Cerebras Systems Inc. (NASDAQ:CBRS) saw its stock trade near its initial public offering price on Wednesday, after the AI chipmaker's first earnings report as a public company disappointed investors with weak margin guidance that overshadowed strong revenue growth and a major deal with OpenAI.
Shares were indicated at $193.25 in premarket trading, down 14.8% from Tuesday's close of $226.72, according to data from Google Finance. That puts the stock just 4.5% above its $185 IPO price from last month, when the company raised approximately $6.38 billion in gross proceeds after underwriters exercised their full option.
Margins Squeeze Despite Revenue Surge
Cerebras reported that first-quarter GAAP revenue nearly doubled year-over-year to $193.4 million, while core revenue—which excludes pass-through costs and warrant amortization—rose 92% to $191.3 million. The company also posted a GAAP net loss of $14.0 million, narrowing from a year ago, with a core net loss of just $2.5 million.
However, the company's full-year core gross margin guidance of 38% to 41% came in well below the first quarter's 47% and significantly trailed rivals like Nvidia (NASDAQ:NVDA), which boasts mid-70% margins, and AMD (NASDAQ:AMD) with mid-50% margins. The guidance reflects the rapid shift in Cerebras's revenue mix toward lower-margin cloud and services.
Cloud Revenue Growth Pressures Profitability
Cloud and other services revenue surged to $82.8 million from $29.8 million a year ago, now representing 42.8% of total revenue, up from 30.0% in the same period last year. However, gross margin for this segment plummeted to 48.9% from 68.2%, a decline of 19.3 percentage points. In contrast, hardware margins improved to 41.3% from 30.5%.
Chief Financial Officer Bob Komin acknowledged on the post-earnings call that renting outside capacity would temporarily depress cloud and services margins, as reported by Reuters. The cloud segment generated only about $20.2 million in gross profit on $53.0 million in new revenue, a 38% margin, while hardware contributed $24.4 million on $40.9 million, close to 60%.
Growth Story Remains Intact
Despite the margin concerns, Cerebras's growth narrative remains compelling. The company announced a multi-year deal with OpenAI for 750 megawatts of compute, valued at over $20 billion. Amazon Web Services is also using Cerebras CS-3 systems with its Trainium chips to accelerate response times in Amazon Bedrock. OpenAI's Sachin Katti described Cerebras as a "dedicated low-latency inference solution."
Chief Executive Andrew Feldman emphasized the value of speed, stating in the earnings release that "fast AI is more valuable than slow AI." Morgan Stanley analysts led by Joseph Moore noted after the quiet period that demand for fast, low-latency inference is rising rapidly, calling Cerebras a "unique opportunity" to invest in an AI processor company challenging Nvidia.
Valuation and Risks
Even after the premarket decline, Cerebras trades at roughly 49 times the midpoint of its 2026 core revenue forecast of $855 million to $865 million, with a market capitalization of about $49.79 billion based on Tuesday's close. The company faces risks including the need for additional capital, limited data center space, ongoing losses, and heavy reliance on a few large customers such as OpenAI, Group 42, and AWS.
Analysts suggest that capacity, not demand, will drive Cerebras shares in the coming quarters. If leased capacity sits idle longer than expected or if Nvidia and AMD push inference prices lower, the stock could remain near its IPO level, still looking expensive relative to revenue.
