Cerebras IPO Surged to $350, Now Testing $244 — Will Q2 Earnings Confirm Wafer-Scale Speed Story?

Cerebras differentiates itself by manufacturing AI accelerators in a wafer-scale configuration. This architecture means the entire silicon wafer is leveraged in a single processor, whereas the more conventional design is to cut the wafer into smaller die and package them together. This design dramatically increases the memory on the die and the number of processor cores and results in an enormous advantage in regard to processing speed in inference tasks for large models.

The semiconductor company raised $6.4 billion in its May IPO, the largest semiconductor IPO ever. The offering was oversubscribed 20 times, demonstrating significant interest from institutions. Shares debuted trading above the price range, reaching $350 per share by the end of the first month of trading, or a 2.6x run from the range. This rapid move captures the momentum normally associated with an IPO and the optionality that follows. 

Once the dust settled at the end of its first month of trading, the stock backed off from peak trading levels by 33%, or to $234.85, a healthy pullback that still provides an 85% gain from the company’s IPO pricing levels.

The OpenAI Deal Is the Validation

Cerebras cites its partnership with OpenAI as the primary element of its ‘bull’ argument; 750 megawatts of dedicated high speed AI inference computing for many years (valued at more than $20B). This deal is not a bet; it’s OpenAI making a multi-year revenue commitment to Cerebras for the architecture that can meet the challenges of frontier AI. The OpenAI deal validates Cerebras’ wafer-scale architecture for inference computation speed against competition utilizing GPUs. The deal also provides critical information about advanced model development for hardware design.

OpenAI is not the only named client; partnerships have expanded Cerebras’ addressable market. Through their partnership, AWS will place Cerebras CS-3 systems in their data centers. AWS Trainium 3 will take care of model prefill, enabling CS-3 to perform decoding and inference in a disaggregated model, where it provides Cerebras with a competitive advantage for inference’s high-speed token generation. The partnership further validates Cerebras’ differentiation; integrated wafer-scale silicon is justified by cloud providers for the performance advantage.

Additionally, Cerebras announced a partnership with CrowdStrike (as reported earlier this week), to run Falcon AIDR threat detection models on CS-3 chips.

Q2 Guidance: Revenue Growth Flatlines, Margins Compress

This is where the bull narrative meets reality. Cerebras is guiding Q2 core revenue of around $194 million. While an increase over Q1’s $193.4 million, it still reflects essentially flat sequential growth, a marked contrast to the 92% YoY growth delivered in Q1. The slowdown could be due to customer absorption (i.e. customers cannot deploy chip systems faster than their (infrastructure) systems can absorb them) or it could be due to supply (Cerebras cannot ship systems at a faster rate than the manufacturing systems can produce).

Management also guided Q2 gross margins to be in the range of 36% to 38%. Compared to the Q1 results and Q1 cloud/services margin of 52.9%, the significant drop is attributable to hardware margin erosion as special performance-based incentive pricing (where customers pay a premium for speed) is expected to normalize at a lower competitive level. This means the first-mover premium is expected to erode.

The Profitability Path: Long-Term Targets vs. Near-Term Reality

Management looks to a gross margin structure of 60% and an operating margin structure of 40% as long-term goals. A margin structure of this nature would put them on par with software companies. The guideposts for this structure reveal that management expects investors to wait for continued revenue growth in order to offset the fixed costs of manufacturing, improved manufacturing efficiencies, and a more competitive performance-based pricing structure. All of these expectancies are completely beyond management’s control.

A bullish structure is developing on the CBRS chart as it establishes successive higher lows from the $169.35 low. Bulls have also been able to drive the price above the $220.61 level after breaking through the 2 major moving averages. An ascending trendline from the bottom base in July also helps Elliot Wave support the price.

CBRS Price Chart - Source: Tradingview

The $210.67 50 EMA and $219.13 100 EMA are also providing support and warrant mention. Bullish momentum continues to hold as the RSI is at 64 indicating Strong buying pressure without being in overbought territory. Over the next few hours, resistance is likely to be the $237-$244.03 zone. Breaking this level with a 4-hour candle close would likely validate a new all-time high and improve the outlook and target a new all-time high at $257.26 and then $269.39.

Key Levels (Aug 10-11, Pre-Earnings Aug 12)

• Immediate breakout level:  $244.03 (critical resistance)
• Extended targets:  $257.26, $269.39 (if breakout extends)
• Ascending trendline support:  $220.61–$219.13 (100 EMA)
• Secondary support:  $210.67 (50 EMA), $204.90
• Major floor:  $188.64
• Current price:  $234.85 (below breakout level)
• RSI:  64 (constructive, room to run)

What to Watch in Q2 Earnings Tomorrow (August 12 After Market Close)

The first question is on core revenue. Was core revenue at $194 million or did it miss? The second question is on gross margins. Did they hold steady in the target range of 36% to 38%? The third is on management's new outlook for the coming years. The fourth deals with the progress of the OpenAI integration and the AWS deployment. Are we still seeing OpenAI dominant revenue at better than 50%? Lastly, can the declining recoverable profits from the hardware segment be made up by a focus on cloud and services?

If Cerebras exceeds expectations and offers upbeat views, CBRS could indeed break above the $244.03 mark and go towards $257–$269. A downside view on earnings or outlook presents a greater risk of consolidation below $244.

The founding story of Cerebras' IPO describes how wafer-scale speed is a moat, the OpenAI $20B+ deal supports the positioning and the partnerships with AWS/AMD/CrowdStrike expand the market. That said, the Q2 guidance shows lackluster revenue and compression of margin levels. Investors want to see Cerebras' ability to scale gross margins to 60%. Here, they see red flags with execution deteriorating rapidly.

There is an ascending consolidation in CBRS with the key breakout level at $244.03; RSI at 64 is constructive. If CBRS breaks the $244.03 level, targets will be in the $257 - $269 range. However, if the level is not broken, the moving averages at $219 -$221 are likely support levels.

For traders, we believe the $244.03 level is critical, as it could potentially become support if the level is not broken. For investors, we would recommend waiting for the Q2 earnings results, expected to come out tomorrow, along with any changes in guidance, to determine where a potential viable investment opportunity may lie. Overall, we believe the speed of Cerebras is strong, but the compression in margin levels is a significant concern.