Nebius (NASDAQ:NBIS) shares surged 28.4% in early trading on Thursday, reaching $190.34, as investors responded positively to the company's stronger-than-expected fourth-quarter revenue projections. The rally added approximately $10.7 billion to the company's equity value, based on the 253.9 million shares outstanding as of March 31.
Early consensus estimates indicate that $1.52 billion, or 44% of the projected 2026 revenue of $3.421 billion, is expected in the fourth quarter alone. This figure is 3.8 times higher than the first-quarter revenue of $399 million, underscoring the anticipated back-loaded growth pattern. The stock now sits just 5.1% below Freedom Capital's $200 price target, set on July 20, while Baird analyst Rob Oliver initiated coverage on July 22 with an outperform rating and a $250 target, suggesting a 31.3% upside from current levels.
The broader AI infrastructure sector also rallied sharply, with CoreWeave (NASDAQ:CRWV) gaining 23%, IREN (NASDAQ:IREN) rising 27.3%, and Microsoft (NASDAQ:MSFT) climbing 15.2% to $449.84. Microsoft's Azure and other cloud services revenue grew 43%, with Microsoft Cloud sales reaching $59.3 billion, up 27% year-over-year. CEO Satya Nadella noted that Azure revenue surpassed $100 billion for the first time, providing further evidence of strong demand in the AI cloud space.
Nebius's AI-cloud division reported a 45% adjusted EBITDA margin in the first quarter, with $174 million in adjusted EBITDA. However, capital expenditures on equipment and intangibles totaled $2.47 billion, representing 6.2 times the group's revenue, and the company reported a GAAP operating loss of $128 million. Despite these investments, the implied basic equity value of approximately $48.3 billion represents 14.2 to 16.1 times management's projected 2026 revenue, though this does not account for full dilution, as diluted weighted shares exceeded basic shares by 19.6% in Q1.
The strong demand narrative is supported by a recent deal with Reflection AI, valued at over $1 billion, for Nebius computing services. CEO Arkady Volozh stated, "Compute and cloud needs are vastly exceeding capacity," highlighting the company's strategic positioning in the AI infrastructure market. Financial Times reported that Citadel acquired a significant stake in Situational Awareness's public equity holdings after AI-related losses, with Situational Awareness holding a 5.6% position in Nebius as of May.
Analyst actions have been mixed but generally positive. Freedom Capital upgraded Nebius on July 20, while Baird began coverage on July 22 with an outperform rating. Northland analyst Nehal Chokshi set a $410 target on July 20, implying a 115.4% upside. Baird's Oliver highlighted Nebius's "strong full-stack offering well positioned for inference," along with customer diversification and rapid sector growth. However, the valuation divide persists: Barchart focuses on analyst upgrades and rising quarterly projections, Seeking Alpha points to the 45% cloud margin as signaling software-like economics, while Motley Fool argues that a 100-fold return remains unlikely due to potential shifts in growth assumptions.
Nebius is scheduled to report second-quarter results before the market opens on August 12. Key areas to watch include revenue near the preliminary estimate of $586 million, cloud margin performance, capital expenditures, and liquidity sources. The sequential growth trajectory implies Q2 revenue of $586 million (up 47% from Q1), Q3 of $916 million (up 56%), and Q4 of $1.52 billion (up 66%), totaling $3.421 billion—just 0.6% above management's upper guidance of $3.4 billion. This leaves little room for slower deployment in any quarter.
Risks include delays in scaling, power limitations, GPU shortages, softer utilization, and financing costs that could disrupt the growth trajectory. As of March 31, Nebius reported non-current debt of $8.43 billion, and its filings highlight risks related to funding, supply chain, and customer demand. Following the surge, the stock is no longer trading as a basic recovery play; the market is now pricing in the Q4 performance as a given.
