Key Points
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Nebius is in a better financial position than some peers.
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Nebius expects its annual revenue run rate to explode from about $1 billion to around $8 billion next year.
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If customers pull back spending, however, that revenue growth might not fully materialize.
Nebius Group (NASDAQ: NBIS) shareholders had a rollercoaster week. Shares were down as much as almost 15% before sharply rebounding to end the week. The volatility came as investors considered whether AI cloud infrastructure companies like Nebius would fully realize revenue currently in its contract backlog.
Nebius stock closed the week 2% above last Friday’s close, according to data provided by S&P Global Market Intelligence.
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Image source: Nebius Group.
Growing debt fears
The early week plunge came as increasing debt loads for companies working to fund the expansion of artificial intelligence (AI) infrastructure have spooked investors. Nebius is in a better financial position than its peer, CoreWeave. Though Nebius has taken on debt to increase capacity this year, it still has negative net debt (more cash than debt).
Risks in the sector, exemplified by CoreWeave’s high debt position, contributed to the fear and selling that occurred earlier this week. Although Citigroup issued a “buy” rating for CoreWeave in an analyst note on Thursday night, indicating approximately 100% upside for the stock.
That spurred a recovery across the sector. It’s not just debt within the AI cloud infrastructure providers group investors need to watch, however. Customers have signed long-term agreements worth billions with companies like Nebius. If customers pull back on that spending, stocks like Nebius will plunge again.
Shares are priced assuming that Nebius will achieve its guidance of a $7 billion to $9 billion annual revenue run rate by the end of 2026. That compares to an expected $1 billion run rate at the end of the current quarter.
If some of that revenue fails to materialize, investors should brace for more downward volatility in Nebius stock.
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