Nebius (NASDAQ:NBIS) saw its stock decline sharply on Wednesday, falling 9.9% to $152.97 by midday, as investor concerns over the company's funding requirements and asset-light strategy intensified. The drop came amid a broader sell-off in technology and related stocks, with CoreWeave (NASDAQ:CRWV) slipping 8.5%, IREN (NASDAQ:IREN) falling 10.6%, and Nvidia (NASDAQ:NVDA) off 2.8%. The Nasdaq Composite was down 1.1% at 11:39 a.m. EDT.
The central question for investors is whether Nebius can successfully shift a significant portion of its expansion costs off its balance sheet. Despite strong customer support, the company's cash expenditures far outpace its revenue. In the first quarter of 2026, Nebius reported revenue of $399 million, but spent $2.47 billion on property, equipment, and intangible assets—a ratio of 6.2 times revenue. Interest expenses amounted to $63.7 million, or 16% of revenue.
Customer advances provided some relief, totaling $3.20 billion, which covered 129% of cash capital spending. These advances contributed to positive operating cash flow of $2.26 billion. However, the company's deferred revenue stood at $4.78 billion as of March 31, with outstanding performance commitments of $33.59 billion, of which Nebius expects to recognize 29% as revenue over the next 24 months.
Nebius held $9.30 billion in cash as of March 31, but its convertible notes principal amounted to $10.04 billion, underscoring the importance of execution and refinancing. Nvidia remains a key backer, with a 9.3% beneficial interest largely via a warrant, as disclosed in July. Despite the recent drop, Nebius shares are still 61% higher than the $94.94 price seen in March.
The company's asset-light strategy involves partners funding, owning, and operating data centers and hardware, while Nebius provides the architecture, software, and customer base. CEO Arkady Volozh has stated that partners can access a wider customer base with better margins. Initial deals include revenue sharing, licensing fees, and committed-capacity arrangements.
Nebius recently arranged a $775 million facility secured by graphics processors and future contracted cash flows, with an interest rate 2.5 percentage points over SOFR. The company said this loan, combined with customer cash flows, fully covers capital costs for that deployment. A July 17 release referenced over $40 billion in contracted revenue from investment-grade clients, including Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META).
Credit conditions have tightened, with major technology firms selling $194 billion in bonds by July 7, a 79% increase over the total issued in 2025, according to Reuters. Colby Stilson, head of fixed income at Brown Advisory, noted, “We’re already seeing fatigue within credit markets in supporting this massive debt issuance.”
The upcoming second-quarter results, scheduled for August 12, will be a key test. Investors will monitor capital expenditure, customer prepayments, secured loans, and asset-light income. Guidance on margins could prove more significant than any new contract announcements. Risks include partners failing to meet expectations, customer attrition, competitive pricing, and tighter capital availability, as well as potential dilution from convertible notes.
