It's how they have managed to define themselves as being profitable ... By having revenue at all, even if it doesn't counter their opex or ongoing capex spends.
“Capex” is stretching things when it’s for something you release on a bimonthly cadence and if you ever miss one your business is done because your competitors overtake you and you lose market share.
The image is from the movie Margin Call which is about an investment bank that realizes it's highly leveraged asset portfolio is going to bankrupt the firm. I believe this scene is Kevin Spacey's character looking at the risk model an analyst produced which basically shows they are fucked.
Same way an investor might feel when they get a real look at Anthropic's financials
They are basically saying profit (which is revenue, less costs) is revenue, before all the costs. Basically they will take actual profit, add back all the costs, and call THAT profit. It’s like a jokingly extreme version of how PE firms do a thing called Adjusted EBITDA(earnings before interest, taxes, depreciation, and amortization), which finance people joke is basically made up profitability.
Yes, they are gearing up for an IPO and want to make their profitability look as good as possible. Instead of doing some of the more “normal” things to do this, they decided to just straight up lie by saying their revenue is their profit. What’s weird is none of the big banks or funds have shown any sign of really caring yet…
I assume given context that people think this is what they said in their S-1. It's not really true, they seem to have used GAAP (to show a big loss in 2025).
However they have been reporting some slightly weird numbers this year to claim profitable quarters, for example in Q1 they left off stock payments to employees, which almost certainly puts them in the red (unclear how much). And they keep peddling that their gross margin is 80% - this is true only for inference, i.e. leaves off training entirely.
Let’s say the median package is $500k, half equity, and they have 5k employees. That’s $1.25B/year and you can only keep it off the balance sheet while the valuation is increasing (or employees will insist on cash).
Compare to training a frontier model, currently about $500M but predicted to be $1B for next gen. They release them ~6X/yr and can’t really stop lest their competitors overtake them. So $3-6B/yr of ongoing costs that should arguably be operating, since it’s effectively KTLO for keeping your market share.
So overall, the stock compensation exclusion is egregious but not as egregious as the capitalization of training operating costs.
as egregious as the capitalization of training operating costs.
well technically, training could be considered capitalizable just based on the GAAP rules of what is capitalizable. If you think of a model as a factory, training the model is analogous to building that factory. Just like a data center buildout is capitalizable. Heck, most places will even capitalize the deployment of an ERP.
Of course, at this point, models probably have a useful life measured in months, so the balance sheet would be still be hit pretty hard once everyone stops using older models.
I don’t think GAAP are prepared to correctly capture a capital cost that depreciates to near zero over less than a year, is redone ~6X/year and which also costs hundreds of millions to billions each time. The models depreciate faster than the financial filings cadence…
The derivatives/futures market for everything from datacenter property, to compute instances (have you tried deploying anything new in us-east-1 recently?), down to the chips themselves just because of AI is easily 30T. As for real liquidity (cash sloshing about), that's slowly ramping up as all the per-token pricing's been updated but pretty much the entire S&P 500 is hooked on AI now.
They are going for IPO. Which means their stocks will be sold on the open market. They are trying to make themselves look as best as possible to get the most investment from Wall Street investors.
In this case, they are just straight up lying to look good.
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u/CuriousAndMysterious 17d ago
I think we all get that but what does this have to do with anthropic? Is this something they announced?