Hello and welcome to Eye on AI. In this edition:
Anthropic unveils its IPO prospectus. Cybersecurity researchers poke holes in Anthropic’s security. OpenAI claims breakthroughs in math, computer science, and physics. OpenAI releases GPT-6.1 Terra. The number of AI-spotted cyber vulnerabilities is soaring.Yesterday Anthropic published its IPO prospectus, giving us some key insights into the company’s financials, and by implication, the economics of the rest of the AI industry. But the company’s S-1 filing also left a lot of key questions unanswered. As my colleague Allie Garfinkel wrote in her “Term Sheet” newsletter today, the prospectus embodied all the contradictions of the AI era, encapsulating both the enormous potential opportunities of the technology, and its gigantic risks.
For more of Fortune’s excellent reporting on Anthropic’s prospects, check out the “Fortune on AI” section of this newsletter below.
Meanwhile, here’s a look at some of the most interesting things we learned from Anthropic’s S-1, and some of the things we’d still like to know.Anthropic’s operating economics aren’t too shabby (for now). As of June, the company was generating more than two dollars in revenue for every dollar it was spending on compute. That’s better unit economics than some AI skeptics had assumed. Once other operating costs were added in, the company’s adjusted operating margin was still at a 19% profit margin in the most recent quarter it reported. (Although that figure excludes the cost of Anthropic’s stock-based compensation, as well non-cash charitable contributions, and what Anthropic is paying to settle copyright violation claims from book authors.) What’s more, those unit economics have been improving over time, with a 50% improvement in revenue per dollar of compute cost just between the first and second quarters of 2026. The S-1 also shows that the company’s operations generated $3.9 billion in free cash flow in the first half of 2026.But the company warns repeatedly throughout its S-1 that these trends might not continue. In particular, it warns “as significant incremental compute is brought online in future periods, the associated expense will be recognized in advance of the full revenue that the compute will ultimately support, and we expect operating margin and Adjusted Operating Margin may compress in those periods.”The company also cautions that price competition with rivals could significantly impact its margin or even “adversely affect our ability to achieve or sustain profitability.” For more on the extent to which OpenAI is already winning market share by undercutting Anthropic on price, check out this story, headlined “Anthropic’s margin is OpenAI’s opportunity,” that ran earlier this week in The Information.
Anthropic is planning to spend crazy amounts on compute. The company spent $5.6 billion on compute and infrastructure in the six months through June 2026. That spending is set to explode. By exactly how much? It’s a bit hard to tell because the company’s S-1 includes many different numbers in different places. The spending commitments are over different time periods. Some of them are cancelable. Some of them are not. My colleague Emily Forlini lays out some of this in her excellent piece from yesterday on Anthropic’s future compute plans. Meanwhile, Sebastian Herrera and I looked at the risk stemming from the ease with which Anthropic’s customers can switch to competing AI models versus the fact the company has locked in most of its costs with non-cancelable compute contracts.Here is quick look at those compute numbers: the company is spending $45 billion to secure data center capacity from Microsoft, $110 billion with Amazon, $121 billion with SpaceX, and $115 billion with Google, plus commitments for between $125 billion to $150 billion more, as well as $45 billion with neocloud Nscale and $41 billion with its rival Lambda. So that’s at least $602 to $627 billion, right there. Then there’s the amounts it is spending for chips in some of these data centers. That includes at least $20 billion with AMD and $161 billion in a colossal leasing deal with Broadcom. So that brings the total up to as much as $808 billion.Whether Anthropic’s revenue growth will really be strong enough to cover these costs is one of the big questions that the S-1 can’t really resolve. Certainly its 1,300% revenue growth rate between the first half of 2025 and the first half of 2026 would be sufficient. But, of course, that hypersonic revenue expansion is almost certainly not going to last.
Anthropic doesn’t like concentrated power, except its own. One of the risks that the company warns about in its prospectus is that AI could be used by authoritarian governments to “create high-tech surveillance states, deepen repression, and make themselves much more difficult to dislodge.” Anthropic says it is “committed to working with free societies to provide a counterweight to authoritarian abuse and promote freedom and democracy.” But apparently not shareholder democracy.
The company rests all control of its board in the hands of its Long-Term Benefit Trust (LTBT), whose five members have the ability to appoint the majority of Anthropic’s corporate board, and its seven cofounders, who collectively, through a Founders LLC, have 50.1% voting power to elect the rest of the board. In some very limited circumstances, if the LTBT and the cofounders deadlock over the election of a board director, Anthropic’s employees, who hold a special Class E of voting stock, get to help decide. They also get to vote on certain changes to how the LTBT operates. Regular investors, who receive Class A shares, but for all practical purposes they will always be out-voted by the cofounders (their votes will only count in cases where the cofounders are split on a decision). Anthropic backers Amazon and Google are granted Class N shares that also have no voting power.For a company that often pays lip-service to democracy—and which has taken steps to solicit a wide set of views on what values should be embodied in the written “constitution” it uses to guide the behavior of its Claude models—Anthropic’s lack of trust in shareholders does seem somewhat jarring.The risks are unprecedented. My colleague Beatrice Nolan has a good piece breaking down some of the major risks highlighted in Anthropic’s S-1. These include everything from bad actors using its AI models for cyberattacks to the risk the U.S. government will choose to nationalize the company at some point. Of course, the biggest risk mentioned in the prospectus is the potential that AI could wipe out humanity. Matt Levine over at Bloomberg has a typically hilarious and trenchant column on Anthropic’s S-1 (much of which dwells on the corporate governance issue I raise above) which begins with his annoyance that Anthropic chooses to couch this risk in its prospectus using passive voice:Concerns have been raised both within our organization and by other researchers, regulators, policymakers, and industry participants that sufficiently advanced AI systems could, if not developed, deployed, and operated with appropriate safeguards, oversight, and security measures, pose catastrophic or existential risks to humanity, particularly if such systems were misused, replicated, weaponized, or allowed to operate with a high degree of autonomy.
Among those raising those concerns has, of course, been Anthropic CEO Dario Amodei.Now we come to some of the big outstanding questions that the S-1 didn’t answer:
Why hasn’t the company told us about its third quarter results? There was a lot of criticism of Anthropic on social media for not having included third quarter 2026 financial results in its S-1, even though it included other recent events in the document, and even though it briefed existing investors about these results during its October 14 investor day. The critics are saying the company didn’t include the third quarter results because they don’t paint as positive a picture of the company’s financial health and growth prospects.
We know that growth slowed in Q3 for two reasons. One is that some of these figures leaked out from that investor day. But also, there are some figures in the S-1 that allow you to impute a few of the Q3 figures. For instance, Anthropic mentions that its revenue for the three months ended September 30 was 86 times what it was for the same period in 2024. Doing that math produces about $16.8 billion (which is the same figure that leaked from the investor day.) That is about 45% more than in the second quarter of 2026. But that growth rate is significantly less than the 147% growth rate between the first and second quarter.What other less flattering numbers are in the not-yet-reported third quarter results?How much is Anthropic’s use of convertible notes covering its true expenses? Another criticism leveled at the company on social media is that its use of convertible notes to pay for some computing costs mask its true operating economics. Some compared this to a tactic used by many of the money-losing companies that went public during the dot-com bubble. Those companies often paid for stuff by issuing warrants to suppliers ahead of their IPOs. This made their adjusted operating figures and their cash flow numbers look much better than if they had to pay for stuff with cash.Most of Anthropic’s notes were issued to Amazon and Google and it is possible that those companies also offered Anthropic discounted rates on the compute the company used. The question is, what happens in the future, after Anthropic is public, and it has to start paying cash for this compute?What is the exact payment schedule for all of that compute? The S-1 doesn’t specify exactly what amounts Anthropic needs to pay which compute and infrastructure providers when. The S-1 talks about obligations coming due between 2026 and 2033, or in some cases 2036. In other places, it talks about commitments due over the course of between one and 20 years. Analysts would like to see a schedule of exactly when these payments are likely to be due so they can get a more realistic sense of how likely Anthropic is to have enough revenue to meet these obligations.Hopefully, we’ll get answers to many of these questions in the coming weeks before Anthropic’s shares actually begin trading. That’s expected to happen sometime between November 9 and Thanksgiving.
With that, here’s more AI news.Jeremy Kahnjeremy.kahn@fortune.com@jeremyakahn
Before we get to the news, just a reminder to check out our new vodcast, Fortune AI Weekly. This week, Bea Nolan and I discuss the growing number of AI-related cyber security crises, growing concerns among investors about the sustainability of the AI boom, and what the mood was like at Nvidia GTC Berlin. You can check out the vod here on YouTube.
Also, if you want to learn more about how your company can harness AI successfully, please consider joining me and my Fortune colleagues at this year’s Fortune Brainstorm AI San Francisco, taking place December 7-8. We’ve got a great lineup of speakers, which we’ll be announcing soon. You can apply to attend here.
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