Nebius Group (NASDAQ:NBIS) experienced a sharp selloff on Thursday, with shares sliding approximately 10% to $197.21, significantly underperforming its AI-infrastructure peers. The decline, which erased a substantial portion of the week's earlier gains, comes just days before the company is scheduled to report its second-quarter earnings.
The market's reaction underscores the heightened scrutiny on Nebius's ability to translate massive capital expenditures into revenue growth. Initial consensus estimates project second-quarter revenue of $535.03 million, a 34.1% sequential increase from the first quarter's $399 million. However, to meet the company's full-year guidance of $3.0 billion to $3.4 billion, Nebius would need to generate an average of $1.033 billion to $1.233 billion per quarter in the second half, representing a staggering 93% to 130% jump from the second-quarter consensus.
Capacity Expansion Under the Microscope
Management has indicated that third-quarter expansions are expected to significantly boost its operational footprint, supporting the goal of reaching 800 megawatts to one gigawatt of connected power by year-end. This timeline is critical, as investors will be looking for concrete evidence that this capacity is coming online and will drive the anticipated revenue surge.
The company's first-quarter results highlighted strong operating leverage, with adjusted EBITDA turning positive at $129.5 million compared to a loss of $53.7 million in the prior year. However, the capital-intensive nature of the business is evident: purchases of property, equipment, and intangible assets totaled nearly $2.5 billion in the quarter, more than tripling year-over-year. As of March 31, Nebius held $9.3 billion in cash against roughly $8.45 billion in total debt.
Analyst Sentiment Mixed
Wall Street's view on Nebius is divided. Piper Sandler initiated coverage with a Neutral rating and a $224 price target, citing near-term risks to estimates, particularly regarding the Vineland data center. Citigroup reduced its price target to $278 but maintained a Buy recommendation. Bank of America and Northland Securities are more bullish, with price targets of $280 and $410, respectively. According to FactSet, the consensus rating is Overweight with an average price target of $267.31, implying about 35% upside from Thursday's close. However, the target range is exceptionally wide, from $144 to $410, reflecting divergent expectations on capacity delivery and future margins.
James Fish of Piper Sandler pointed to Nebius's asset-light approach and reliance on customer prepayments as positive factors, but also flagged potential headwinds. The company recently announced the appointment of Lindsey Irvine as chief marketing officer, though no updated financial guidance was provided.
Financing and Risks
To alleviate its capital burden, Nebius secured $775 million in GPU-backed financing in July and has been pursuing partner-funded projects that require less upfront investment. Yet, significant risks remain, including construction delays, GPU supply constraints, and financing requirements. High customer concentration, pricing pressure, and a potential slowdown in AI demand could also dampen returns on new capacity.
Nebius is set to release its second-quarter earnings before the market opens on August 12. While revenue figures will be closely watched, the timeline for third-quarter capacity may attract even greater attention, as it will be a key determinant of whether the company can achieve its ambitious 2026 targets.
