The neocloud company Nebius Group (NBIS +8.59%) has once again delivered another strong earnings report and more exciting news regarding its growing network of data centers.
Nebius reported an adjusted net loss of roughly $100 million on revenue of $399 million, which surged 684% from the prior year. Both numbers beat Wall Street consensus estimates, which had projected a loss of $174 million and revenue of $375 million, according to Investor's Business Daily.
The stock had surged roughly 18%, as of 12:26 p.m. ET. Nebius, which builds data centers specifically for companies running artificial intelligence solutions, such as the hyperscalers, has performed remarkably well this year.
The stock is up nearly 134%. Is it still a buy?
Image source: The Motley Fool.
New data center in Pennsylvania
In addition to the strong results, Nebius said it remains on track to achieve $3 billion to $3.4 billion in revenue this year and to hit a $7 billion to $9 billion annual recurring revenue run rate.
"We continue to see unprecedented demand across the market," Nebius Founder and CEO Arkady Volozh said in a letter to shareholders. "Compute and cloud needs are vastly exceeding capacity as more industries embrace AI and companies move beyond experimentation to real-world applications."
The company also announced that it has secured a new site in Pennsylvania capable of generating up to 1.2 gigawatts (GW) of power.
That means Nebius will eventually have two sites with over 1 GW of power and seven with over 100 megawatts (MW) of capacity. Nebius also raised its power capacity guidance to over 4 GW by the end of this year.
Is the stock a buy after its parabolic run?
Trading at over $211 per share, as of this writing, Nebius now exceeds its consensus price target of $177, according to TipRanks, although I would expect Wall Street analysts to issue higher price targets following the strong report and new capacity guidance.
With a market cap of over $52 billion, Nebius now trades at nearly 16 times forward revenue. Coming into the report, analysts did not expect the company to generate a profit this year or next year, so the stock is by no means cheap.
NASDAQ: NBIS
Key Data Points
However, data center companies like Nebius are viewed as a vital part of the AI trade, as they provide the capacity needed to run AI solutions. So long as demand for AI and compute continues to increase, Nebius will do well.
The question everyone has been asking is whether this demand can continue and for how long? I don't think we'll have an answer any time soon.
In terms of the data center sector, I definitely like Nebius. The company has $9.3 billion of cash and equivalents on its balance sheet. While debt has grown significantly year over year, I wouldn't say the company is overly levered right now.
Furthermore, Nebius offers more than just AI infrastructure. The company is building a full-stack AI-native cloud that can help companies with agentic workloads and the training of large language models (LLMs).
Nebius also owns other AI businesses with promise, such as an autonomous technology business, and has strategic equity investments in other AI companies.
In the AI data center space, I prefer Nebius to its peers. But I also believe AI concerns could be real, so investors need to keep this in mind when sizing their positions, especially after the stock's parabolic run.
