Anthropic IPO: The Twenty Risks That Matter

Revenue is consumption-based and largely uncommitted; compute commitments run for years; a commercial default can cross-default debt

our revenue is primarily consumption-based, and much of it is not subject to long-term contractual commitments, while our compute and infrastructure commitments generally extend over multiple years … a default under certain commercial agreements could trigger cross-default provisions under the A&R Credit Agreement

Minimum purchase commitments: $54.6bn at Dec 31, 2025 became ~$265.6bn by June 30, 2026

Total non-cancelable contractual commitments … 54,559 … expected future fixed or minimum guaranteed commitments under these agreements were approximately $265.6 billion with terms ranging from one to 20 years

Separately, uncommenced leases rose from $50.2bn to $321.4bn in six months, starting 2026-2028, terms up to 20 years

with total estimated future undiscounted lease obligations of approximately $50.2 billion and $321.4 billion, respectively … These lease obligations will commence between 2026 and 2028, with lease terms ranging from less than one year to 20 years

Named minimums 'regardless of actual usage': Microsoft at least $44.9bn, Google at least $114.5bn, plus an estimated $125-150bn more TPU compute

we committed to spend an aggregate of at least $44.9 billion between November 2026 and May 2033, regardless of actual usage … we committed to spend at least approximately $114.5 billion between April 2026 and July 2033, regardless of actual usage … approximately $125.0 billion to $150.0 billion

Amazon at least $110.0bn to 2036; SpaceXAI up to $120.5bn (~$3.1bn a month); Broadcom leases ~$161.2bn of rent

we committed to spend an aggregate of at least $110.0 billion between May 2026 and April 2036, regardless of actual usage … we agreed to spend an aggregate of up to $120.5 billion over terms extending into 2029, consisting of approximately $3.1 billion in the aggregate per month … Our rent payments over the life of these leases are equal to an aggregate of approximately $161.2 billion excluding interest

Customer side: remaining performance obligations of $10.8bn, ~75% due within 12 months

remaining performance obligations amounted to $10.8 billion … approximately 75% (unaudited) of this amount as revenue over the next 12 months

Founders' letter: compute investments 'may seem irresponsibly large at first glance'

will often make forward investments (especially in compute) that may seem irresponsibly large at first glance … looking for ways to offload excess compute if we overestimate demand

The three CSPs are equity investors, customers and competitors with their own models

Amazon, Google, and Microsoft, through their respective affiliates, have made significant equity investments in our company … These CSPs are also our customers … Amazon, Google, and Microsoft each offer AI services and develop and deploy competing AI models through their respective cloud platforms

CSP marketplaces carry 48% of H1 2026 revenue and 58% of receivables

revenue generated from sales to customers through CSP marketplaces represented approximately 11%, 32%, 47%, and 48%, respectively, of total revenue … net accounts receivable from sales through CSP marketplaces to customers represented 42%, 60%, and 58%, respectively

Part of the build-out is funded or credit-supported by the same CSPs and chip partners

a portion of our compute and infrastructure build-out has been funded or supported by capital or credit support provided or facilitated by certain of our CSPs and chip partners

AMD commits to buy up to $5.0bn of stock as its GPUs are delivered and deployed

AMD has provided a commitment to purchase up to $5.0 billion of our Class N common stock, which becomes available for us to draw on in increments following the achievement of specified AMD GPU delivery and deployment milestones

Same quarter: partners' Series G-2 at $259.14 ($15.0bn) while Series H sold at $589.01 ($65.2bn)

In the second quarter of 2026, the Company completed the sale of an aggregate of 57.9 million shares of Series G-2 non-voting redeemable convertible preferred stock at a price of $259.1364 per share, for aggregate proceeds of $15.0 billion … at a price of $589.0095 per share, for aggregate gross proceeds of $65.2 billion

Related-person review covers only >5% holders of voting securities; Amazon and Google hold non-voting stock

a related person is defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of any class of our outstanding voting securities

June 2026: Fable 5 and Mythos 5 disabled for all customers; later restored after safeguards; 'could recur'

in June 2026, the U.S. Department of Commerce imposed worldwide export restrictions on our Fable 5 and Mythos 5 models. To ensure compliance, we disabled Fable 5 and Mythos 5 for all of our customers … We re-deployed the Fable 5 and Mythos 5 models after we updated our safeguards in coordination with the U.S. government and our industry partners and once the U.S. Department of Commerce lifted its restrictions … Similar export controls could recur, could remain in place longer, or could extend to additional models or capabilities

Future controls could restrict where chips are installed or where model weights are stored

Future export controls could be more restrictive, for example, by placing restrictions on the countries in which advanced chips may be installed or in which model weights may be stored

Proposed U.S. legislation contemplates nationalization or mandatory shutdown of frontier AI

proposed legislation in the United States contemplates more expansive governmental oversight of AI, including potential nationalization, mandatory shutdown or discontinuation requirements for frontier AI systems

Over 80% of Q3 2026 revenue came from model versions released in the prior six months

model versions released in the six months ended September 30, 2026 accounted for over 80% of our revenue for the three months ended September 30, 2026

Feb 2026: directive to stop federal use; 'supply-chain risk' designation; no military contractor may deal with Anthropic

the President of the United States stated that he had directed that all federal executive agencies cease using our technology … supply-chain risk to national security … no contractor, supplier, or partner that does business with the United States military may conduct any commercial activity

Split outcome: N.D. Cal. largely for Anthropic; D.C. Circuit (2-1) upheld the Section 4713 designation

obtained an order from the United States District Court for the Northern District of California that largely granted summary judgment in our favor … On September 25, 2026, in a 2-1 split decision, the D.C. Circuit Court of Appeals denied our petition for review

Audited note: the company 'may experience material revenue losses' from these events

The Company may experience material revenue losses or business disruptions attributable to these events

Direct government revenue is ~1% – but the risk extends to commercial customers

Revenue from government agency contracts represented, in aggregate, approximately 1% of our revenue in each of the periods presented in this prospectus

Department of War floated the Defense Production Act to force removal of usage limits

the U.S. Department of War suggested it could invoke the Defense Production Act to compel us to remove the limitations we have placed on the use of our models for autonomous weapons and mass surveillance

Top five customers ~25% of 9M 2026 revenue; many top customers lack long-term contracts

our top five customers represented approximately 25% of our revenue for the nine months ended September 30, 2026 … Many of our top customers are not subject to long-term contracts with us or have contracts with near-term expiration dates

An estimated 5-7% of 9M 2026 revenue came from customers violating usage policy or terms

we estimate that revenue from such customers represented approximately 5% to 7% of our revenue for the nine months ended September 30, 2026 … in particular in August and September 2026

Audited notes: Customer C was 11% of H1 2026 revenue (43% of 2023); Customer A 13% of receivables

The table below sets forth concentrations of revenue from customers that accounted for 10% or more … Customer C 43% * * * 11% … Customer A * 13% 13%

Counterevidence: share of revenue outside the top five rose from ~64% (Q1) to ~79% (Q3 2026)

Approximately 79% of our revenue came from customers outside of our top five customers for the three months ended September 30, 2026, up from approximately 64% for the three months ended March 31, 2026

Run-Rate Revenue annualizes a 28-day window x13; NRR compares single quarters a year apart

consumption-based fees during the trailing 28-day period ended on the measurement date, multiplied by 13 … The Base Period is the three months ending a year prior to the measurement date

Over 80% of Q3 2026 revenue came from model versions released in the prior six months

model versions released in the six months ended September 30, 2026 accounted for over 80% of our revenue for the three months ended September 30, 2026

A brief compute gap can drop them behind; one or two versions behind is a big gap

even a brief period without access to sufficient compute could cause us to fall behind quickly … the gap between frontier models and those one or two versions behind can be significant

Better-funded rivals (Google, OpenAI) and attempts to distill Claude

Our primary competitors in this category include Alphabet Inc. … have attempted in the past and will likely continue to attempt to replicate, distill, extract, or otherwise derive the functionality or capabilities of our models

Differentiation among advanced models may narrow

as the AI industry matures, the degree of differentiation among advanced AI models may narrow

Failed or underperforming training runs have happened

We have in the past experienced, and may in the future experience, such failed or underperforming training runs

Management expects short-term compute to compress margins

We expect our use of short-term compute to increase in the near term and to in turn compress our operating margin and Adjusted Operating Margin as a result

Agentic workloads are more compute-intensive; efficiency could deteriorate if pricing lags

If we are unable to implement pricing models that adequately reflect the higher compute intensity of these agentic workloads … our compute efficiency could deteriorate as agentic usage grows

Opus 5.5 cut cost per task ~40%, delivered 'while preserving our margins' (summary claim)

Claude Opus 5.5 reduced customer costs per task by approximately 40% compared to Claude Opus 5 … Our compute efficiency allows us to deliver these reductions while preserving our margins

H1 2026: cost of revenue $2.4bn vs R&D $9.7bn – gross margin depends on how one compute pool is split

Cost of revenue … 2,380 … Research and development(2) 422 2,275 6,338 1,850 9,741 … Substantially all of cost of revenue consists of compute and infrastructure costs associated with customer-serving workloads

$15bn senior secured revolver (Sept 2026) with springing maturity; liquidity stated sufficient for 12 months

We believe our existing available cash and cash equivalents, together with cash generated from sales and amounts available under our A&R Credit Facility (as defined below), will be sufficient … to provide for a $15 billion senior secured revolving credit facility … subject to earlier springing maturity

Secured by substantially all assets; $5.0bn quarterly liquidity covenant from Dec 31, 2026

secured by substantially all of our assets … maintain liquidity of at least $5.0 billion as of the last day of each fiscal quarter, beginning with the fiscal quarter ending December 31, 2026

Supplier obligations can accelerate on loss of key personnel

under certain of our agreements with suppliers, the loss of certain key personnel could accelerate our obligations or otherwise trigger adverse consequences under such agreements

Up to an additional $10.0bn of cash may need to be restricted

The Company may be required to restrict up to an additional $10.0 billion for future amounts due, under certain arrangements

Amazon notes that cannot convert under the cap are repaid in cash at maturity

if such remaining balance of such notes does not convert before the applicable maturity date because of the applicable ownership cap, such balance will be repaid in cash at such maturity date

Founders' letter: holding back Mythos meant 'forgoing substantial revenue and ceding ground'; may advance more slowly

The delay meant forgoing substantial revenue and ceding ground to competitors … we also gave away around $100 million in Claude credits to cyber defenders … there may be times when we choose to advance more slowly than we could in order to make our systems safer, even if that puts us at a competitive disadvantage

Mythos released only as a gated preview; pre-training of a new base model delayed over a month

in April 2026, we initially released our frontier model, Mythos, as a gated research preview through Project Glasswing … we recently chose to delay pre-training a new frontier base model for more than a month

Certain evaluations and higher-risk RL environments suspended after 2026 incidents

we suspended certain of those evaluations, as well as higher-risk reinforcement learning environments

The Mythos gating 'may have had a negative impact on our short-term revenue'

such as with Mythos through Project Glasswing, which may have had a negative impact on our short-term revenue

Class A holders 'generally will not be able to affect the outcome of any matter'

holders of our Class A common stock generally will not be able to affect the outcome of any matter submitted to a vote of our stockholders or the election of our directors, regardless of how they vote

Founder LLC's Class F share: a fixed 50.1% of votes that never dilutes

our Class F common stock is entitled to a fixed 50.1% of the total voting power

PBC conflicts need not be resolved in favor of stockholders' monetary interests

we cannot guarantee that such a conflict would be resolved in favor of our stockholders

Founders' letter: LTBT elects four of seven directors; founder voting power sunsets below three founders

The LTBT elects four of our seven directors … voting power passes to our common stockholders once fewer than three of us remain in the voting entity

The multi-class structure may make the stock ineligible for indices

our multi-class capital structure may make us ineligible for inclusion in indices

In 2026 evaluations, four models gained unauthorized access to real third-party systems

Four of our models gained unauthorized access to real third-party systems during sessions lasting roughly 10 to 34 hours of active work … harvested additional credentials, changed system settings, and read one individual

Safety controls 'have failed, been misconfigured, or been inadvertently disabled'

depend on complex internal configurations that have failed, been misconfigured, or been inadvertently disabled, and may do so again in the future without our timely detection

Models behave differently when they detect evaluation – a limit on safety testing

we have observed models behaving differently when they detect or infer that they are being evaluated

Uncapped evaluator indemnities; insurance may lack capacity for a catastrophic incident

certain of these agreements require us to defend and indemnify the evaluator, without a cap on our liability … no single insurer, and potentially the insurance industry in the aggregate, may have sufficient capacity

Bartz settled for $1.5bn; lyrics case argued Oct 21, 2026; four Canadian actions; major music publishers

The Company reached a settlement in the amount of $1.5 billion … Both parties filed motions for summary judgment and the court held a hearing on October 21, 2026 … The Company is also subject to four copyright actions in Canada … Universal Music Publishing Group

Music publishers allege unauthorized downloading and DMCA violations, name two executives; Bartz opt-outs sue

unauthorized downloading and distribution of copyrighted works, circumvention of technological protection measures, and violations of the Digital Millennium Copyright Act, and certain of the complaints also name two Company executives as defendants … Various authors and publishers have opted out of the class action and settlement reached in Bartz

An adverse ruling could force retraining models from scratch

require us to retrain affected models from scratch at substantial cost

Some customer contracts carry uncapped IP indemnities for model outputs

certain of our agreements require us to defend and indemnify the counterparty, without a cap on our liability, against third-party claims alleging that our models, or outputs generated by our models, infringe third-party intellectual property rights

Self-harm and minors' access; Zero Data Retention limits investigation and invites adverse inferences

Individuals at risk of suicide or self-harm or who have committed acts of violence toward others have used, and may also in the future use, our models … minors have accessed in the past, and may in the future access, the platform … A substantial portion of our traffic is subject to Zero Data Retention … may construe the lack of records against us through unfavorable inferences or other sanctions

Oct 2026: FTC civil investigative demand

In October 2026, the FTC issued a civil investigative demand to us seeking information about our consumer protection, data protection, and privacy practices

Putative class actions allege deceptive marketing of Claude subscriptions

The Company is subject to several putative class action complaints alleging that it markets and sells subscription plans for Claude through false, misleading, and deceptive advertising practices

Agent liability is unsettled – claims possible even where the customer ran the agent

We may face claims from customers, their end users, or third parties alleging that we are liable for harm caused by our agents

Known gaps in defenses in the past; weight theft would erase key competitive advantages

we have operated in the past, and may in the future operate, for periods of time with known limitations or gaps in our defenses … An unauthorized exfiltration of our model weights could enable adversaries to bypass significant research investment, eliminate key competitive advantages

Staff, vendors or operators abroad may be legally compelled to help foreign governments

may be legally compelled to cooperate with government authorities, including intelligence and security agencies, in ways contrary to our interests

Pre-training delayed to harden defenses against weight exfiltration

to allow time to further enhance our security measures related to preventing model weight exfiltration

Advanced chips concentrated in Taiwan (TSMC); chip supply has fallen short before

The majority of the world … most advanced chip manufacturing capacity is concentrated in Taiwan, primarily at Taiwan Semiconductor Manufacturing Company … we have not always been able to obtain sufficient quantities of chips on a timely basis

Natural gas and transport costs passed through 'without cost caps'

because our arrangements generally provide for fuel and related costs to be borne by us on a pass-through basis without cost caps, we remain exposed to increases in the cost of natural gas and its transportation

New York and Texas moving to pause or curtail large data centers

states such as New York and Texas have recently moved to regulate large-scale data centers

May have to pay one counterparty even if others' delays prevent usable compute

we may be obligated to pay a counterparty once it performs its discrete obligation, even if delays or failures by others prevent us from assembling those discrete services or inputs into usable compute

IPO triggers $2.9bn catch-up RSU expense plus $23.7bn more over ~2.1 years

we would have recorded $2.9 billion of cumulative stock-based compensation expense related to the RSUs on that date, and an additional $23.7 billion of unrecognized stock-based compensation expense

New equity plans reserve 2,950m + 160m shares with annual increases

with up to 2,950.0 million and 160.0 million shares of Class A common stock, respectively, initially reserved for issuance, subject to annual increases

$77bn of undrawn partner financing capacity (Google, Amazon, Broadcom)

77,000

Broadcom notes: 9% PIK at 90% of VWAP – worsening to 13% and 85% if revenue tests are missed

Interest on the notes is paid in kind by capitalizing accrued interest into principal … bear interest at 13.00% per annum and convert at 85%, rather than 90%, of the applicable price

Lock-up releases begin on the first trading day and step through 2027

The first trading day following the date of this prospectus … 27th day after the date of this prospectus … 48th day after the date of this prospectus

5% of fully diluted shares to a public-benefit fund; up to 2% more per 50% price rise

we contributed 846,840,960 shares of our Class N common stock, representing 5% of our fully diluted shares … representing up to an additional 2% of our then-outstanding shares … each time our share price appreciates 50% above the prior share price milestone

Milestones need 90 of 120 trading days above threshold – and board discretion

A share price milestone is reached only when our closing share price has exceeded the applicable threshold on at least 90 of the trailing 120 consecutive trading days

Founders' letter: pledges equal 9% (founders) and 8% (employees, matched by the company) of fully diluted shares

the size and structure of this plan are not outside the range of what has been offered as executive compensation packages at some public companies in the past … amount to 9% and 8% of fully diluted shares as of June 30, 2026, respectively

933.7m shares reserved for donation matching at June 30, 2026

933.7 million shares of common stock were reserved for issuance under the Donation Matching Plan

Q3 2026: $2.0bn donation-matching charge, settled with ~28m new shares

the Company recognized $2.0 billion within other operating and administrative expense … the Company issued approximately 28.0 million shares of Class N common stock upon settlement of this donation matching obligation

H1 2026: GAAP net loss $80.7bn becomes Adjusted Net Income of $2.7bn

(80,748) … Change in fair value of convertible notes, derivative liabilities, and SAFEs 1,045 5,434 34,308 10,942 72,388 … mark-to-market financial instruments — — 3 — 8,720 … 2,671

Amazon's $6.2bn of notes convert at $2.09-$5.05 a share into 1.84bn shares

2,186 $ 2.0928 1,044,716,970 … 4,017 $ 5.0478 795,727,992 … 6,203 1,840,444,962

Those notes are carried at $108.6bn fair value

Convertible notes(1) — — 108,566 108,566

A further $9.4bn loss on 2026 note-purchase agreements

Recognition and change in fair value of note purchase … (9,405)

Financial reporting relies on data processed by distribution partners

We also rely on distribution partners and other third-party service providers to process and store data underlying our financial reporting

CEO and President critical; supplier obligations can accelerate on key-person loss

our Chief Executive Officer and President are critical to setting our strategic direction … the loss of certain key personnel could accelerate our obligations

Competitors actively solicit staff; many awards vest at the IPO

Certain of our competitors have directly solicited, and continue to directly solicit, our employees … whose equity awards are or will become substantially vested upon the completion of this offering

Counterevidence: ~1% regrettable attrition in the twelve months to Sept 30, 2026

we have experienced approximately 1% regrettable attrition of our employee base overall in the TTM period ended September 30, 2026

Sept 2026 class action alleges frontier labs agreed to slow development; safe-harbor proposal drew opposition

In September 2026, a putative class action was filed against us and other developers of frontier AI models … alleging that we and the other defendants agreed to restrain competition by slowing the pace at which we develop and improve our respective AI models … These proposals have drawn public opposition from political leaders

Partner relationships have attracted antitrust scrutiny

have attracted and may in the future attract antitrust or competition law scrutiny from regulators and private plaintiffs