CoreWeave (CRWV.US)'s strong Q3 performance is hard to hide concerns about financing and profit, and Damo and Bernstein are both cautious about its prospects

The Zhitong Finance App learned that AI cloud computing service provider Coreweave (CRWV.US) announced strong results for the third quarter of 2026. Both revenue and adjusted operating profit exceeded market expectations, and once again raised the full-year results guidance. On November 11, Morgan Stanley and Bernstein released separate research reports, both acknowledging CoreWeave's progress in business growth, computing power pricing, and execution capabilities, but they are still cautious about its long-term prospects. Morgan Stanley maintained the stock's “hold and see” rating, with a target price of $70; Bernstein maintained its “outperforming market” rating, with a target price of 54 dollars. As of press release, CoreWeave's stock price had risen more than 16% to $56.5.

CoreWeave's third-quarter revenue reached US$3.661 billion, up 168% year over year and about 42% month-on-month, higher than market expectations of US$3.56 billion. Adjusted operating profit reached US$379 million, significantly exceeding market expectations of US$245 million and the company's previous guidance range of US$200 million to US$260 million. The adjusted operating margin rose to 10.4%, higher than market expectations of 6.9%, a marked improvement from about 5% in the second quarter, and achieved a double-digit operating margin one quarter ahead of schedule.

Driven by strong performance, CoreWeave once again raised its 2026 full-year results guidance. Morgan Stanley pointed out that the company raised the median annual revenue guide by about 3% to US$13.15 billion, while also drastically increasing the adjusted median operating profit guide by about 26% to US$1,325 billion.

According to the latest guidelines, CoreWeave's fourth quarter revenue is expected to reach US$4.686 billion to US$4.986 billion, with a median value of US$4.836 billion, which is about 2.5% higher than market expectations; adjusted operating profit is expected to reach US$747 million to US$847 million, with a median value of US$797 million, which is about 18% higher than market expectations.

At the same time, the company raised its annual recurring revenue (ARR) guidance for the end of 2026 from $18.5 billion to $19.5 billion to $20 billion to $21 billion, reflecting a further improvement in revenue growth prospects for deployed computing power.

Morgan Stanley believes that the main driving force behind CoreWeave's performance improvement comes from demand for AI computing power continuing to exceed supply, and the company's increasing pricing capabilities. Management revealed that by the end of 2027, eligible customer demand was about 10 times the company's available computing power, and the potential demand in 2028 had reached several times the usable capacity.

Against the backdrop of tight supply and demand, CoreWeave raised the price of related services by about 25% in July, then further raised the price by about 10% in the third quarter, and prices continued to rise in the fourth quarter. Currently, the annual revenue per megawatt (MW) corresponding to the newly signed four-to five-year contract is about 20 million to 25 million US dollars, while the annual revenue per megawatt of some short-term contracts exceeds 40 million US dollars.

The scale of computing power infrastructure also continues to expand. By the end of the third quarter, CoreWeave had put into operation more than 1.7 gigawatts (GW) of electricity, an increase of more than 200 megawatts over the second quarter; the contracted power capacity increased from 3.7 gigawatts in the second quarter to more than 4.6 gigawatts. The company's total future revenue corresponding to unfulfilled contracts reached US$132.5 billion, an increase of about 138% year on year and 27% month on month.

In addition to adding computing power, the company's potential to renew its existing GPU devices has also received attention from Wall Street. CoreWeave expects that approximately 130,000 GPUs will end their existing contracts in 2027, and another 170,000 will expire in 2028. According to the current price level, management estimates that equipment due in 2027 may contribute close to $4 billion in annualized revenue after re-contracting. If equipment due in 2028 is included, the potential annualized revenue scale can be close to $10 billion, and there is no need to re-invest the same amount of equipment procurement capital.

However, huge capital expenditure and financing requirements are still the core concerns of investors.

CoreWeave's third-quarter capital expenditure reached US$14.5 billion, higher than the previous guidance range of US$11.5 billion to US$13.5 billion. The company also adjusted its capital expenditure guidelines for the full year 2026 to US$37 billion to US$39 billion, with a median value of US$38 billion. Management said that if construction in 2027 is carried out only for existing signed orders, the scale of capital expenditure for that year may be roughly equivalent to 2026.

To ease market concerns about financing capacity, CoreWeave disclosed that as of the end of the third quarter, the company held about US$6.5 billion in cash and other short-term liquid assets, and had close to US$5 billion in deferred withdrawal term loans that had not been withdrawn. Additionally, the company expects to receive approximately $9 billion in advance payments and security deposits from customers over the next three months, of which more than $3 billion relates to existing infrastructure without additional capital expenses.

Morgan Stanley pointed out that CoreWeave plans to launch a new investment-grade loan financing in the next few weeks. Management expects the yield to be about 7% to 7.5%, and the relevant financing can cover more than 90% of the corresponding capital expenditure. At the same time, the company said that it has committed more than 75% of capital expenditure in 2027 to support financing through existing investment-grade customers and enterprise customer contracts.

Morgan Stanley believes this arrangement will help ease market concerns about whether CoreWeave can raise sufficient capital for the 2027 expansion plan. However, the bank stressed that the new financing arrangement has yet to be finalized, so it will maintain a “shareholding wait and see” rating for the time being.

In contrast, Bernstein is more cautious about the sustainability of CoreWeave's long-term business model. Bernstein pointed out that although CoreWeave's performance in the third quarter was almost impeccable, and management made significant progress in business execution and financing arrangements, the current high profitability is largely based on the tight supply of AI computing power and the willingness of customers to pay premiums.

The bank anticipates that by 2028, the US data center market, which includes large cloud computing companies, emerging AI cloud service providers and other players, may increase the effective supply capacity of about 55 gigawatts or more. With the gradual release of production capacity in the industry, the current extremely tight supply and demand relationship may ease, putting pressure on CoreWeave's computing power rental prices.

Bernstein also raised questions about the long-term sustainability of the customer advance payment model. Although CoreWeave can currently require customers to pay a significant percentage of the contract amount in advance, if the supply of computing power increases and the customer's bargaining power increases in the future, it may be difficult to maintain such favorable financing conditions for a long time.

Meanwhile, CoreWeave's debt burden remains heavy. Bernstein pointed out that the company's interest expenses in the third quarter reached 846 million US dollars, more than double the adjusted operating profit for the same period; during the quarter, debt increased by 11.8 billion US dollars to 46.9 billion US dollars, while shareholders' equity was about 4 billion US dollars.

The bank believes that even if CoreWeave continues to expand its business scale, interest expenses, equipment renewal costs, and ongoing financing requirements may still erode operating profits. Especially in the context of rapid iteration of GPU technology, whether old devices can continue to receive high-priced renewals will be an important variable in determining the company's long-term returns.

Bernstein predicts that CoreWeave's adjusted net profit may not be corrected until the first half of 2028. Although the bank acknowledged the company's recent continuous improvement in execution capacity and believed that improved market sentiment might drive a rebound in stock prices, it still maintained a “outperforming market” rating and a target price of 54 US dollars.

Morgan Stanley maintained its target price of $70. Based on CoreWeave's closing price of $48.73 on November 10, the target price of the two institutions meant potential room for growth of about 44% and 11%, respectively, but the difference in ratings reflected the parties' different judgments on the company's long-term risk and valuation attractiveness.

Overall, CoreWeave's latest financial report further proves that demand for AI computing power is still strong, and the company is also speeding up revenue growth by increasing prices, expanding deployment scale, and improving operational efficiency. However, in a context where tens of billions of dollars will still need to be invested in infrastructure construction in the next few years, the ability to continue to obtain low-cost financing, maintain high computing power rental prices, and ultimately transform rapid growth into stable free cash flow is still the key to determining its long-term investment value.