Nvidia and Palantir Technologies are among the leading companies in their respective niches in the artificial intelligence (AI) industry, with one of them dominating the hardware space and the other one being known for its cutting-edge software platform. Both companies report healthy growth in their revenue and earnings as customers flock to buy their hardware and software solutions. However, these AI stocks were upstaged by a much smaller company on the market so far in 2025.
Nebius Group (NBIS 4.86%), a Dutch company specializing in AI-focused data centers, saw its stock shoot up a remarkable 136% so far this year. That's higher than the comparable 24% gains clocked by Nvidia and the 102% spike registered by Palantir.
Let's see why that has been the case, and check whether this high-flying growth stock can deliver more upside.
Image source: Getty Images.
Nebius' terrific growth has fueled its red-hot rally this year
Nebius operates in the fast-growing cloud infrastructure-as-a-service (IaaS) market. This market got a massive boost in the past couple of years as organizations look for access to data center capacity to train AI models and run applications in the cloud.
Nebius offers a scalable cloud computing platform powered by graphics processing units (GPUs) from Nvidia, which can be rented on demand by customers for running AI workloads. Additionally, Nebius' AI Studio platform gives customers access to multiple large language models (LLMs) to build AI applications and run inference on its data center network.
The demand for these services is so strong that Nebius' revenue in the first half of 2025 increased by a whopping 545% to $156 million. Management remarked on the company's August earnings conference call that it sold out its entire capacity of Nvidia's previous generation Hopper GPUs. Now, the company is offering Nvidia's latest generation of Blackwell systems through its data centers.
NASDAQ: NBIS
Key Data Points
Importantly, Nebius is focused on adding more data center capacity so that it can satiate the huge demand for AI cloud infrastructure. Nebius expects to have 220 megawatts (MW) of connected data center capacity at its disposal by the end of the year to deploy more GPUs. The target for 2026 is even more ambitious, as the company projects having over 1 gigawatt (GW) of contracted data center capacity at its disposal by the end of next year.
Investors should note that the cloud AI infrastructure business is a game of capacity. The more capacity a provider can offer to customers, the more revenue it can generate. This is the reason why Nebius has increased its annualized run-rate revenue (ARR) guidance to a midpoint of $1 billion for 2025 from its earlier expectation of $875 million. Nebius calculates its ARR by multiplying its revenue in the last month of the quarter by 12. That forecast could increase further as Nebius adds more capacity.
One more important thing to note here is that Nebius' adjusted net loss increased by just 38% year over year in the previous quarter, which was way lower than the spike in its revenue. This bodes well for the company's bottom-line performance in the future. One reason why it was able to achieve that last quarter is because of its ability to generate strong margins from its software and services offerings.
On Nebius' recent earnings call, CFO Dado Alonso remarked:
Look, when we price our GPUs, we aim for healthy margins on a per hour compute basis. For the Hopper generation, we expect to break even in roughly 2 to 3 years on a gross profit level. That includes both the cost of hardware, but also the associated operational expenses. This estimate doesn't factor in our higher-margin software and services revenue. As those scale, we see potential to shorten the return on invested capital.
So, as the size of Nebius' revenue increases, the company should be able to gradually move toward profitability. The good part is that analysts forecast a major bump in the company's revenue over the next couple of years as well.
Data by YCharts.
But is the stock worth buying right now?
The chart above shows that Nebius' growth is expected to accelerate significantly in the second half of 2025, considering that it has generated $156 million in revenue in the first half of the year. What's more, the estimate for 2027 tells us that its top line is on track to jump by more than 5x in just two years.
Nebius seems capable of indeed clocking such outstanding growth, given its capacity expansion plans. That's why it seems worth buying, even though it is trading at 63 times sales. In fact, Nebius' price-to-sales ratio is much lower than Palantir's ratio of 114, and the former is growing at a much faster pace right now.
So, Nebius' valuation is justified by its phenomenal growth, which it can sustain in the long run thanks to the huge opportunity in the cloud AI infrastructure market. That could help the stock sustain its momentum in the long run.
