Nebius Group (NASDAQ: NBIS) saw its stock decline 6.7% in afternoon trading on Tuesday, reversing an earlier pre-market gain of nearly 3%. The move extends the stock's two-session slide to roughly 10.6%, as a major new customer order failed to alleviate lingering concerns about the company's cash conversion and capital intensity.
The sell-off comes even as Reflection AI committed to purchase over $1 billion in computing capacity through 2029. That headline figure, if spread evenly over the period, would amount to approximately $290 million annually—less than 10% of Nebius's midpoint revenue guidance of $3.0 billion to $3.4 billion for 2026. While strategically significant, the deal is not large enough to materially shift near-term estimates.
Reflection AI will gain access to systems powered by NVIDIA's (NASDAQ: NVDA) GB300 chips. "The need for open models is clear," said Ioannis Antonoglou, CTO and co-founder of Reflection AI, adding that the added capacity will support training larger models. However, key contract details such as start date, margins, prepayment structure, and take-or-pay obligations were not disclosed, leaving the economics of the deal ambiguous.
The market's muted reaction stands in stark contrast to previous major announcements. Earlier this year, a $17.4 billion contract with Microsoft (NASDAQ: MSFT) sent Nebius shares up 43.3% in a single afternoon, while a $12 billion deal with Meta Platforms (NASDAQ: META) drove a 15% gain. The $1 billion Reflection order, by comparison, added just 2.2% to the combined headline value of those two deals, and investor enthusiasm has clearly waned with each successive announcement.
Financial metrics from the first quarter underscore the challenges. Nebius reported revenue of $399 million, while capital spending reached approximately $2.5 billion—a ratio of 6.3 times revenue. Operating cash flow of $2.26 billion was heavily dependent on a $3.20 billion increase in deferred revenue. Financing activities contributed an additional $6.30 billion. The company ended the quarter with $9.3 billion in cash.
Nebius's adjusted EBITDA came in at $129.5 million for the first quarter, with depreciation and amortization of $212 million representing 53% of revenue. The company extended the estimated useful life of its servers and network equipment from four to five years, which reduced quarterly depreciation by $43.1 million and boosted net income by $41.6 million—a notable accounting adjustment that investors may scrutinize.
The company's Cloud 3.6 update introduces the Echo infrastructure agent, enhanced SkyPilot integrations, enterprise-grade security, and faster storage—features designed to improve customer stickiness. Yet neither the update nor Tuesday's report provided granular detail on software-only revenue or margins, leaving a key part of the value proposition unquantified.
In the broader market, CoreWeave (NASDAQ: CRWV) fell 4.2% on Tuesday, while NVIDIA gained 3.8% and Meta rose 0.7%. The divergence suggests investors are rotating away from capital-intensive cloud lessors rather than questioning overall AI chip demand. CEO Arkady Volozh reiterated that compute demand is "vastly exceeding capacity," but the market appears focused on execution risks including rollout delays, pricing pressure, customer credit risks, and potential financing challenges.
For Nebius to regain investor confidence, the company will need to demonstrate deployment of GB300 machines, conversion of deferred revenue into recognized sales, and a reduction in capital spending relative to revenue. The Reflection AI deal broadens Nebius's client base, but without greater transparency on contract economics, the path to sustainable cash generation remains unclear.
