Nebius reports higher quarterly capex on AI cloud expansion

May 13 (Reuters) - Nebius Group NBIS.O on Wednesday reported higher-than-expected first-quarter capital spending, driven by investments tied to the procurement of graphics processing units and data center hardware for its core AI cloud business.

The company has grabbed a slice of the lucrative AI and cloud infrastructure market by providing Nvidia GPUs and computing platforms to developers.

However, analysts have flagged Nebius' heavy capital spending as a major concern as the company aggressively expands its global data center footprint, putting pressure on margins despite strong revenue growth.

Nebius even paused its share buyback program in late 2024 to redirect capital toward expanding its core AI infrastructure business.

The concerns mirror those at larger rival CoreWeave CRWV.O, which has projected between $30 billion and $35 billion in capital spending this year, warning that the ramp-up in investments could weigh on near-term margins.

Nebius Group has been expanding its AI infrastructure business through acquisitions and large computing contracts.

Earlier this month, the company agreed to buy AI startup Eigen AI for about $643 million to strengthen its inference platform and U.S. presence.

Nebius also signed a long-term deal with Meta META.O to provide up to $27 billion worth of computing capacity over five years.

Capital expenditure jumped to about $2.5 billion in the first quarter, compared with $544 million a year ago. Analysts at Visible Alpha estimated $2.4 billion.

Revenue for the three months ended March jumped to $399 million, beating an estimate of $371.4 million, according to data compiled by LSEG.