CoreWeave (CRWV 2.29%) shares jumped on Friday, after Citigroup analysts gave the AI (artificial intelligence) computing stock a buy rating and a 12-month price target of $192 -- far ahead of where the stock is trading now (even after its nearly 23% jump on Friday).
While CoreWeave bulls undoubtedly appreciate the big move higher, nothing has changed in the underlying business. CoreWeave's core problem remains: It will likely need to spend an extraordinary amount of capital before it can prove it can produce substantial and durable profits that live up to its valuation.
The tech company, which runs data centers packed with Nvidia graphics processing units (GPUs) and sells that computing power to AI labs and hyperscalers that want to train and run large and powerful AI models, has seen explosive demand. Of course, the challenge is translating that demand into revenue and, ultimately, into profits.
Image source: Getty Images.
Demand keeps outrunning capacity
CoreWeave's latest quarter shows both the pull and the limits of its business expansion. In its third-quarter 2025 update, CoreWeave CEO Michael Intrator pointed to record-breaking revenue and a near-doubling of its revenue backlog sequentially. Revenue for the period came in at $1.365 billion, up 134% year over year, while revenue backlog stood at an astounding $55.6 billion as of Sept. 30 (up from $30.1 billion just three months earlier.
With a backlog that is far in excess of its quarterly limits, the company will undoubtedly strive to grow as fast as it possibly can. But there are limits to how fast a company can grow -- especially in a capital-intensive business like AI infrastructure.
Indeed, growth is already cooling from an extreme pace. CoreWeave's revenue growth decelerated from 207% year over year in Q2. That does not automatically mean something is wrong, but the slowdown matters because investors will likely value this business on how long its breakneck pace of growth can persist. In addition, this deceleration highlights some of the risks to the timeline of CoreWeave's buildout.
Spending and debt
CoreWeave's income statement shows why investors should stay cautious even after the stock's momentum late last week. The company posted third-quarter operating income of $51.9 million; but it still reported a net loss of $110.1 million. Interest expense is the big culprit: CoreWeave's net interest expense for the quarter was $310.6 million -- up from $104.4 million in the year-ago quarter as the company takes on debt to finance its expansion.
And CoreWeave's financing burden is not going away anytime soon. Growing into its backlog will require a lot more hardware and power. CoreWeave reported $1.9 billion of capital expenditures in the third quarter alone, and it guided to $12 billion to $14 billion of capital expenditures for full-year 2025.
Of course, debt isn't the only way to raise money. But when the company isn't securing debt to finance its buildout, it is diluting shareholders through equity sales. Either way, there are risks to shareholder returns involved.
Highlighting just how capital-hungry CoreWeave is, the company has secured $14 billion in debt and equity transactions year to date.
NASDAQ: CRWV
Key Data Points
Time to buy?
For CoreWeave, execution is what matters. The company will need to bring new sites online on schedule, filling them with contracted demand, and do so without its cost of capital rising faster than its operating income.
We're already seeing some risks in execution. In its third-quarter update, management flagged that a third-party data center developer fell behind schedule, negatively affecting the company's fourth-quarter outlook.
Of course, we can't rule out the possibility that CoreWeave will turn into a long-term winner in the fast-growing AI infrastructure space. For now, the company's soaring backlog suggests customers are desperate for capacity from the company. Still, risks seem to be building just as fast as revenue.
So, is the growth stock a buy today? With shares trading at a price-to-sales ratio of almost 10, even as interest expense is soaring and the company remains unprofitable, I personally think that waiting for a more attractive entry point makes sense. Sure, there's no guarantee we'll see a more attractive entry point. But instead of buying into the hype, I'd rather patiently wait for a potentially lower price that better balances risks with the potential reward.
