CoreWeave (CRWV.US)'s strong performance helped the Xinyun sector to rebound! Whether Nebius (NBIS.US) can relay the high growth report card is a key test

The Zhitong Finance App learned that CoreWeave (CRWV.US)'s third-quarter results exceeded market expectations and raised full-year results guidance, driving the entire Emerging Cloud Service Provider (Neocloud) sector stocks higher before the market on Wednesday. As of press release, CoreWeave and Nebius (NBIS.US) are up more than 10%, and Iren (IREN.US) is up nearly 6%.

CoreWeave's strong performance report mitigated market concerns about the sustainability of the growth of the emerging cloud service provider industry — concerns that had been putting pressure on the stock prices of major players in the industry in previous months. This not only boosted Nebius stock prices, but also raised market expectations for Nebius' quarterly results to be announced later this week. If Nebius also delivers a strong performance at that time, it is expected to further ease market concerns about new cloud vendors and help the stock rebound.

CoreWeaveQ3 revenue surged 168% year over year, raising annual results guidance

Financial reports show that, benefiting from continued growth in demand for artificial intelligence (AI) computing power, CoreWeave's third-quarter revenue was US$3,661 billion, up 168% year on year and 42% month-on-month, better than market expectations of US$3.56 billion. In GAAP terms, net loss for the third quarter was US$709 million, net loss for the same period last year was US$110 million, and net loss for the previous quarter was US$626 million. The diluted loss of $1.27 per share was higher than $0.22 in the same period last year, but better than the market expected loss of $1.46 per share.

In non-GAAP terms, CoreWeave's adjusted net loss for the third quarter was $529 million, the adjusted net loss for the same period last year was $41 million, and the adjusted net loss for the previous quarter was $567 million. The adjusted net loss ratio was 14%, an improvement from 22% in the previous quarter. The adjusted profit before interest, tax, depreciation and amortization (EBITDA) reached US$2,256 billion, an increase of about 169% over US$838 million in the same period last year. The adjusted EBITDA margin reached 62%, the highest level in nearly five quarters.

CoreWeave revealed that by the end of the third quarter, the company's total revenue backlog of orders reached US$132.5 billion, an increase of 138% over US$55.6 billion in the same period last year. Of these, approximately 36% of revenue backlog orders are expected to confirm revenue within the next 24 months, 38% are expected to be confirmed in the 25th to 48th month, and the remaining 26% are expected to be confirmed after 48 months. The company said that the increase in revenue backlog orders mainly comes from existing and new customers, including artificial intelligence laboratories, large cloud computing service providers, enterprise customers, and AI native companies. However, these revenue backlogs are not equivalent to realized revenue, and related revenue recognition still depends on the company's ability to provide computing power and related services as required by the contract.

Looking ahead to the full year, CoreWeave expects 2026 revenue to reach 13 billion to 13.3 billion US dollars, higher than the previous high revenue forecast of 13.2 billion US dollars. The company raised its annual revenue guidelines, showing that although AI data center construction faces challenges such as rising financing costs and project delays, the market demand for AI computing power is still strong.

Nebius Q3 Earnings Preview

Nebius will announce financial results for the third quarter of 2026 ahead of the market on November 12 (Thursday). The market currently expects Nebius' third-quarter revenue to increase 521% year-on-year to reach US$907.2 million; the adjusted loss per share is expected to be approximately $0.72 million.

Prior to the release of the earnings report, Nebius's stock price experienced sharp fluctuations. On November 5, Nebius once fell to $113.30 in the intraday period, retreating about 62% from the high of $299.86 during the year, the lowest level since April. Since then, the stock has rebounded for several consecutive trading days, but is still about 55% below its high during the year.

The market is currently mainly concerned about whether Nebius can deliver data center capacity as planned, whether the customer concentration is too high, and how much additional debt or equity financing the company will eventually need in the face of tens of billions of dollars in capital expenses each year. Third-quarter results will be an important point in testing these issues.

In the second quarter, Nebius achieved revenue of US$582.3 million, a year-on-year increase of 454% and a month-on-month increase of about 46%, exceeding market expectations. After deducting revenue costs, the company's gross margin was about 77%, and the Group's adjusted EBITDA reached US$236.2 million, and the profit margin was about 41%; of these, the adjusted EBITDA profit margin of the core Nebius AI cloud business was close to 50%. However, due to data center expansion, depreciation, interest and other expenses still at a high level, the company's net loss from continuing operations for the quarter was approximately US$190.4 million.

Therefore, third-quarter results cannot be judged solely on whether earnings per share exceeded expectations. As Nebius is undergoing capital-intensive expansion, the significant gap between adjusted profit and GAAP net profit is likely to continue. Investors need to decide whether revenue growth will be driven by increased utilization of deployed capacity, or whether it will be achieved through a new round of high-cost investments.

Previously, Nebius maintained the target of annual revenue of 3 billion to 3.4 billion US dollars in 2026, an annualized operating rate of 7 billion to 9 billion US dollars at the end of the year, and the Group's adjusted EBITDA profit margin of about 40%. If revenue for the third quarter reaches about US$907 million, then the cumulative revenue for the first three quarters will be close to US$1.89 billion, which means that fourth-quarter revenue will need to reach at least US$1.11 billion to reach the lower limit of the annual revenue guidelines.

As a result, the fourth-quarter earnings outlook will be more important than the third-quarter historical results. If management reaffirms the target of an annualized revenue operating rate of 7 billion to 9 billion US dollars by the end of the year and clearly explains the schedule for production capacity launch, the market may re-establish confidence, believing that the current decline in the stock has been excessively factored into risk factors.

Microsoft and Meta orders drive growth, but at the same time amplify customer concentration and delivery risks

Nebius' revenue growth was mainly driven by the launch of new production capacity and increased GPU usage by large customers. Management said earlier that demand for AI computing power continues to exceed existing supply capacity, and newly added production capacity is usually booked by customers before it is officially put into operation.

The company also benefits from strong GPU pricing. Nebius previously disclosed that the auction price of some next-generation Blackwell computing power production capacity is about 15% higher than the previous peak price, and about 20% higher than the price of existing projects. The unit revenue from short-term computing power contracts is also significantly higher than that of earlier projects, which indicates that the tight supply of high-performance GPUs still provides the company with some pricing capacity.

The contract value between Nebius and Microsoft (MSFT.US) is approximately US$17.4 billion. If Microsoft purchases additional services, the contract amount may increase to approximately US$19.4 billion. The contract requires Nebius to deliver GPU infrastructure in multiple stages; if after the grace period ends, Nebius still fails to complete delivery according to the agreed schedule and is unable to provide replacement production capacity, Microsoft has the right to terminate the corresponding batch of services.

According to recent reports, Microsoft is stepping up its scrutiny of emerging cloud computing service provider projects such as Nebius, iREN, and nScale, while taking a more cautious approach to some new projects with high costs and high delivery risks. Microsoft has yet to announce the cancellation of the core contract with Nebius, but investors will be concerned to see if management confirms that the project schedule has not changed and whether Microsoft is still willing to expand cooperation between the two parties.

Meanwhile, Meta (META.US) and Nebius signed a five-year exclusive computing power agreement worth 12 billion US dollars, which is expected to begin delivering production capacity in early 2027. Meta also agreed to buy Nebius's remaining computing power production capacity that cannot be sold to third party customers in specific clusters. The additional purchase amount can reach up to US$15 billion, bringing the potential scale of cooperation between the two sides to about US$27 billion.

These long-term agreements have increased visibility into future revenue, but have also led to a higher concentration of customers. Nebius revealed that in the second quarter, three customers contributed approximately 24%, 21%, and 14% of revenue, respectively. If any of these customers delays deliveries, adjusts capacity requirements, or stops additional orders, this could have a significant impact on the company's short-term growth expectations.

In the long run, Microsoft and Meta are also building their own data centers. Currently, large technology companies are using emerging cloud service providers such as Nebius, partly because their self-built computing power production capacity is expanding at a rate that cannot keep up with AI demand. If self-construction production capacity increases in the future, Nebius will need to attract more AI model companies, enterprise customers, and government customers to avoid long-term dependency on a few hyperscale cloud service providers.

Capital expenditure of 20 billion to 25 billion US dollars tests financing capacity

Nebius's growth model requires continuous procurement of Nvidia GPUs, expansion of data centers, and securing power supply ahead of time, so its capital requirements are far higher than traditional software companies. In the second quarter, the company's capital expenditure reached approximately US$5.7 billion, mainly for GPUs, related hardware, and data center expansion. Management expects capital expenditure to reach $20 billion to $25 billion for the full year 2026.

The company hopes to provide financial support for expansion through a combination of customer prepayments, operating cash flow, asset-backed financing, convertible bonds, and equity financing. Some of the contracts signed in the second quarter include advance payment clauses, which can cover 50% to 60% of related capital expenses, thereby reducing the extent to which Nebius fully relies on its own balance sheet to finance expansion.

However, the issue of financing remains the main concern of shareholders. Nebius was funded through additional market issuance (ATM) in the second quarter, leading to an increase in the number of tradable shares; in August, the company completed the issuance of advanced convertible notes with a total principal amount of approximately US$5.75 billion. In October, Nebius also received $3.5 billion in priority guaranteed financing from Citigroup to support its global production capacity expansion.

Although these financings have enhanced the company's ability to expand in the short term, they have also led to interest expenses and potential equity dilution. If the data center is launched as planned and utilization remains high, the newly invested capital is expected to be converted into revenue; however, if the project is delayed, Nebius will first need to bear debt repayment, depreciation, and operating expenses, while revenue confirmation is delayed, which may cause cash flow pressure to increase rapidly.

Wall Street remains relatively optimistic about Nebius' long-term prospects. According to TipRanks data, a total of 13 Wall Street analysts covered Nebius in the past three months and gave an average target price of about $296.73, the highest target price was $410, and the lowest price target was $144.