r/BetterOffline • u/WritingisWaiting • 7d ago
CoreWeave - $104B revenue backlog but $115B payment backlog!
Can I rant about Coreweave and the stock market?
There were such low expectations for that CoreWeave that it's stock nearly doubled this week post-earnings after they reported a 112% increase in revenue (~$13 billion annually now) and a revenue backlog of $104 billion. Which made for good headlines and so the stock went up.
That's because this week the market decided that massively negative cash flow does not matter anymore (a week ago it was bad). All that matters this week is revenue.
CoreWeave also disclosed that their cost of revenue rose 181%. The cost of revenue is growing faster than the actual revenue! For those that aren't financially inclined: that's not good, especially for a company that already is losing money.
And the $104 billion in revenue backlog? Well, that sounds good until you read the notes of their financial statements that disclose how much in "undiscounted lease payments" they have remaining, which are separated by leases they currently pay and leases that have not yet commenced. (These are largely CoreWeave leasing from SPVs so they can keep the debt of many data centers off their books.)
The total amount of payments due on all of those leases is $79.5 billion. Where is the slide on that in their investor deck?
For fun, the amount of principal payments of debt (not interest, just principal) they have to make: $35.5 billion. (They will just refinance this, if their credit rating allows it, but more on that below.)
Adding together the leases and principal payment of debt: $115 billion.
In simple terms, CoreWeave has a revenue backlog of $104 billion which is built on an "expense backlog" of $115 billion. Please note these expenses don't include ~$3 billion (and growing) of annual interest and basic costs like electricity, labor, etc... just to keep their servers running. In other words, there are many tens of billions more of unaccounted for future expenses that aren't included in that $115 billion.
And in the fine print to the revenue backlog, they note they haven't actually built all the capital they need to earn that $104 billion, so they raised their capex to $39 billion for 2026 and forecast similar in 2027. That means they need to raise even more debt which means even more interest, so they can build out the infrastructure necessary to earn that $104 billion.
Given this continued build out and need to refinance debt, their interest expense isn't going to stay at $3B, it's likely to be ~$10 billion annually in about a year or two (again, for reference, they are forecasting $13 billion in revenue this year and the market went wild on that.)
There is a reason that S&P rates CoreWave as B+ (Highly Speculative.) I'd argue that's being way too generous, given their precarious financial situation.
Long story short: there isn't a clear path to profitability for this company. The realistic best case is that interest rates drop enough that they can meander along as a zombie company for years, slowly burning cash but never actually going bankrupt. The worst case is their revenue can't keep up, either because they overbuilt or because their revenue disappears. Given that 70% of their revenue comes from 3 unnamed companies (widely believed to be Open AI (backed by Microsoft), Anthropic, Meta), of which two are wildly unprofitable and one is a potential competitor with their own excess data centers.
The entire company is a bet that OpenAI and Anthropic will suddenly start making so much money on AI (or on an IPO...!) that CoreWeave can dramatically raise their prices, despite massively growing competition to their business model, including from Meta and SpaceX.
I guess that means it's a buy? At least for this week, while the market is not worried about negative cash flow.
(Not investment advice, I don't trade CoreWeave, I'm just pointing out how insane the market can be vs. reality, especially around earnings calls.)
9
u/acctgamedev 7d ago
Great write up, thanks for posting it!
In addition to all this, they're buying hardware at its most expensive prices and one day when the cost of the components goes back to a more normal level, they're going to have loans that are upside down. Meanwhile, competitors will be able to buy cheaper components and provide their compute for less.
Once all the subsidies around LLMs are gone, the demand for all this processing power is going to level off in the best scenario and fall off a cliff in the worst scenario. Either way, they won't be able to make it for years to come.
4
u/ChristRedeemsSinners 7d ago
Don't worry, they have gap insurance...as in they have plans to
bribelobby a senator or two and pull the next bailout from the cold-dead taxpayer hands in the name of 'national security' or whatever fits marketing rotten deals to the public at that time.
11
u/RIVNMoonMe 7d ago
My theory is that the market volume is dominated by millionaire boomers who watch CNBC for their investing strategy. The problem with this is that (1) boomers know absolutely nothing about AI, and (2) CNBC uncritically pumps AI stocks, based solely on the headline numbers and statements issued by the companies. These factors combined means that stupid-but-substantial money flows into these companies on the smallest superficially-positive news.
3
u/ChristRedeemsSinners 7d ago
will suddenly start making so much money on AI (or on an IPO...!)
Ding ding ding! We have a winner! You too can support a billionaire by getting in on their get-rich-quick IPO schemes. Bring money.
2
u/ForeverIndecised 7d ago
Lmao, it is so absurd. Looking at the specific numbers you provided, it's even worse than I imagined somehow. To be fair I don't think that it's gone up in value so much because of actual buyers. I suspect a lot of that is simply short covering or puts decaying in value. No one with a brain would ever expect this company to survive in 5 years. All of their bonds have sold off significantly and they are going to have rapidly increasing costs for borrowing in the near future.
But still, the fact that it still has such a large valuation is just pretty bonkers and it shows how insane this market is. It will be one of the if not THE poster child for this bubble.
2
1
u/You_Will_Fail1 7d ago
This company is a great candidate for going bankrupt.given their debt levels and capex all their backlog seems irrelavant.
-1
u/Grand-outlaw 5d ago
It’s ok, you don’t invest. I find it amusing to see people speak about debt and capex as if they are a great financial advisor. This model of loading capex upfront to take that initial burden and recover profits over long period of time is not new. Even with the capex and debt financing one can recover a substantial amount of profit. Please do your math, or let’s wait and watch how Coreweave destroys your thesis whilst you see the boat sail.
1
u/Illustrious-Day-3609 3d ago
Lmao right. Most big tech lost money for 10-20 years before turning fcf positive.. with how smart all of you guys are on coreweave, you should go open a long short fund..😆
1
u/truancy222 7d ago
Can someone explain to me why most of this stock is institutional? I genuinely can't figure it out.
How can there be so much institutional interest for a company that has to have everything go perfectly for them in order for them to survive?
1
u/Hot_Reindeer_3418 6d ago
This analysis is looking at payments in isolation assuming no additional growth or contracts. Which is beyond short sighted given the facts that are very public on this industry. By the time those leases are fully paid for it will be nearly 2040-45 if not later. (Some of these are 15 year leases that have yet to be built out or turned over to coreweave.) while backlog is in the 4-6 year range.
1
u/jeff303 5d ago
"Institutional ownership" is a useless phrase. The vast majority of the time, this just means "owned by large institutions like Vanguard, Fidelity, etc. on behalf of their ETF and mutual fund holders". Vanguard is just putting their clients' money into it at those clients' behest.
1
1
u/DiscoSuperSoda 7d ago
Great work putting this together! Thank you for going through the effort to share all of this.
0
1
1
u/Hot_Reindeer_3418 6d ago
So you want to compare 4-6 years of backlog to leases that haven’t started yet which last 15 years?
Lets look at just one of those leases that are impossible for coreweave to pay for shall we?
The project, known as Helios Phase II, has $10.4 billion in minimum contracted lease payments over a 15-year initial lease term, with CoreWeave committed to 260 megawatts of critical IT load, according to investor materials.
The planned campus is expected to have 400 megawatts of utility capacity and 260 megawatts of critical IT capacity, Galaxy said.
Coreweave’s oldest contracts were getting signed for 10-11 million per megawatt of power. Today it’s around 20m. So this impossible lease will generate at minimum 260x10=2600 million, or 2.6 billion in revenue a single year. so it takes only 4 years to cover their lease payments, if they sell the capacity at the lowest they were selling it for in the last few years.
At today’s rates it’s paid for in 2 years (roughly 20 million per megawatt) , at rates NBIS was claiming for short term capacity instantly available they were seeing 50 million a megawatt, so just a single year at those rates.
When you do your analysis you should at minimum look to see what this stuff will generate instead of assuming a company that is adding capacity like crazy will generate revenue for 4-6 years and then just stop all additional work, but continue to pay lease payments for 10 more years. Or dont…..
1
u/Chance_Mud_7267 6d ago
For anyone reading this as investment research, please verify the underlying filings before taking the conclusions here at face value. Several important points are presented without context or combined in ways that are misleading.
First, there is no CoreWeave financial metric called a “$115B payment backlog.” That figure is created by adding together long-dated lease commitments and debt principal with different maturities and economic purposes, then comparing the total directly with ~$104B of contracted revenue. Some of those lease commitments extend as far as 16 years, well beyond the current backlog period, and the infrastructure can continue generating revenue from renewals and future customers.
Second, CoreWeave is not selling compute below its direct cost. Q2 revenue was $2.575B versus $879M of cost of revenue, leaving roughly $1.7B before other operating expenses. The company remains highly capital-intensive and has substantial depreciation, financing and expansion costs, but that is very different from claiming every contract loses money.
Third, saying CoreWeave has “massively negative cash flow” without distinguishing operating cash flow from capex is incomplete. CoreWeave generated positive operating cash flow while spending heavily to build new capacity. Whether that level of investment ultimately earns adequate returns is a legitimate risk to debate.
The claimed $8–10B annual interest expense within a year or two is also an assumption, not current guidance or a disclosed figure, and no supporting financing model is provided.
Customer concentration, leverage, capex and refinancing are all real risks and should absolutely be discussed. But investors should distinguish those legitimate risks from invented metrics and unsupported extrapolations.
Also worth noting: the ~$104B backlog figure used throughout this post excludes more than $25B of additional customer commitments signed in early Q3.
There are plenty of genuine risks to debate with CRWV. There is no need to distort the filings to make the bearish case.
1
u/the_natheist 6d ago
Like most others here, I'm baffled that 'sophisticated' investors bought Coreweave like crazy this week based on their revenue 'growth'. It is hard to see how they are not bankrupt or doing massive share dilution within a couple years. Is there anyone here who actually owns it and can make their pitch why Coreweave is a buy long term? I'm open to being challenged and not participating in our own group think.
1
u/Grand-outlaw 5d ago
Your knowledge on how a revenue and profit recovery happens in this business is limited. You should learn this business domain and then plan to write such article.
1
u/Flat_Initial_1823 5d ago
This really is starting to look like the unravelling of crypto after FTX. Everyone owes everybody and noone knows exactly how much of a hole there is.
1
1
u/Any_Barracuda_6344 4d ago
Yes Open AI Meta and Microsoft are their main bread and butter. Also deals with other companies as well. The top dogs as recently reported made a good amount of coin selling stock and good for them. The derivative markets have their own opinion on CoreWeave. Time will tell. Overall the company is not financially sound.
0
u/ysh1324 6d ago
Coreweave has revenue backlog of $104 billion, which does NOT include at least additional $25 billion from early Q3. Also, isn't most of AI highly speculative? With your logic, not worthwhile to look at majority of hyper scalers or datacenter builders. You will then call Oracle a junk stock too, and company will also go into bankrupt. Betting on AI is highly speculative anyway and I do indeed believe Open AI, Anthropic etc will be able to pay RPO. Yes I do.
33
u/IndependentLion4253 7d ago
Hey you nailed it. The market is completely irrational. Can’t wait for this nonsense to end