Morgan Stanley: CoreWeave added 500MW of capacity in a single quarter, setting a record, while high debt and customer concentration suppress valuations.

Morgan Stanley's August Q2 earnings report indicates that CoreWeave added a net active power capacity of 500MW in a single quarter, exceeding any previous quarter in history, and representing more than three times the figure from the same period last year. Management reiterated their goal of reaching at least 8GW by 2030. The median revenue guidance for FY26 has been raised by 2% to between $12.4 billion and $13.2 billion, while the median ARR guidance has been increased by 3% to between $18.5 billion and $19.5 billion. The company also raised its full-year capital expenditure guidance median by 12% to between $35.5 billion and $39 billion, with Q3 capital expenditure guidance of $11.5 billion to $13.5 billion, exceeding market expectations of $10 billion. The ARR for the Managed Inference platform grew from $1 million to over $100 million, and it is expected to reach at least $250 million by the end of the year. The report assesses that the adjusted operating profit margin for Q2 was approximately 8%, above expectations; however, the Q3 profit margin guidance of 5.8%-7.2% is below market expectations, and a significant improvement in Q4 margins will be required to achieve the full-year guidance. Morgan Stanley forecasts that CoreWeave's operating profit margin will be 15.9% in FY27 and 22.4% in FY28, with free cash flow remaining negative until 2028 and debt expected to increase to approximately $38 billion by the end of 2026. Morgan Stanley maintains an Equal-weight rating and a target price of $99, believing that the demand for GenAI data centers is strong; however, high debt levels and customer concentration remain key constraints preventing a breakthrough in valuation.