Executives at artificial intelligence startup Anthropic have warned that a move by the U.S. government to place the company on a national security blacklist could slash billions of dollars from its projected 2026 revenue and damage its reputation with customers and investors.
The warnings emerged in federal court filings tied to a lawsuit the company filed Monday seeking to block the U.S. Department of Defense from placing it on the blacklist. The legal challenge marks a dramatic escalation in a dispute between the AI firm and the Pentagon over restrictions governing how Anthropic’s technology can be used in military-related work.
Senior executives described the potential consequences in sworn statements submitted to the court, arguing that the designation could destabilize the company’s commercial and government-facing businesses.
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Krishna Rao, the company’s chief financial officer, said the impact could reach into the billions.
“Across Anthropic’s entire business, and adjusting for how likely any given customer is to take a maximal reading, the government’s actions could reduce Anthropic’s 2026 revenue by multiple billions of dollars,” Rao said in the filing.
Rao warned that if the government’s actions are allowed to stand, the consequences for the company would be “almost impossible to reverse.”
According to the filing, Anthropic estimates that hundreds of millions of dollars in revenue tied specifically to work with the Defense Department could be at risk in 2026 alone. The company also fears broader ripple effects across the defense technology ecosystem.
Rao said Anthropic could lose between 50% and 100% of revenue linked to defense contractors and other companies whose operations depend heavily on Pentagon relationships.
Beyond direct contract losses, the company argues that the designation could undermine investor confidence at a time when AI firms are spending heavily on computing infrastructure and research.
Rao said the move would likely increase the cost of raising capital needed to fund operations and growth.
Anthropic’s Head of Public Sector, Thiyagu Ramasamy, described what he called immediate damage to the company’s standing in the government technology market.
“The government’s actions immediately and irreparably harm Anthropic,” Ramasamy said in the court filing.
“The designation also impugns Anthropic’s integrity and reputation as a trusted partner, having a real but incalculable effect on sales to non-governmental customers.”
According to Ramasamy, the company expects an immediate loss of more than $150 million in annual recurring revenue tied to current and anticipated Defense Department contracts.
The company’s public sector business had been expanding rapidly before the dispute. Ramasamy said that between December 2025 and January 2026, Anthropic recorded a fourfold increase in its annual recurring revenue run rate from government clients.
Internal projections suggested that over the next five years, the public sector business could generate revenue in the multiple billions of dollars.
Those projections now appear uncertain.
If defense contractors distance themselves from the company to avoid potential compliance risks, Ramasamy warned that Anthropic’s expected public sector annual recurring revenue — projected to exceed $500 million in 2026 — could “shrink substantially or disappear altogether.”
The company’s commercial relationships are also showing signs of strain.
Paul Smith, Anthropic’s chief commercial officer, said the controversy has already disrupted negotiations and prompted some clients to reconsider their partnerships.
In one case, a partner with a multi-million-dollar annual contract switched from Anthropic’s Claude AI system to a competing generative AI model for a deployment at the U.S. Food and Drug Administration. Smith said the move eliminated an anticipated revenue pipeline worth more than $100 million.
Other deals have also been affected.
Smith said negotiations with financial institutions representing roughly $180 million in potential contracts have been disrupted, while a $15 million agreement was paused.
One fintech customer also cut the value of an existing contract in half — from $10 million to $5 million — citing concerns over the company’s dispute with the Pentagon.
According to Smith, enterprise customers are increasingly anxious about the implications of the government’s actions.
Anthropic has received inquiries from more than 100 corporate clients expressing what he described as “deep fear, confusion and doubt” about the risks of continuing to work with the company.
The case highlights the growing tension between rapidly expanding AI firms and government efforts to regulate how advanced technology can be used in national security contexts. Companies developing powerful AI models are increasingly pursuing contracts with government agencies and defense contractors, seeing the public sector as a major growth market.
But that relationship also exposes them to heightened scrutiny from regulators and national security officials concerned about how the technology is deployed.