In Friday's trading session, Cerebras Systems Inc. (NASDAQ:CBRS) saw its shares decline by 5.3% to close at $218.87, extending a sharp post-earnings selloff that began on Thursday. The AI chipmaker's stock had already plunged 12% following its second-quarter earnings report, and the latest slide reflects growing investor unease about the company's lofty valuation rather than its underlying business momentum.
The market capitalization now stands at $51.8 billion, which translates to roughly 58.5 times the midpoint of management's 2026 core revenue guidance of $880 million to $890 million. This premium multiple has become a focal point for analysts and investors alike, especially as the company's GAAP financials reveal widening losses and a significant compression in gross margins.
Strong Core Performance, But GAAP Concerns Persist
Cerebras reported core revenue of $209.9 million for the second quarter, a 103% year-over-year increase. However, GAAP revenue came in at $180.1 million, reflecting a $29.8 million gap. The difference stems from $14.5 million in pass-through sales that are excluded from core revenue, and $44.3 million in customer-warrant amortization that is added back. These adjustments are based on commercial deal terms rather than actual cash collected during the quarter, raising questions about the quality of earnings.
GAAP gross margin fell sharply to 14.2% from 31.1% in the year-ago period, while core gross margin improved to 40.6% from 31.2%. The company's operating loss on a GAAP basis widened to $477.2 million, more than eight times the prior year's loss, largely due to $377.0 million in stock-based compensation and $22.8 million in related payroll taxes. On a core basis, the operating loss narrowed by 23% to $33.6 million.
Cloud Business Surges, Hardware Declines
Chief Executive Andrew Feldman highlighted the company's progress, noting that core revenue more than doubled and the cloud business nearly quadrupled year-over-year. GAAP cloud revenue jumped 281% to $126.0 million, while hardware revenue declined 23% to $54.1 million. The shift toward cloud services is a strategic priority, but it also contributes to the margin pressure and the widening gap between GAAP and core metrics.
Outlook Raised, Backlog Provides Visibility
Management raised its 2026 core revenue guidance to a range of $880 million to $890 million, up from a prior $855 million to $865 million. The company also lifted its core gross margin outlook to 41%-43% and its core operating margin to -19% to -17%, an improvement from previous guidance. This optimism is supported by a substantial backlog of $25.4 billion in remaining performance obligations, which equates to about 28.7 times the midpoint of 2026 core revenue guidance. Cerebras has also secured more than 600 megawatts of data-center capacity through 2027.
Liquidity remains strong, with cash, restricted cash, and short-term investments totaling $8.6 billion. Capital expenditures for the first half of the year were $548.9 million, and operating cash used was $47.5 million, indicating that the company has ample runway to fund its expansion.
Analyst Sentiment Stays Positive Despite Valuation
Wall Street analysts remain bullish, with all ten covering analysts rating the stock a Buy. The average price target stands at $298.90, implying a potential upside of 36.6% from Friday's close. Recent actions include Citi maintaining a Buy with a $320 target, Craig-Hallum reiterating Buy at $325, and UBS, Rosenblatt Securities, and Morgan Stanley all maintaining Buy ratings with targets ranging from $279 to $330. However, these targets rely on the company's ability to convert its contracted demand into profitable revenue quickly.
The stock's performance contrasted sharply with peers on Friday. Nebius Group (NASDAQ:NBIS) surged 8.9%, while Nvidia (NASDAQ:NVDA) remained nearly flat, and CoreWeave (NASDAQ:CRWV) slipped 0.7%. Cerebras's decline underscores the market's focus on valuation and accounting quality.
Upcoming Catalyst: SUPERNOVA Event
Investors will look for a tangible catalyst next week when Cerebras hosts its SUPERNOVA event on Tuesday, August 18, at 15:30 PDT. Management has promised product announcements and demonstrations involving production AI applications. The event could provide evidence that new products are accelerating backlog conversion without further widening the GAAP-to-core gap.
However, risks remain. The valuation hinges on extraordinary growth projections, and concentration risk is elevated with major clients such as OpenAI. Additionally, warrant incentives, equity-based compensation, and leased capacity may obscure profit margins and dilute shareholder value over time. As the company trades at 58.5 times projected sales, investors will demand proof that growth can justify the premium.
