TradingKey - As demand for AI compute continues to heat up, two next-generation AI cloud service providers delivered better-than-expected results, reigniting market confidence in AI infrastructure demand. In U.S. trading on August 12, Nebius (NBIS) shares surged 34% to close at $247.05, while CoreWeave (CRWV) rose 19% to close at $107.73.
Source: Google Finance
Nebius reported particularly bright second-quarter results. The company's revenue surged 454% year-over-year to $582.3 million, topping market expectations. Among this, AI cloud business revenue reached approximately $575 million, up 514% year-over-year, becoming the primary driver of nearly all growth. Adjusted EBITDA reached $236 million, well above analysts' expectations of $169 million, with profit margins expanding from 32% in the first quarter to 41%. However, on a GAAP basis, the company still recorded a net loss of $190 million from continuing operations.
In addition, Nebius signed four major AI cloud contracts in the second quarter, with an average value exceeding $1 billion per contract, serving clients including Reflection, Cohere, and U.S. quantitative trading firms. The company stated that roughly 70% of the deals involved customer advance payments and expects full-year customer advance payments to exceed $9 billion. To date, the company's cumulative customer commitments have topped $40 billion.
Even more noteworthy, Nebius's compute pricing power is strengthening. The company recently conducted its first capacity auction, with transaction prices approximately 15% higher than the previous record-high quote for Blackwell GPUs.
Currently, the annual contract value per megawatt for Nebius's long-term contracts ranges from approximately $20 million to $25 million, while short-term capacity contract prices have reached $40 million to $50 million per megawatt, with some transactions pricing even higher.
This price disparity also gives the company greater operational flexibility. Nebius CEO Arkady Volozh stated that under current contract terms, the company could virtually sell out all of its planned capacity for 2027, but management chose to reserve a portion of supply to capture higher returns from short-term contracts when demand is booming.
Meanwhile, CoreWeave, which previously reported earnings, also signaled that demand for AI compute remains strong. The company's second-quarter revenue reached $2.58 billion, slightly exceeding market expectations, and its loss per share of $1.14 was also better than analysts' estimates. More importantly, CoreWeave's sales backlog has surged to $104 billion, nearly doubling from last November, with new customer commitments not yet included in this quarter's financial report reaching another $25 billion.
However, market opinions remain sharply divided over the long-term profitability of AI cloud companies.
Bulls argue that AI compute demand still significantly exceeds effective supply, with customers willing to lock in capacity through advance payments, and rising short-term compute prices indicating that new cloud providers are gaining stronger pricing power than previously expected by the market.
Piper Sandler has raised its price target on CoreWeave to $153 and listed it as a top pick, while Citizens maintained its $180 price target.
However, bears' concerns have not disappeared. CoreWeave needs to continuously invest massive amounts of capital to build data centers and procure GPUs, and its cost of capital is noticeably higher than the implied returns on certain infrastructure assets.
D.A. Davidson thus maintained its Neutral rating and warned that if capital investment continues to outpace revenue growth, the company may eventually face declining returns on capital. Bernstein similarly noted that the capital expenditure pressures stemming from CoreWeave's rapid expansion warrant attention.
Nebius faces similar risks. The AI cloud market is attracting an increasing number of participants, and the entry of new players such as xAI means competition could further intensify, as the market weighs whether current high compute prices and massive order volumes can be sustained over the long term.
Find out more
Comments