Nebius Group N.V. (NASDAQ: NBIS) closed Thursday at $255.04, preserving a two-day gain of 32% after its quarterly earnings report. The stock slipped 1.6% during Thursday's session, following Wednesday's 34.1% surge. Investors are now scrutinizing the sustainability of this rally, especially given the company's aggressive capital spending plans.
Earnings Highlights and Market Reaction
The company reported second-quarter revenue of $582.3 million, a 454% year-over-year increase. Adjusted EBITDA turned positive at $236.2 million, compared to a loss of $21.0 million in the prior year. The AI-cloud segment contributed $575 million, or 98% of total revenue. Annualized run-rate revenue climbed 598% to $3.0 billion.
However, the stock's momentum faces a significant test. Nebius invested $5.66 billion in capital expenditures during the quarter, which is 9.7 times its quarterly revenue and 24 times its adjusted EBITDA. This heavy spending underscores the capital-intensive nature of scaling AI infrastructure.
Funding Strategy and Customer Prepayments
To finance expansion, Nebius has leaned on customer prepayments. Around 70% of new AI-cloud agreements include prepayments covering 50% to 60% of associated capital expenses. The company expects to receive over $9 billion in customer prepayments in 2026. These advances generated $2.25 billion in operating cash flow during the quarter.
Despite this, total debt stands at $8.55 billion, slightly higher than cash and equivalents of $8.04 billion. Deferred revenue ballooned to $5.98 billion, up $4.40 billion since year-end, reflecting the prepayment commitments.
Analyst View and Risks
The consensus analyst rating is Strong Buy, with an average price target of $312.67, implying a 22.6% upside from Thursday's close. However, this is based on only three analysts, and post-results updates could shift the outlook.
Risks include potential delays in power supply, GPU availability, or data center readiness, which could postpone revenue recognition while debt and depreciation continue. The company reported a GAAP net loss of $190.4 million for the quarter, though this was an improvement from a $91.5 million loss in the prior year (excluding a one-time revaluation gain).
Expansion Plans
Nebius has increased its contracted power goal for the end of the year to 5 gigawatts, with plans to add over 1 gigawatt annually starting in 2027. The expansion rate is now capacity-driven rather than demand-driven, indicating confidence in long-term growth.
Founder and CEO Arkady Volozh commented, "This was the quarter the market validated our strategy," highlighting the four AI-cloud agreements, each averaging over $1 billion.
Market Context
The stock's recent performance reflects a broader trend in AI infrastructure plays. Nebius, which emerged from Yandex's divestment, is positioning itself as a key player in the AI cloud space. However, the capital intensity and reliance on prepayments introduce unique risks compared to traditional cloud providers.
Investors will watch next week's trading to see if the stock holds above the post-earnings low of $247.38 and tests the high of $275.96. Analyst updates could redefine the valuation cap. Nebius has no scheduled company events in the coming week, leaving the market to digest the earnings report and its implications.
