metrics for people really to be watching Anthropic's IPO filing and what happens next as they actually go forward and become a public company? Yeah. I mean, so we will learn a lot in their Q3 numbers when they come out, as well as their year-end numbers. I think the biggest piece to me is this is absolutely a viable business. I think, you know, a year ago it was, hey, it's all spend ahead and let's keep our fingers crossed that this can be profitable. The fact that they have 45% margins today and they have a line of sight to 70, 80%, which is software margins. It's a really powerful sort of dynamic. The other thing is we will see a wave of AI companies looking to go public in 27 and 28. The key dominoes will be Anthropic and OpenAI, but there is an incredible sort of pipeline of companies. And there are lots of other industries outside of the pure play AI. It's everything from defense tech and data and security and life sciences and med device and consumer products. The mandate for companies now is that AI is embedded in their core business when they talk to bankers and look to go public. So what we will see is this is the pure play ones. It is an important barometer, right? We all want the banks to price this properly, make sure that it is viewed as successful, but we will see a significant string of companies looking to go public where AI is a core part of their business. That is very exciting from an IPO perspective. It is so exciting. We have so much to look for here as we move forward into the months ahead. And we really appreciate you being here to unpack all of this with us. Jim Neeson, Managing Partner and Founding Executive at Connor Group. Thank you so much. Justine, thank you. Quite a pleasure.