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have  experienced  rapid  growth  in  recent  periods,  and  our  historical  growth  rates  are  not  indicative  of  future 
performance or our ability to sustain or forecast future revenue growth.”

In addition, our revenue has included, and we expect will continue to include, amounts from customers that we 
subsequently  determine  are  using  our  models,  platform,  and  applications  in  violation  of  our  usage  policy  or 
commercial terms. We believe this dynamic is common in our industry. Because detection, investigation, and 
enforcement  take  time,  we  recognize  revenue  from  such  customers  when  the  related  services  are  provided, 
before  restricting  or  terminating  their  access.  Based  on  our  detection  and  review  process,  we  estimate  that 
revenue from such customers represented approximately 5% to 7% of our revenue for the nine months ended 
September 30, 2026. This estimate requires judgment and may change as our detection methodologies evolve 
and  we  identify  previously  undetected  usage.  We  expect  the  percentage  of  revenue  from  customers  using  our 
models,  platform,  and  applications  in  violation  of  our  usage  policy  or  commercial  terms  to  decline  in  future 
periods  as  we  have  enhanced  our  detection  and  enforcement  efforts,  in  particular  in  August  and  September 
2026; however, the timing and magnitude of any resulting adverse effect on our revenue and revenue growth 
are uncertain.

Operating Expenses

Compute and Infrastructure

Compute  and  infrastructure  expenses  primarily  consist  of  costs  attributable  to  operating  our  technology 
infrastructure,  which  supports  the  full  range  of  workloads  for  our  models,  including  research,  model 
development,  serving  customers,  and  internal  usage  of  Claude.  These  costs  primarily  consist  of  compute  fees 
paid to CSPs under committed and on-demand arrangements, including storage, networking, and connectivity, 
and  related  support  costs,  infrastructure  costs  associated  with  serving  customer  workloads  through  partner 
channels, colocation facility costs, equipment leases and committed power costs associated with our data center 
operations, and third-party application infrastructure software costs directly related to our compute operations. 
Beginning in 2026, as our obligations commence under compute and infrastructure leases, these expenses also 
include  operating  lease  costs,  amortization  of  finance  lease  assets,  variable  lease  costs,  and  depreciation  and 
amortization  on  owned  servers,  networking  equipment,  and  related  data  center  assets.  See  Note  8  to  our 
consolidated  financial  statements  included  elsewhere  in  this  prospectus  for  a  functional  presentation  of  our 
operating expenses, including cost of revenue, and a description of the workloads underlying the compute and 
infrastructure expenses within each functional caption. Within that functional presentation, substantially all of 
the  cost  of  revenue  consists  of  compute  and  infrastructure  expenses  associated  with  customer-serving 
workloads. Additionally, cost of revenue includes certain personnel-related costs and allocated overhead costs. 

Customers adopt and retain our technology based on whether our models are at the frontier of AI capability and 
maintaining that frontier position is essential to revenue generation. Each model release represents continuous 
intelligence  improvements,  making  ongoing  model  development  a  critical  factor  in  revenue  generation.  We 
operate an iterative cycle in which compute deployed to model development yields more capable and efficient 
models.  Those  efficiency  gains  free  compute  to  serve  additional  customer  workloads.  In  turn,  serving  our 
customers  at  scale  generates  feedback that informs research and model development. In this cycle, customer-
serving activity and model development are each a direct input that informs the other, and we therefore view 
compute and infrastructure costs as critical to our ability to generate revenue within a short time of incurring 
such costs. 

We  expect  compute  and  infrastructure  expenses  to  increase  in  absolute  dollars  and  remain  our  largest 
operating expense for the foreseeable future as additional committed compute becomes available to us under 
multi-year  arrangements  with  CSPs,  and  as  we  continue  to  invest  in  additional  compute.  These  expenses  are 
paid and recognized as compute becomes available to us, rather than when committed, and are generally fixed 
in  the  near  term  given  the  majority  of  our  compute  is contracted  under  multi-year  commitments  that  we 
typically  procure  12  to  18  months  in  advance  of availability.  We  deploy  this  committed  compute  as  a  single, 
shared  resource  across  all  workloads,  and  thus  plan,  incur,  and  assess  it  on  a  total  basis  rather  than  by 
individual workload. As a result, compute and infrastructure expenses as a percentage of revenue will depend 
primarily on how our revenue scales relative to our total committed compute cost base. In addition, as part of 
our  public  benefit  initiatives,  we  intend  to  direct  a  meaningful  portion  of  our  resources,  which  may  include 
compute, toward ensuring that the benefits of frontier AI are broadly accessible, and we expect to significantly 
scale these efforts over time. 

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