CoreWeave (CRWV 16.30%) was one of the hottest stocks on the market after its initial public offering (IPO) in March. At one point, the artificial intelligence (AI) cloud company's shares were up roughly 330% year to date. In recent months, though, CoreWeave's sizzle has fizzled somewhat.
This trend continued after CoreWeave reported third-quarter results after the market closed on Monday. Its shares were around 13% lower in early trading on Tuesday. Should you buy CoreWeave stock on the dip?
NASDAQ: CRWV
Key Data Points
Why CoreWeave's shares sank
Based on the market reaction to CoreWeave's Q3 update, you might think that the AI hyperscaler reported dismal results. However, that wasn't the case.
CoreWeave's revenue skyrocketed roughly 134% year over year to $1.36 billion. That's the highest quarterly revenue in the company's history and above the $1.29 billion expected by analysts.
Sure, CoreWeave remained unprofitable, but its bottom line improved significantly in Q3. And the $0.22 per-share loss was much better than the consensus Wall Street estimate of a net loss of $0.51 per share.
What was behind the sell-off? CoreWeave provided full-year 2025 revenue guidance of $5.05 billion to $5.15 billion. The upper end of that range is well below the average estimate of $5.29 billion among analysts surveyed by LSEG.
An overreaction?
A good case can be made that investors overreacted to CoreWeave's lower-than-expected guidance. CEO Mike Intrator explained in the Q3 earnings call that the reason revenue won't be quite as high as anticipated is because of "temporary delays related to a third-party data center developer who is behind schedule."
Importantly, Intrator noted that the customer that's being impacted by those delays agreed to adjust the delivery schedule and push back the expiration date. CoreWeave should still be able to receive the full value of the contract, albeit later than hoped for.
Image source: Getty Images.
One key thing that appears to have been largely overlooked in the sell-off is CoreWeave's massive revenue backlog growth. The company's backlog soared 271% year over year in Q3 (and almost doubled quarter over quarter) to $55.6 billion.
CoreWeave has landed deals with big customers, including Meta Platforms and OpenAI. CFO Nitin Agrawal revealed during the Q3 call that more than 60% of CoreWeave's revenue backlog is connected to investment-grade customers.
Agrawal also mentioned that CoreWeave's total addressable market is expanding. He cited several factors for this expansion, including the rapid adoption of AI across industries and use cases, as well as CoreWeave's moves to broaden its product portfolio.
Buy on the dip (maybe)
Should investors buy shares of CoreWeave on the dip? I think it's a definite maybe, depending on your investing style.
CoreWeave isn't a candidate for income investors. The company doesn't pay a dividend and probably won't initiate a dividend program anytime soon.
Most value investors probably won't find this AI stock appealing, either. Earnings-based valuation metrics can't be used with CoreWeave since it isn't profitable. The stock's price-to-sales (P/S) ratio is a lofty 14.4. However, I wouldn't call CoreWeave an expensive stock.
That P/S ratio is based on trailing-12-month sales. The hyperscaler's shares trade at a much more reasonable 4.2 times consensus 2026 sales.
That leaves growth investors. CoreWeave looks like an ideal stock in this case. The company should have significant growth potential as AI adoption grows. My hunch is that agentic AI, which is still in its early innings, could provide a huge tailwind for CoreWeave over the next few years.
One thing to consider, though, is that CoreWeave could have to spend so much to meet the AI infrastructure demand that its losses continue to mount up. At some point, a company needs to be profitable. There's also the possibility that CoreWeave's business could become commoditized when supply catches up with demand.
Despite these risks, I like CoreWeave's prospects. This AI stock appears to be a good one to buy on the dip.
