CoreWeave (NASDAQ: CRWV) saw its shares climb 5.5% to $77.20 at the start of U.S. trading on Monday, bouncing back from recent lows. The move followed a reaffirmation of a Buy rating and a $140 price target by BofA Securities, a unit of Bank of America (NYSE: BAC). Despite the positive sentiment, the investment bank's updated capital expenditure forecast of $34 billion for 2026—up from a prior $29 billion—underscores the significant financial hurdles the cloud computing firm faces.
Capital Spending and Margin Outlook
BofA's $34 billion capex projection is based on analyst estimates rather than new company guidance. CoreWeave's most recent official outlook remains between $31 billion and $35 billion. The bank's analysis shifts the focus from demand to execution, highlighting a steep path to profitability. For the second quarter, BofA expects an operating margin of just 2.4%, below the Street consensus of 2.8%. By the fourth quarter, the bank forecasts a margin of 14.6%, a sharp contrast to the 1.0% adjusted margin reported in the first quarter.
The company's operating loss of $144 million and net loss of $740 million in Q1 underscore the margin challenges. Adjusted EBITDA came in at $1.16 billion, reflecting a 56% margin, but interest expenses remain a heavy burden. Net interest expense for Q1 totaled $536 million, while adjusted operating income was only $21 million, resulting in an interest coverage ratio of 25.5 times on a preliminary basis.
Power Conversion and Backlog
CoreWeave's operational progress is measured by power activation. By the end of the quarter, active power exceeded 1 gigawatt, while contracted power stood at over 3.5 gigawatts. A basic calculation of those thresholds yields an activation ratio of roughly 29%, though the company has not released precise data. The order book remains a key support, with a backlog of $99.4 billion—approximately 2.9 times BofA's capex estimate. Revenue is recognized only when sites are powered and equipped, so converting contracted megawatts to revenue is critical.
Revenue Growth and Client Concentration
First-quarter revenue more than doubled year-over-year to $2.08 billion, driven by strong demand for AI infrastructure. However, the company's heavy reliance on major clients, particularly Meta Platforms (NASDAQ: META), introduces risk. Meta has agreed to a new $21 billion contract with CoreWeave, on top of a previous $14.2 billion deal, extending through December 2032. Meta is also in early negotiations to provide up to $10 billion in computing capacity to Anthropic, a move that could influence its future demand for CoreWeave's services. Rosenblatt analyst John McPeake maintained a $250 price target, noting that GPU shortages remain "the norm right now across the industry."
Market Context and Risks
Shares of CoreWeave are still trading roughly 50% below their $153.20 peak. BofA's $140 price target implies an 81% potential upside from current levels. Risks remain elevated, including delays in power supplies, rising component costs, and increased funding expenses. Competition from other neocloud providers, such as Nebius Group (NASDAQ: NBIS), which advanced 4.3%, and data-center builder Applied Digital (NASDAQ: APLD), which jumped 7.5%, adds to the pressure. Meta's cloud strategy could also strain pricing.
Despite Monday's rebound, the path to profitability requires converting contracted megawatts into revenue and then into operating profit at a rate that outpaces rising interest costs. The $34 billion capex projection, while based on estimates, highlights the scale of investment needed to support growth. As BofA's analysis suggests, the focus now is on implementation, not just demand.
