Nebius Group (NASDAQ:NBIS) has unveiled an ambitious capital expenditure roadmap for 2027, projecting spending between $40 billion and $45 billion. The AI cloud provider, in its latest shareholder letter, indicated that customer prepayments and financing secured against existing investment-grade contracts would cover approximately 75% to 85% of this outlay. This leaves a substantial funding requirement of $6 billion to $11.25 billion that must be sourced from other avenues, according to calculations based on the company's guidance.
The funding gap represents 15% to 25% of the planned capital spending. While this might raise concerns about potential shortfalls, the company has not indicated a funding deficiency. The remaining amount could be financed through existing cash reserves or additional borrowing. The announcement comes amid a period of rapid expansion for Nebius, which has significantly increased its capital expenditure forecasts for the near term.
Higher Spending, Delayed Capacity
Nebius raised its 2026 capital expenditure forecast to approximately $27 billion, up from a previous range of $20 billion to $25 billion. This upward revision underscores the company's aggressive growth strategy in the AI infrastructure space. However, the market reacted negatively, with shares falling nearly 12% in early premarket trading, as reported by Reuters. This trading indication came before the regular Nasdaq session, reflecting investor concerns about the scale of spending and potential delays in capacity deployment.
Funding Scenarios and Implications
The funding gap varies depending on the combination of spending and coverage. At the lower end, with $40 billion in capex and 85% coverage, the shortfall would be $6 billion. At the upper end, with $45 billion and 75% coverage, the gap widens to $11.25 billion. These scenarios represent the bounds of the company's guidance, but no probability is assigned to either combination. The actual outcome will depend on how customer prepayments and financing arrangements evolve.
It's important to distinguish between customer prepayments and loans. Prepayments provide cash upfront in exchange for future service obligations, while loans must be repaid with interest. Neither should be double-counted when assessing available cash for construction. This distinction is critical for understanding the company's financial flexibility.
Financial Performance and Debt Burden
Nebius's unaudited quarterly accounts reveal the cost of its expansion. Revenue for the third quarter of 2026 surged to $980.8 million, up from $146.1 million a year earlier. The company achieved an operating profit of $50.4 million, reversing a $130.2 million loss in the same period last year. However, interest expense ballooned to $112.5 million, more than double the operating profit, highlighting the increasing debt load associated with the expansion.
The net loss narrowed to $37.5 million from $119.6 million, driven by the revenue growth. Quarterly capital spending skyrocketed to $7.30 billion from $955.5 million a year earlier. As of September 30, cash stood at $7.43 billion, before the company secured a new credit facility in October.
Existing Financing and Future Outlook
On October 22, Nebius announced a $3.5 billion senior secured credit facility with Citi, maturing in 364 days. The initial interest rate is Term SOFR plus 2.75 percentage points, rising to a maximum margin of 3.50 points, subject to adjustments. Chief Operating Officer Ophir Nave emphasized the importance of sequencing financing to optimize long-term cost of capital. The proceeds will support data center construction, GPU purchases, and general corporate purposes. The short maturity of this facility means refinancing terms will be critical for next year's construction budget.
Operational Challenges and Market Reaction
Despite better-than-expected quarterly results, as reported by Barron's, there are concerns about delays in future revenue. Reuters indicated that some third-party capacity has been shifted to the first half of 2027. The company maintains that underlying contracts remain in place, but these delays could impact cash flow timing.
The next major test comes in February 2027, when Nebius targets annualized revenue above $7 billion, about two months later than originally planned. This measure annualizes one month's revenue and is not a full-year sales projection. The company's ability to execute on its ambitious capex plan while managing financing costs will be closely watched by investors.
