Nebius beats estimates as AI cloud demand surges
Nebius shares jumped more than 20% Wednesday after the AI infrastructure company beat second-quarter revenue estimates and reported a sharp increase in large customer contracts.
Revenue reached $582.3 million for the quarter ended June, ahead of the $572.75 million expected by analysts surveyed by LSEG.
Revenue from Nebius’ core AI cloud business rose nearly sixfold from a year earlier.
CEO Arkady Volozh said the company is converting growing AI demand into “contracted, profitable growth.”
Four new contracts averaged more than $1 billion each
Nebius signed four major AI cloud agreements during the quarter with an average contract value of more than $1 billion.
Total contract value nearly quadrupled, while the value of contracts signed with new customers increased more than ninefold.
The Nvidia-powered cloud provider said contracts signed during the quarter carried annual values above $20 million per megawatt and are expected to begin coming online late in the fourth quarter.
Nebius now has more than $40 billion in customer commitments and expects to receive more than $9 billion in customer prepayments this year.
Volozh says Nebius could sell all of its 2027 capacity today
Competition in AI cloud infrastructure is growing, with companies including xAI adding their own large compute platforms.
Volozh said the supply-demand imbalance remains wide enough that Nebius could sell all of its planned 2027 capacity at current terms.
CoreWeave reinforced the same trend a day earlier when it raised its annual forecasts following strong customer demand.
Emarketer analyst Jacob Bourne said AI cloud demand continues to accelerate despite increasing competition, although the durability and diversity of that demand beyond the AI industry remains an open question.
Nebius is spending heavily to keep up
The expansion is requiring billions of dollars in new infrastructure.
Nebius spent approximately $5.7 billion on capital expenditures during the quarter, above Visible Alpha estimates of $4.7 billion.
The money is going into GPUs, data centers and power capacity as Nebius races to bring more compute online.
The company increased its contracted power target for 2026 to 5 gigawatts, up from its previous target of more than 4 gigawatts.
Beginning in 2027, Nebius expects to deploy more than 1 gigawatt of additional capacity every year.
For perspective, one gigawatt is roughly enough electricity to power 750,000 US homes.
Nebius is locking in customers before capacity is built
The scale of Nebius’ customer commitments gives the company more visibility as it commits billions to new infrastructure.
More than $40 billion has already been contracted, while billions in customer prepayments are expected to help fund expansion.
The company is effectively selling future AI computing capacity before the data centers are fully online.
Wednesday’s results showed the model accelerating: revenue beat expectations, contract sizes increased sharply, and Nebius raised its power target again.
The next challenge is execution. Nebius now has to build the infrastructure fast enough to deliver the capacity customers have already agreed to buy.
Disclaimer
WallStAccess is a financial media platform providing market commentary and analysis for informational and educational purposes only. This content does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. Readers should conduct their own research or consult a licensed financial professional before making investment decisions.
