Nebius Plunges 15% as $7.3 Billion Capex Sparks Concern Despite 571% Q3 Revenue Surge

TradingKey - Nebius (NBIS) shares fell more than 15% in premarket trading on Thursday after reporting its third-quarter earnings. Although both revenue and adjusted profit improved significantly, investors looked past the rapid growth, quickly shifting their focus to massive data center investments, persistent operating cash outflows, and potential future financing needs.

Source: TradingView

In the third quarter, Nebius reported revenue of $981 million, up 571% year-over-year and beating market expectations of approximately $908 million. The core AI cloud business contributed $974 million, surging 643% year-over-year, indicating that demand for AI compute leasing remains robust. For the first nine months, cumulative revenue reached $1.962 billion, up 549% from the prior-year period.

Profitability metrics also showed marked improvement. Nebius posted third-quarter adjusted EBITDA of $466 million, compared with a loss of $5.2 million in the prior-year period, while adjusted net profit reached $90.9 million, reversing from a loss of approximately $100 million in the same period last year.

However, on a GAAP basis, the company still recorded a net loss from continuing operations of $37.5 million, or a diluted loss of $0.13 per share. This indicates that while Nebius's core business is nearing profitability, expenses such as depreciation, interest, and share-based compensation continue to weigh on the bottom line.

What truly triggered market concern was the scale of capital required for expansion. In the third quarter, Nebius's expenditures for the acquisition of property, equipment, and intangible assets reached $7.3 billion, up approximately 664% from $956 million in the prior-year period. For the first nine months, such expenditures totaled $15.431 billion, reflecting the company's accelerated data center construction and AI server procurement to fulfill an expanding pipeline of customer contracts.

Meanwhile, the company recorded net cash outflows from operating activities of $273 million in the third quarter, compared with net outflows of about $80.6 million in the prior-year period. Although Nebius generated roughly $4.231 billion in net operating cash inflows for the first nine months of the year, this figure was significantly driven by increases in customer advances and deferred revenue. The quarterly cash flow turning negative again stoked investor concerns that the pace of expansion might exceed its internal cash-generation capability.

As of the end of September, Nebius held approximately $7.426 billion in cash and cash equivalents, with total cash and restricted cash of about $8.641 billion. Compared with the $7.3 billion in equipment expenditures in the third quarter, the existing cash cushion is far from ample. The company expects capital expenditures to further rise to between $40 billion and $45 billion in 2027 and aims to achieve pretax breakeven by the end of 2027. This means that over the coming year, Nebius will remain in a critical transition period between heavy investment and earnings realization.

To support its global compute buildout, the company recently secured $3.5 billion in senior secured financing from Citi, noting that it can rely on customer advances, operating cash flow, and asset-backed financing to supplement funding.

Nebius also disclosed that long-term contract commitments signed by investment-grade customers exceeded $40 billion, providing a foundation for subsequent financing. However, with debt and capital expenditures rising in tandem, the market will pay closer attention to whether newly built capacity can come online as scheduled and whether long-term contracts can be translated into revenue and free cash flow in a timely manner.