Microsoft is limiting employees' use of Anthropic's Claude Fable 5 because of the AI startup's new data retention requirements, The Verge reported on Wednesday, citing sources.

Anthropic on Tuesday said it is rolling out Claude Fable 5, a public version of its Mythos AI model, with guardrails barring its use in risky areas such as cybersecurity.

Claude Fable 5 is the most powerful model Anthropic has made available for wider use, with the company citing its performance in software engineering and analytics.

Microsoft has told employees that its legal teams are evaluating changes to Anthropic's data retention requirements, according to the report.

The concerns center on customer data and confidential information, and it is not yet clear whether Microsoft's legal teams will clear Claude Fable 5 for internal use, the report said.

Under Anthropic's data retention policy for Mythos-class models, prompts submitted and outputs generated are retained for 30 days for trust and safety purposes on every platform where the models are offered.

Anthropic retains inputs and outputs for up to two years if they are flagged by its trust and safety classifiers as violating its usage policy.

Microsoft and Anthropic did not immediately respond to Reuters requests for comment.

Anthropic last week said it had confidentially filed for a US initial public offering but did not disclose the size or terms of the offering.

It last raised $65 billion at a post-money valuation of $965 billion in late May, putting it ahead of rival OpenAI.

Cybernews has previously reported that Microsoft is also pulling back from broader use of Anthropic tools like Claude Code after reportedly burning through its AI budget faster than expected. After rolling out Claude Code to thousands of developers, the company is now said to be ending licenses by June 30 and shifting staff toward its own GitHub Copilot tools, as usage-based AI pricing rapidly increased costs across the industry.

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