CoreWeave (CRWV.US)'s strong results help drive a rebound in the neocloud sector! Whether Nebius (NBIS.US) can follow up with a high-growth report card becomes a key test.

CoreWeave (CRWV.US)'s better-than-expected third-quarter results and raised full-year guidance drove the entire neocloud sector higher in Wednesday's U.S. premarket trading. As of press time, CoreWeave and Nebius (NBIS.US) were up more than 10%, while Iren (IREN.US) was up nearly 6%. CoreWeave's strong earnings report eased market concerns about the sustainability of growth in the neocloud industryconcerns that had been weighing on the share prices of major companies in the sector for months. This not only gave Nebius's stock a boost but also raised market expectations for Nebius's quarterly results due later this week. If Nebius also delivers strong results, it could further ease market concerns about neocloud providers and help sustain the stock's rebound. CoreWeave Q3 revenue surged 168% year over year, full-year guidance raised The earnings report showed that, benefiting from continued growth in artificial intelligence (AI) computing demand, CoreWeave's third-quarter revenue was US$3.661 billion, up 168% year over year and 42% quarter over quarter, beating market expectations of US$3.56 billion. Under GAAP, the third-quarter net loss was US$709 million, compared with a net loss of US$110 million in the year-ago period and a net loss of US$626 million in the previous quarter. Diluted loss per share was US$1.27, which, although higher than US$0.22 in the year-ago period, was better than market expectations of a loss of US$1.46 per share. Under non-GAAP, CoreWeave's third-quarter adjusted net loss was US$529 million, compared with an adjusted net loss of US$41 million in the year-ago period and an adjusted net loss of US$567 million in the previous quarter. The adjusted net loss margin was 14%, improving from 22% in the previous quarter. Adjusted EBITDA reached US$2.256 billion, up about 169% from US$838 million in the year-ago period, and the adjusted EBITDA margin reached 62%, the highest level in nearly five quarters. CoreWeave disclosed that, as of the end of the third quarter, total revenue backlog reached US$132.5 billion, up 138% from US$55.6 billion in the year-ago period. Of that, about 36% of the revenue backlog is expected to be recognized as revenue within the next 24 months, 38% is expected to be recognized in months 25 to 48, and the remaining 26% is expected to be recognized after 48 months. The company said the increase in revenue backlog mainly came from existing and new customers, including AI labs, large cloud service providers, enterprise customers, and AI-native companies. However, this revenue backlog is not equivalent to realized revenue, and related revenue recognition still depends on whether the company can provide computing capacity and related services as required under contracts. Looking ahead to the full year, CoreWeave expects 2026 revenue to reach US$13.0 billion to US$13.3 billion, above its previous revenue forecast of up to US$13.2 billion. The company's raise of its full-year revenue guidance shows that demand for AI computing power remains strong despite challenges such as rising financing costs and project delays in AI data center construction. Nebius Q3 earnings preview Nebius will report its third-quarter 2026 financial results before the market opens on Thursday, November 12. The market currently expects Nebius's third-quarter revenue to grow 521% year over year to US$907.2 million and expects an adjusted loss per share of about US$0.72. Ahead of the earnings release, Nebius's stock experienced sharp volatility. On November 5, Nebius fell intraday to US$113.30, a roughly 62% drawdown from its year-to-date high of US$299.86 and its lowest level since April. The stock then rebounded for several consecutive trading days but remains about 55% below its year-to-date high. The market's main concerns are whether Nebius can deliver data center capacity on schedule, whether customer concentration is too high, and how much additional debt or equity financing the company will ultimately need in the face of tens of billions of dollars in annual capital expenditures. The third-quarter results will be an important checkpoint for testing these issues. In the second quarter, Nebius generated revenue of US$582.3 million, up 454% year over year and about 46% quarter over quarter, exceeding market expectations. After deducting cost of revenue, the company's gross margin was about 77%, group adjusted EBITDA reached US$236.2 million, and the margin was about 41%; among that, the adjusted EBITDA margin of the core Nebius AI cloud business was close to 50%. However, because data center expansion, depreciation, interest, and other expenses remained at high levels, the company's net loss from continuing operations for the quarter was about US$190.4 million. Therefore, the third-quarter results cannot be judged solely by whether earnings per share beat expectations. Because Nebius is in a capital-intensive expansion phase, a significant gap between adjusted profit and GAAP net income may persist. Investors need to determine whether revenue growth is driven by higher utilization of deployed capacity or by a new round of high-cost investment. Previously, Nebius maintained its targets for full-year 2026 revenue of US$3.0 billion to US$3.4 billion, a year-end annualized revenue run rate of US$7.0 billion to US$9.0 billion, and a group adjusted EBITDA margin of about 40%. If third-quarter revenue reaches about US$907 million, cumulative revenue for the first three quarters would be close to US$1.89 billion, meaning fourth-quarter revenue would need to reach at least about US$1.11 billion to achieve the low end of the full-year revenue guidance. Therefore, the fourth-quarter outlook will be more important than the third-quarter historical results. If management reiterates the target of a year-end annualized revenue run rate of US$7.0 billion to US$9.0 billion and clearly explains the timetable for bringing capacity online, the market may regain confidence that the stock's current decline has already overpriced risk factors. Microsoft Corporation and Meta orders drive growth but also amplify customer concentration and delivery risk Nebius's revenue growth is mainly driven by new capacity coming online and increased GPU usage by large customers. Management previously said that AI computing demand continues to exceed existing supply capacity, and newly added capacity is usually booked by customers before it officially begins operations. The company also benefits from strong GPU pricing. Nebius previously disclosed that auction prices for some next-generation Blackwell computing capacity were about 15% higher than previous peak prices and about 20% higher than quotes for existing projects. Unit revenue from short-term computing contracts is also significantly higher than that of earlier projects, indicating that tight supply of high-performance GPUs continues to give the company some pricing power. Nebius's contract with Microsoft Corporation (MSFT.US) is worth about US$17.4 billion and could increase to about US$19.4 billion if Microsoft Corporation purchases additional services. The contract requires Nebius to deliver GPU infrastructure in multiple phases; if, after the grace period ends, Nebius still fails to complete delivery according to the agreed timetable and cannot provide alternative capacity, Microsoft Corporation has the right to terminate the corresponding batch of services. There have recently been reports that Microsoft Corporation is strengthening its review of projects by neocloud providers such as Nebius, IREN, and Nscale, while taking a more cautious approach to some costly new projects with greater delivery risk. Microsoft Corporation has not announced cancellation of its core contract with Nebius, but investors will focus on whether management confirms that the project timetable is unchanged and whether Microsoft Corporation remains willing to expand cooperation between the two sides. Meanwhile, Meta (META.US) signed a five-year, US$12 billion dedicated computing agreement with Nebius, with capacity delivery expected to begin in early 2027. Meta also agreed to purchase remaining computing capacity that Nebius cannot sell to third-party customers in certain clusters, with additional purchases of up to US$15 billion, bringing the potential scale of cooperation between the two sides to about US$27 billion. These long-term agreements increase visibility into future revenue but also lead to high customer concentration. Nebius disclosed that in the second quarter, three customers contributed about 24%, 21%, and 14% of revenue, respectively. If any one of these customers delays delivery, adjusts capacity demand, or stops placing additional orders, it could have a material impact on the company's short-term growth expectations. Over the long term, Microsoft Corporation and Meta are also building their own data centers. At present, part of the reason large technology companies use neocloud providers such as Nebius is that the expansion of their own computing capacity cannot keep pace with AI demand. If self-built capacity increases in the future, Nebius will need to attract more AI model companies, enterprise customers, and government customers to avoid long-term reliance on a small number of hyperscale cloud service providers. US$20 billion-US$25 billion in capital expenditures tests financing capacity Nebius's growth model requires continuous purchases of NVIDIA Corporation GPUs, expansion of data centers, and securing power supply in advance, so its capital needs are far higher than those of traditional software companies. In the second quarter, the company's capital expenditures reached about US$5.7 billion, mainly for GPUs, related hardware, and data center expansion. Management expects full-year 2026 capital expenditures to reach US$20 billion to US$25 billion. The company hopes to fund expansion through a combination of customer prepayments, operating cash flow, asset-backed financing, convertible bonds, and equity financing. Some contracts signed in the second quarter include prepayment terms that can cover 50% to 60% of related capital expenditures, thereby reducing the extent to which Nebius must rely entirely on its own balance sheet to finance expansion. However, financing remains shareholders' biggest concern. Nebius raised funds through at-the-market (ATM) offerings in the second quarter, increasing its number of outstanding shares; in August, the company completed an offering of senior convertible notes with an aggregate principal amount of about US$5.75 billion. In October, Nebius also obtained US$3.5 billion in senior secured financing from Citigroup to support its global capacity expansion. Although these financings strengthen the company's short-term expansion capacity, they also bring interest expense and potential equity dilution. If data centers come online as planned and utilization remains high, the newly invested capital is expected to revenue; but if projects are delayed, Nebius will need to bear debt service, depreciation, and operating expenses first while revenue recognition is postponed, which could rapidly intensify cash flow pressure. Wall Street remains relatively optimistic about Nebius's long-term prospects. According to TipRanks data, 13 Wall Street analysts covered Nebius over the past three months, with an average price target of about US$296.73, a highest target of US$410, and a lowest target of US$144.