Shares of Nebius Group (NASDAQ: NBIS), a rising name in the AI-native infrastructure space, jumped sharply following its most recent earnings report. The stock was up around 4% by market close, climbing as much as 9% intraday and briefly breaking through the $40 price level before easing slightly into the close. That type of move drew attention on Wall Street and in the retail investor community—and for good reason.
While the headline numbers were mixed, the underlying strength in recurring revenue, improvements in gross margins, and forward-looking guidance were all compelling. Here's a closer look at why NBIS stock surged after earnings, what the company revealed about its operational roadmap, and whether this fast-moving AI player is a smart long-term bet.
What Does Nebius Group Do?
First, let’s get oriented with the business. Nebius Group describes itself as an AI-native cloud infrastructure platform—a company specifically built from the ground up to handle intensive AI and machine learning workloads. Unlike traditional cloud players, Nebius designs both the hardware and software that powers its data centers in-house. This vertical integration gives it a distinct competitive edge in terms of customization, cooling efficiency, and optimization for AI-specific tasks.
To simplify—Nebius does what CoreWeave does, but arguably with a tighter tech stack. While CoreWeave offers data center infrastructure using mostly off-the-shelf hardware (like from SMCI or NVIDIA), Nebius builds its own racks and infrastructure systems around AI-centric use cases. Its software stack is tailor-built to manage large-scale data clusters, fine-tune workloads, and dynamically allocate compute, all while being optimized for power efficiency and cooling.
A Vertical Player in the AI Infrastructure Stack
Nebius Group is not your traditional cloud infrastructure provider. The company operates a vertically integrated platform purpose-built for AI and machine learning workloads, meaning it controls everything from custom hardware and racks to proprietary software, cooling systems, and compute scheduling layers.
This gives Nebius several advantages:
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Greater power efficiency due to in-rack cooling systems that operate at higher thermal thresholds (up to 40°C vs. industry standard 27°C),
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More flexibility and control over how resources are allocated to AI models,
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Faster time-to-deploy for enterprise clients that need fine-tuned infrastructure for training and inference.
Think of it as a vertically integrated version of CoreWeave, with design and engineering capabilities extending deeper into the stack. The focus is on providing AI-native compute, rather than retrofitting traditional data centers to handle AI loads.
Revenue Miss, But Recurring Revenue and Guidance Impress
On the surface, Nebius delivered a modest disappointment:
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Revenue came in at $55 million, slightly below expectations of $57 million.
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EPS was a loss of $0.39, beating expectations for a $0.44 loss.
However, the real driver of investor excitement came from Annual Recurring Revenue (ARR) and guidance.
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ARR hit $249 million by the end of March—significantly ahead of the $220 million target.
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Management reaffirmed its full-year ARR target of $750 million to $1 billion by December 2025.
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Full-year revenue is projected to land between $500 million and $700 million, suggesting further acceleration in the quarters ahead.
In a high-growth infrastructure business like this, ARR matters far more than headline revenue. It’s a strong forward indicator of customer stickiness, contract value, and the predictability of future cash flows.
Earnings Recap: A Mixed Bag on the Surface, Strong Momentum Beneath
Let’s dig into the numbers now. Nebius reported revenue of $55 million for the quarter—up a staggering 389% year-over-year, highlighting just how early and fast this business is growing. That said, this figure slightly missed Wall Street estimates, which were looking for about $57 million.
However, the earnings picture improved when looking at EPS (earnings per share). The consensus forecast had projected a loss of $0.44 per share, but Nebius beat that by reporting a smaller loss of $0.39 per share.
More importantly, the guidance was solid. Management reiterated its full-year revenue target of $500 million to $700 million and also updated its Annual Recurring Revenue (ARR) figures—perhaps the most critical KPI in a recurring SaaS-like infrastructure business. Through March, ARR reached $249 million, blowing past expectations of $220 million. Management believes ARR could reach $750 million to $1 billion by December 2025.
So despite the top-line revenue miss, this is a company clearly on the upswing with expanding recurring sales, improving margins, and forward-looking visibility.
EBITDA Loss Narrows; Profitability by 2025?
Nebius is not yet profitable, but the earnings report hinted at real progress. The company reported:
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An EBITDA loss of $62 million, a slight improvement from $71 million a year ago.
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Gross margins expanded, driven by economies of scale and improved data center efficiency.
While EBITDA margins remain in deeply negative territory (over -100%), Nebius is actively scaling its revenue base faster than costs, suggesting that operating leverage is kicking in.
The company reiterated its commitment to achieving EBITDA breakeven by late 2025, possibly in Q3 or Q4. This would mark a major inflection point for institutional investors seeking confirmation of a sustainable business model beyond top-line growth.
CapEx Cut Eases Dilution Fears
One of the more bullish developments from the earnings call was a reduction in capital expenditure guidance:
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CapEx was previously expected to hit $2 billion in 2025,
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That has now been revised down to $1.6 billion.
One major concern with growth-stage businesses is capital intensity and the risk of dilution. Nebius currently holds $1.4 billion in cash and has no debt, which is a healthy starting point. The company had previously guided for $2 billion in CapEx for the year, but in the most recent call, that estimate was revised down to $1.6 billion.
That opens up a critical possibility: the company may not need to raise capital again in 2025. And if that’s the case, share dilution may be off the table for the next few quarters—a major win for investors and a potential bullish tailwind for the stock.
That said, Nebius is funding its growth primarily through equity financing, not debt. So if the cash burn accelerates again or CapEx creeps higher, we could see additional capital raises in 2026.
Risk: Depreciation and Fast Hardware Cycles
There are still risks to consider. One structural headwind is the rapid depreciation of AI compute hardware.
As NVIDIA, AMD, and other chipmakers ramp up release cycles for high-performance GPUs like H100, H200, and now Blackwell, the useful life of Nebius’s installed GPU base may shorten. The company’s depreciation and amortization expenses are already nearly 90% of revenue, a metric that investors should continue watching closely.
That said, Nebius has the advantage of designing its own systems around thermal efficiency and optimal performance, which may soften the blow of rapid hardware turnover compared to competitors relying on off-the-shelf infrastructure.
What Makes Nebius Different?
What makes NBIS stand out is its custom-built hardware stack, designed specifically for AI workloads. For example, a traditional data center must keep ambient temperatures at 27°C to prevent overheating, but Nebius can operate safely at 40°C due to its unique in-rack thermal designs.
That means cooling costs are 10–15% lower, giving NBIS an energy and margin advantage over competitors like CoreWeave. They don’t buy generic racks from SMCI or others; every component is designed for maximum power efficiency, thermal tolerance, and scalability.
Financial Outlook: How Big Can This Business Get?
Let’s explore the big picture.
If Nebius can hit its mid-term ARR goal of $1 billion, and convert that into $5–7 billion in revenue within 3–5 years (management's stated aspiration), and if margins expand toward the 25% EBITDA mark, we’re talking about $1.25–$1.75 billion in annual EBITDA.
Using valuation comps in the infrastructure and cloud AI space:
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At 3x revenue, NBIS could be worth $20–25 billion.
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At 5x revenue, it could trade closer to $35–40 billion.
That’s a 3x–5x upside from today’s $8 billion market cap, assuming execution stays on track and external conditions remain supportive.
Catalysts to Watch
Several upcoming developments could serve as positive catalysts:
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New 100MW data center in New Jersey is under contract—an important step in U.S. expansion.
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Additional large enterprise clients could drive ARR to $300–350 million by next quarter.
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Updates on profitability timeline and additional margin improvement will be key in the next earnings call.
Bottom Line: Is NBIS a Buy?
Nebius Group is still early in its growth curve, but it’s executing well across all major KPIs. If the company continues expanding ARR, improving margins, and hitting CapEx targets without dilution, the upside potential is substantial. This is a business that could 3x–5x over the next few years—but as always with high-growth infrastructure plays, execution risk remains.
While still a small-cap and high-risk play in a capital-intensive space, Nebius Group is showing all the right signs. It's:
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Growing ARR at an explosive rate,
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Reducing CapEx while maintaining forward momentum,
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Targeting EBITDA breakeven within 12–18 months,
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Benefiting from architectural and operational differentiation in a crowded market.
For long-term investors willing to tolerate volatility, NBIS looks like a high-upside, early-stage pick-and-shovel AI infrastructure stock. With careful capital management and consistent ARR expansion, it has the potential to evolve into a major player in the next wave of cloud AI computing.
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
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