Anthropic's Gross Margin Rocketed to 85% From 12% in a Year, but the S-1 Warns It Won't Last

Anthropic filed its public S-1 with the Securities and Exchange Commission on Oct. 26, giving investors a first look at its full financials ahead of its planned IPO. One of the highlights was that revenue grew much more rapidly than the cost of revenue, and the numbers from the first half of this year imply a gross margin of 85%, up from 12% a year earlier.

Although that figure is impressive, the artificial intelligence (AI) lab's prospectus cautions investors to expect that its margins will fluctuate. Let's look at why, and weigh the question of whether you should consider investing in Anthropic when it goes public.

Image source: Getty Images.

How Anthropic's margin reached 85%

Anthropic's revenue grew roughly 14-fold in a year's time, from $1.2 billion in the first half of 2025 to $16.3 billion in the first half of 2026. Its cost of revenue, on the other hand, rose from $1 billion to $2.4 billion. The disparity in those growth rates took the company from a thin 12% margin to a high 85% margin. For perspective, Nvidia reported a gross margin of 75% in its most recent quarter.

However, the cost of revenue metric doesn't capture everything. Model training costs fall under research and development, which totaled $9.7 billion in the first half of 2026. Fees that Anthropic pays to Amazon, Alphabet, and Microsoft to sell Claude on their cloud platforms get accounted for under the heading of sales and marketing, where spending totaled $3.8 billion. In total, Anthropic's operating expenses rose from $3.3 billion in the first half of 2025 to $17 billion in the first half of 2026. With all that in mind, a more realistic measure of the company's profitability is its generally accepted accounting principles (GAAP) operating margin, which was 8% in Q2 2026.

Why it won't last

Anthropic's S-1 warns investors that it expects its operating margin to fluctuate over time, and that it will be affected by the company's compute expenses and the timing of those expenses. It contracts for compute 12 to 18 months ahead of delivery, so today's costs reflect capacity ordered when revenue was a fraction of what it is now. When substantial tranches of compute come online, the costs land all at once, so margins could compress if revenue doesn't keep up.

The AI lab has massive compute and infrastructure contracts, with about $417 billion in future minimum payment obligations, and it has ordered additional capacity that is forecast to add between $125 billion and $150 billion. Even though Anthropic's revenue is growing rapidly, the spending of its customers is largely consumption-based and not tied to long-term contractual commitments. So its compute spending is locked in, but its revenue isn't.

Anthropic flagged a few more compute-related risk factors. The cost of compute could rise significantly, and scarcity could become an issue if Anthropic's competitors outbid it for capacity. The company has experienced compute shortages before, and it disclosed in its S-1 that it had requested more compute than its cloud partners were willing to provide.

Should you invest in the Anthropic IPO?

Anthropic's plan to go public soon is exciting, but the data shows that large IPOs like this one are a coin flip in the early going. Five of the 10 biggest IPOs ever had negative returns after one year, according to research by The Motley Fool. The Anthropic IPO will rank among the 10 largest, as the company is reportedly looking to raise up to $100 billion at a valuation of $1.5 trillion to $2 trillion.

The stock will likely also debut with an expensive valuation. If you annualize Anthropic's revenue from the first half of 2026, a $2 trillion market cap for the company would give it a valuation of about 63 times sales. That's a high premium, so you may want to hold off on investing for a while, or start with a small initial investment. From there, you could gradually add to your position over time, or wait to see how the stock performs.

Lyle Daly has positions in Alphabet and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.