Anthropic: Distillation Weighs on Revenue Growth

A significant portion of Anthropic's revenue comes from "distillation," where competitors pay to query Claude in order to train their own models. The company claims to have strengthened its fight against these practices and anticipates a decline in this revenue. As it approaches an IPO, this shift could hinder the reported growth without reflecting actual demand.

Before the IPO, clarifying revenue and the cleansing effect

Anthropic has informed investors that revenue from distillation is expected to continue decreasing. The company is preparing for an IPO that could value it at $1.5 trillion or more. There is a precedent in the tech sector: when Twitter went public, its user growth was closely monitored, as the presence of bots complicated the interpretation of the numbers. Twitter published estimates on fake and automated accounts in its regulatory filings, which led to a decline in user growth indicators. In this context, Anthropic's investors will need to distinguish actual customer demand from revenue generated by companies looking to replicate the company's AI. When asked on Wednesday, Anthropic had not responded by Thursday morning.

Distillation, a source of 5% to 7% of revenue

Anthropic has indicated to potential investors that 5% to 7% of its revenue comes from distillation. This practice involves competing developers using Claude's models to train their own systems. A common method is to create numerous Anthropic accounts and submit a large number of carefully chosen questions to Claude, then collect the responses to train their own models to perform similar tasks. These accounts and queries generate revenue for Anthropic, even if the goal is to copy its technology.

Anthropic records a slowdown in quarterly revenue

In the third quarter, Anthropic's revenue growth slowed, disappointing some investors as the company prepares to go public. Revenue reached $16.8 billion, an impressive figure but one that marks a slowdown compared to earlier in the year. Anthropic has repeatedly accused Chinese AI companies of engaging in distillation and has intensified its efforts to limit this practice, recently claiming to have achieved results. It is suggested that this effectiveness in protecting its models could reduce reported growth, but it is unclear to what extent the recent slowdown is related to this crackdown. A decline in revenue from distillation would not necessarily indicate a weakening of Anthropic's core business and could simply reflect a decrease in the number of competitors paying to leverage its technology. Other factors, such as competition, could also contribute to the slowdown in growth.