Nebius Group (NASDAQ:NBIS) closed Friday's session at $277.68, up 8.88%, bringing its market capitalization to $75.49 billion. The surge pushed the stock 4.85% above the average 12-month price target of $264.22 set by analysts covering the AI cloud provider.
The rally underscores investor optimism following the company's second-quarter earnings report, which showed revenue of $582.3 million, a 454% year-over-year increase from $105.1 million. Adjusted EBITDA swung to a positive $236.2 million from a loss of $21.0 million in the same period last year, with a margin of 49.7%. The AI cloud segment contributed approximately 98% of group revenue.
However, the company's aggressive expansion strategy is raising questions about capital intensity. Capital expenditure in Q2 reached $5.66 billion, up 1,008% from $510.6 million a year earlier, and amounted to 9.7 times quarterly revenue. As of June 30, Nebius held $8.04 billion in cash and $8.55 billion in debt.
Despite the heavy spending, the company's contract economics appear robust. Management disclosed that typical Q2 deal yields ranged from $20 million to $25 million per megawatt, with about 70% of deals prepaid. Approximately 50-60% of capital expenditure is paid in advance, and the estimated time to recover investment is one year and ten months. Total client commitments exceed $40 billion.
CEO Arkady Volozh noted that the company could sell all of its 2027 capacity under current terms immediately, but is holding back some supply for urgent orders. Nebius anticipates upwards of $9 billion in prepayments in 2026, easing the burden of its capital-intensive model. Four separate deals in Q2 each averaged more than $1 billion.
Analyst recommendations remain bullish, with six of ten analysts rating the stock a Buy and none recommending Sell. Price targets range from $144 to $410, reflecting a wide divergence in views on capacity, pricing, and financing risks. Northland Securities set the highest target at $410, while Morgan Stanley's $144 is the lowest.
Dilution remains a concern as the company funds its growth. Nebius issued 12.7 million shares in Q2, raising $2.85 billion, representing 4.7% of shares outstanding as of June 30. An additional 12.3 million shares remain authorized for sale under the program.
Looking ahead, the Federal Reserve's July meeting minutes are due August 19, and any rise in long-term yields could weigh on high-capital AI stocks. Traders are watching whether Nebius can sustain its price above the $264.22 consensus target. The stock's strong performance comes as peers CoreWeave (CRWV) and IREN (IREN) declined on Friday, with trading volume for Nebius reaching 28.78 million shares, 22% above its average.
