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Anthropic PBC v. Department of War, et al. (D.C. Cir.). After first obtaining an order from the United States 
District  Court  for  the  Northern  District  of  California  that  preliminarily  enjoined  the  Department  of  War’s 
directive and Section 3252 supply-chain risk designation of us and preliminarily enjoined the other defendant 
agencies from implementing the Presidential directive until final resolution of the lawsuit, we subsequently, on 
August 27, 2026, obtained an order from the United States District Court for the Northern District of California 
that  largely  granted  summary  judgment  in  our  favor.  The  court  ruled  that  the  Challenged  Actions  were 
retaliatory  acts  meant  to  punish  us  for  speech  protected  under  the  First  Amendment  to  the  United  States 
Constitution and violated our rights under the Due Process Clause of the Fifth Amendment to the United States 
Constitution.  The  court  also  held  that  the  Secretary  of  War’s  actions,  particularly  with  respect  to  10  U.S.C.  § 
3252, violated the Administrative Procedure Act because they were in excess of statutory authority, contrary to 
law, and arbitrary and capricious. The court entered final judgment largely in our favor. The defendants filed a 
notice of appeal of the preliminary injunction. The D.C. Circuit Court of Appeals, however, denied our motion to 
stay the Secretary of War’s Section 4713 designation of us as a supply-chain risk pending review on the merits. 
On September 25, 2026, in a 2-1 split decision, the D.C. Circuit Court of Appeals denied our petition for review, 
ruling that the Department of War’s Section 4713 supply-chain risk designation was proper, and that our rights 
under  the  First  Amendment  and  Due  Process  Clause  of  the  Fifth  Amendment  were  not  violated.  We  filed  a 
petition for rehearing en banc asking the full D.C. Circuit to review the panel’s decision. We cannot predict the 
ultimate outcome of these lawsuits. While we continue to work with government agencies, we cannot be certain 
that the resolution of these lawsuits will not adversely affect our ability to sell to government agencies and other 
customers  that  sell  products  and  services  to  the  U.S.  government,  and  in turn  adversely  affect  our  business, 
financial condition, and results of operations. 

Further, in June 2026, the U.S. Department of Commerce imposed worldwide export restrictions on our Fable 
5 and Mythos 5 models, which we disabled for all customers until those restrictions were lifted, as described in 
the  section  titled  “—Governmental  trade  controls,  including  export  and  import  controls,  sanctions,  customs 
requirements,  and  related  regimes,  could  subject  us  to  liability  or  loss  of  contracting  privileges  or  limit  our 
ability to compete in certain markets.” Similar restrictions could be imposed again in the future. 

Each  of  the  foregoing  may  result  in  significant  reputational  harm,  including  adverse  media  coverage,  public 
scrutiny,  and  negative  perceptions  among  existing  and  prospective  customers,  partners,  employees,  and 
investors, regardless of the ultimate outcome of the litigation. Such perceptions may lead customers, including 
commercial  enterprises  and  international  customers,  to  delay  or  forgo  purchasing  our  models,  platform,  and 
applications,  or  to  impose  additional  diligence,  contractual  restrictions,  or  termination  rights  in  connection 
with  engagements  with  us.  Further,  these  developments  may  create  uncertainty  in  the  broader  market 
regarding  our  long-term  ability  to  operate  in  certain  sectors,  which  could  result  in  increased  volatility  in 
demand  for  our  models,  platform,  and  applications,  reduced  willingness  of  counterparties  to  enter  into  long-
term  or  strategic  arrangements  with  us,  and  fluctuations  in  investor  sentiment,  any  of  which  could  adversely 
affect our business, financial condition, and results of operations.

The bidding process for government contracts can be highly competitive, expensive, and time-consuming, often 
requiring significant upfront time and expense without any assurance that these efforts will generate revenue. 
Government agencies often undertake a significant evaluation process that results in a lengthy sales cycle. Some 
contracts with government agencies are structured in phases or include options, where each phase is subject to 
satisfaction of certain conditions and where the exercise of options is discretionary. As a result, the actual scope 
of work performed pursuant to any such contracts, in addition to related contract revenue, could be less than 
total  contract  value.  In  addition,  product  purchases  by  such  organizations  are  frequently  subject  to  budget 
constraints,  multiple  approvals,  and  unanticipated  administrative,  processing,  and  other  delays.  All  of  these 
factors can add further risk to business conducted with these customers and could lead to lower revenue results 
than originally anticipated. 

We  also  must  comply  with  both  local  and  international  laws  and  regulations  relating  to  the  formation, 
administration,  and  performance  of  contracts.  Contracts  with  government  agencies  are  subject  to  extensive, 
evolving, and sometimes complex regulations which provide public sector customers rights, many of which are 
not typically found in commercial contracts. For example, government contracts generally include the ability of 
government  agencies  to  terminate  for  convenience,  which  if  exercised,  would  result  in  a  lower  contract  value 
and  lower  than  anticipated  revenue  generated  by  such  arrangement.  Any  changes  to  the  government 

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