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Anthropic, PBC
Notes to Consolidated Financial Statements
(Continued)

for forfeitures when they occur. The fair value of stock-based awards, granted or modified, is determined on the 
grant  date  (or  modification  or  acquisition  dates,  if  applicable)  using  appropriate  valuation  techniques.  Stock-
based  compensation  is  included  within  personnel  expenses  in  the  consolidated  statements  of  operations. The 
Company  incurred  stock-based  compensation  expense  of $29  million,  $192  million,  and $1.2  billion  for  the 
years 
ended December  31,  2023,  2024,  and 2025,  respectively.  The  Company  incurred  stock-based 
compensation  expense  of $286  million  and $2.2  billion  for  the  six  months  ended  June  30,  2025  and  2026 
(unaudited),  respectively. The  tax  benefits  recognized  in  the  consolidated  statements  of  operations  for  stock-
based  compensation  arrangements  were not  material  during  the  years  ended December  31,  2023,  2024,  and 
2025 and during the six months ended June 30, 2025 and 2026 (unaudited).

Stock Options

Stock-based  compensation  expense  is  recognized  on  a  straight-line  basis  over  the  period  during  which  an 
employee is required to provide services in exchange for the award (generally the vesting period of the award). 
The Company determines the fair value of stock options on the date of grant using the Black-Scholes-Merton 
option pricing model which is impacted by the estimated fair value of the Company’s common stock, as well as 
changes  in  assumptions  regarding  a  number  of  highly  complex  and  subjective  variables.  These  variables  are 
summarized as follows:

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Fair  value  of  common  stock  –  Until  the  Company’s  common  stock  is  publicly  traded,  the  Company 
must  estimate  the  fair  value  of  common  stock.  The  Company’s  board  of  directors  (the  “Board”) 
considers  numerous  objective  and  subjective  factors  to  determine  the  fair  value  of  the  Company’s 
common  stock  including:  contemporaneous  third-party  valuations  of  the  Company’s  common  stock, 
price paid by investors for the Company’s common and redeemable convertible preferred stock, actual 
and  forecasted  operating  and  financial  performance,  market  conditions,  performance  of  comparable 
publicly traded companies, developments and milestones within the Company, the rights, preferences, 
and  privileges  of  the  Company’s  common  and  redeemable  convertible  preferred  stock,  and  the 
likelihood and timing of achieving a liquidity event, among other factors. 

Expected  volatility  –  Expected  volatility  is  a  measure  of  the  amount  by  which  the  stock  price  is 
expected to fluctuate. Since the Company has no trading history of its common stock, it estimates the 
expected volatility of its underlying common stock as of the grant date of its stock options by taking the 
weighted-average historical volatility of a group of comparable publicly traded companies over a period 
equal to the expected life of the options.

Expected term – Expected term represents the period over which the Company anticipates stock-based 
awards  to  be  outstanding.  The  Company  estimates  the  expected  term  based  on  the  options’  vesting 
term  and  contractual  terms,  such  that  the  expected  life  is  equal  to  the  average  of  the  stock-based 
award’s weighted-average vesting period and its contractual term. 

Risk-free interest rate – The risk-free interest rate used is based on the implied yield in effect at the 
time  of  grant  of  U.S.  Treasury  securities  with  maturities  similar  to  the  expected  term  of  the  stock 
options.

Expected dividend yield – The expected dividend yield is zero, as the Company has never declared or 
paid any dividends and has no current plans to do so.

Restricted Stock Units

The  Company  measures  and  recognizes  stock-based  compensation  expense  for  RSUs  based  on  the  estimated 
fair value of the underlying common stock on the date of grant. The Company’s RSUs vest upon the satisfaction 
of both service and performance conditions. The service condition for these awards is generally satisfied over a 
four-year vesting period. The performance condition is satisfied upon the occurrence of either (i) a qualifying 
change in control of the Company or (ii) a listing of the Company’s equity securities on an established securities 
market  (including  through  a  traditional  public  offering,  direct  listing,  or  business  combination  with  a  special 
purpose acquisition company), in each case, on or before the seventh anniversary of the grant date, as further 
defined in such RSU agreements. If the performance condition is not satisfied within seven years of the grant 
date,  all  unvested  RSUs  are  forfeited.  Compensation  cost  related  to  these  RSUs  must  be  recognized  over  the 

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