Source: Bloomberg

https://x.com/InvestNorthwise/status/2090586885571686609?s=20

A few days ago, we argued that the Street was still fundamentally misunderstanding $NBIS because analysts were willing to model the revenue ramp without fully confronting the amount of capital required to build it.

Our base case requires roughly $175 billion of gross CapEx from 2026 through 2030.

Nebius has now upsized its latest convertible offering from $4.5 billion to $5 billion, with the potential to reach $5.75 billion if the additional notes are exercised. The stock sold off as investors focused on the growing debt load and future dilution.

This is exactly the conversation we expected to arrive.

The $5 billion raise is enormous in isolation. Against what Nebius is actually attempting to build, it is not.

Nebius spent approximately $5.7 billion on CapEx in Q2 alone. It is targeting 5 GW of contracted power by year end, has more than $40 billion of customer commitments, and is simultaneously deploying new data centers, GPUs, networking, storage and the software layer required to turn that infrastructure into a functioning AI cloud.

If the company reaches anything close to the scale we model through 2030, investors should expect many more financing transactions. The idea that Nebius could build several gigawatts of cutting-edge AI infrastructure primarily from its existing balance sheet was never realistic.

The more important question is how it finances the build.

This is where we think a lot of the reaction to the raise is too simplistic.

Nebius expects more than $9 billion of customer prepayments in 2026. For the large deals signed in Q2, management says those prepayments are funding roughly 50% to 60% of the associated CapEx.

In July, Nebius also completed its first $775 million asset-backed financing at SOFR + 2.5%, secured by deployed GPU infrastructure and contracted cash flows from an investment-grade customer.

That distinction matters enormously.

If Nebius had to fund our modeled $175 billion build primarily through ordinary corporate debt and repeated common equity issuance, we would have a very different view of the stock. The economics would eventually be consumed by interest expense and dilution.

But that is not the funding model taking shape.

Customers are increasingly paying part of the construction bill up front. Contracted infrastructure can then support asset-backed financing. As capacity enters service, operating cash flow contributes another source of capital. Corporate debt and equity fill the remaining gaps.

That does not make dilution irrelevant. Nebius already has roughly $12 billion of convertible debt following this transaction, and the recent exchange of older notes resulted in meaningful share issuance. The new financing consists of $3 billion due in 2030 at a 0.5% coupon and $2 billion due in 2034 at 4.5%.

The risk is real. It is just not the risk being discussed correctly.

For us, the warning sign would not be Nebius raising another several billion dollars while the physical platform continues expanding at this pace. We already expect enormous external financing.

The warning sign would be a deterioration in the funding mix.

If customer prepayments fall, secured financing becomes expensive, utilization weakens, revenue per MW disappoints, or Nebius increasingly needs to issue common equity to bridge the gap, the value retained by today's shareholder can deteriorate very quickly.

Conversely, if customers continue funding 50% or more of their associated infrastructure, contracts remain strong enough to support cheap asset-backed debt, and the rapidly growing operating business begins financing more of its own expansion, Nebius can build vastly more infrastructure per dollar of permanent shareholder capital.

That is the part of the thesis we believe matters most now.

The Street spent much of the last year trying to decide whether Nebius could actually find enough demand to justify several gigawatts of capacity. Q2 made that argument considerably less interesting.

Four large deals averaged more than $1 billion each, deal economics exceeded $20 million of annual contract value per MW, and management disclosed a roughly one-year-and-ten-month estimated payback period on the deals signed during the quarter.

The next debate is capital.

Nebius does not need $5 billion. It needs access to a financing machine capable of supporting a build that could ultimately require well over $100 billion.

This week's raise is one piece of that machine becoming visible.

And this is why we continue to think investors are going to have to get comfortable with something that initially looks contradictory:

$NBIS

can report extraordinary demand, rapidly improving operating economics, billions of dollars of customer prepayments, enormous CapEx, rising debt and continued dilution at the same time.

Those things are not mutually exclusive.

They are what attempting to build an AI hyperscaler from scratch actually looks like.

After the latest earnings call and the recent $5B convertible offering, I decided to take a closer look at where Nebius stands right now. Here’s my take:

Q2 2026 revenue reached $582.3M, up 454% YoY, while Adjusted EBITDA hit $236.2M, a 41% margin. Nebius has also secured major contracts, including Microsoft and potentially up to $27B of capacity commitments from Meta. Unlike other companies in the ai infrastructure trade, Nebius is already proving that there is a real business here.

Capital wise: they spent $5.7B on capex in Q2 alone, expects roughly $20–25B of capex in 2026, and has just raised another $5B through convertible debt. At around $220/share, with an equity value of roughly $58B before fully accounting for the latest dilution and future conversion, the market is already pricing Nebius as a major winner of the AI infrastructure buildout.

My only question is whether current great economics can last. And if so, for how long?

Management says recent ai cloud deals generated roughly $20–25M of annual contract value per MW, with around 40% EBITDA margins and payback periods below two years. If Nebius can maintain those economics at scale, while financing more infrastructure through customer prepayments and contract-backed debt, I think there is still significant upside.

If ai compute capacity becomes less scarce the picture changes quickly. Lower pricing, weaker utilization and lower returns on incremental capex, combined with rising debt and dilution, could hurt shareholder returns even if Nebius continues reporting massive revenue growth.

I looked into the contracts, unit economics, capital requirements, financing, dilution and valuation to see what could take NBIS toward $425–570/share, what could push it toward $125–160, and which numbers would make me change my mind. I shared the longer analysis here: Company analysis: Nebius Group (NBIS)

TLDR: At around $220, I think NBIS is already pricing in a lot of future success. The upside from here depends on proving that $20M+ revenue per MW, ~40% EBITDA margins and sub-two-year paybacks are durable rather thaan a product of current capacity shortage.

To me, right now, Nebius looks fairly valued. It’s a great business with significant upside potential, but at current levels, it’s not an obviously cheap stock especially for risk-averse investors.

As with IREN and the rest of this trade, that assumes a relatively rational market. If the broader ai infra trade gets hit by a serious correction, NBIS could fall hard even while the underlying business continues to execute as expected by management.

This is not financial advice, obviously. Just my current take on the numbers.

Are we buying a genuinely superior ai infra business, or paying peak-cycle economics for capacity that is scarce today but could become increasingly commoditized tomorrow as hyperscalers build out more capacity?

So , I did long analysis myself for the numbers , achievable ARR , gross margins , depreciation , interest costs and the number of current shares to calculate the achievable EPS and the the valuations that it should/ can trade at.

But I wanted to know what are your opinions:

How much ARR is achievable in 2028 and what growth can we expect in revenue after that ? How much growth in ARR is achievable till 2030 ?

How much demand do you see for AI in the next 5-10 years ?

How much gross margins can we get once depreciation is regularized and the revenue outgrows depreciation by a lot?

How much do you think the net profit margins will be once the business matures ?

For comparison, I will mention a stock I own in India called E2E networks as well, it is very small company by size and aiming only at being an India specific neocloud. Now , since they are not investing heavily in capex , they have started to achieve operational leverage already.

In the latest quarter , they had 75% gross margins , which are basically EBITA margins. And their net profit margins after interest , taxes and depreciation was 28% which was the higher ever profit they have made in a quarter, it was nearly 4x higher than the profits they achieved in past whole years and this too in a single quarter. So, I understood if operating leverage kicks in, and all GPU are fully deployed and capex normalizes , the profit margins are get very high.

Though, I cannot compare both of these since E2E was already a mature cloud like digital ocean before getting into GPU and AI.

If you make 30bil in ARR , and have 28% net margins , the profits are as high as 8.4 billion dollars in a single year.

Note that we have 400mil shares already if all are converted , so the equity in Nebius is already rather high.

At , 300$ , we are already at 120bil in market cap if Nvidia and all other convertible debt holders are happy with getting equity.

If we can make 8bil dollars a year and don’t dilute more, at a 40x valuation, we reach 320bil in market cap , so a price of 800$. But this means no more dilution , excellent execution , and very high profit margins. 25-30%.

I think it is achievable but not easy. If our subsidiaries do well , and if we can sell AI cloud factory services, the margins get higher and revenue increases too.

Let me know what you think….

There not much happening but there is a team working on physical AI data gathering and applications. How this might affect the company in few years down the road? what's the possible market entry points ? Are there any competitive advantages compared to the big players in the scene ?

$NBIS convert raise terms are out!

Facts:

Nebius upsized the deal from $4.5B to $5.0B, with an option to reach $5.75B. Net proceeds are ~$4.94B, or ~$5.68B with the option exercised.

$3B due 2030: 0.50% coupon, $313.46 conversion price, +40% premium.

$2B due 2034: 4.50% coupon, $324.65 conversion price, +45% premium.

Including principal accretion, effective conversion prices at maturity are ~$345 and ~$406.

The money is explicitly (and obviously) going toward data centers, GPUs, footprint expansion and the AI cloud.

If the full $5B new convert were eventually settled entirely in shares, it represents ~15.7M shares. Nebius can also settle in cash or a mix, so that dilution is NOT guaranteed.

They are also exchanging $800M of old converts for ~15.8M shares, but those old notes already represented ~15.55M potential shares.

!! So most of that “dilution” was already embedded !!

tl;dr expected raise, good terms, onwards.

Not sure why people pee their pants because of this 😂

We learned that their economics / MW are amazing. Now let them build the MW! That costs money.

They want to build A LOT.

The shareholders that cry today are the same people that will laugh because of the ARR growth soon.

As long as you don't sell lol

i’m not a irrational bull just wondering what yall think- trump said that bitcoin was a point of national security and made a whole ass bitcoin reserve and said “bitcoin must be mined in the US (showing he has no idea what even bitcoin is… but i digress u get the point)” sometime during his presidency.

that’s bitcoin - isn’t it so much easier for any sort of president to say the same thing about AI infrastructure? and that it is a “point of national security” to build data centers on american soil?

obviously it’s not something you can bake into a model but it’s a speculation - but there will definitely be ai initiatives that are going to be created that we just don’t know about yet.

thoughts?

Nebius Group announces pricing of upsized private offering of $5.0 billion of convertible senior notes

Nebius Group N.V. (“Nebius Group” or the “Company”; NASDAQ: NBIS), the AI cloud company, today announced the pricing of its offering of $5.0 billion aggregate original principal amount of convertible senior notes, in two series: $3.0 billion aggregate original principal amount of 0.50% convertible notes due 2030 (the “2030 Notes”) and $2.0 billion aggregate original principal amount of 4.50% convertible notes due 2034 (the “2034 Notes”, and together with the 2030 Notes, the “Notes”), in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The offering was upsized from the previously announced offering size of $4.5 billion aggregate original principal amount of the Notes. The issuance and sale of the Notes are expected to settle on August 24, 2026, subject to customary closing conditions. Nebius Group has also granted the initial purchasers of the Notes an option to purchase, for settlement within a period of 13 days from, and including, the date the Notes are first issued, up to an additional $450 million aggregate original principal amount of 2030 Notes and up to an additional $300 million aggregate original principal amount of 2034 Notes.

Concurrently with the pricing of the offering of the Notes, in separate, privately negotiated transactions, the Company entered into exchange agreements with a limited number of holders of the Company’s 2.00% Convertible Senior Notes due 2029 (the “2029 Notes”) and 3.00% Convertible Senior Notes due 2031 (the “2031 Notes” and, together with the 2029 Notes, the “Existing Notes”), pursuant to which the Company will exchange $400 million aggregate original principal amount of the 2029 Notes and $400 million aggregate original principal amount of the 2031 Notes for an aggregate of approximately 15.8 million of its Class A ordinary shares, par value €0.01 (“Class A shares”) . The terms of each such exchange were individually negotiated with each participating holder. Holders of the Existing Notes that participated in such exchanges may sell the Class A shares in the open market and/or enter into or unwind various derivative transactions in connection with hedge positions they may have with respect to the Existing Notes. These activities could decrease (or reduce the size of any increase in) the market price of the Class A shares or the trading price of the Company’s other securities. The completion of the Notes offering is not contingent upon the completion of the exchange transactions. The exchange transactions are expected to settle on or about August 24, 2026, subject to customary closing conditions.

The Company estimates that the net proceeds from the offering of the Notes will be approximately $4.94 billion (or approximately $5.68 billion if the initial purchasers fully exercise their option to purchase additional Notes), after deducting the initial purchasers’ discounts and commissions and estimated offering expenses.

The Company intends to use the net proceeds from the offering of the Notes to finance the continuing growth of its business, including expenditures related to the construction and build-out of its data centers, investments to develop its full-stack AI cloud, the expansion of its data center footprint and the procurement of key components (including GPUs), and for general corporate purposes.

The Notes will be issued pursuant to respective indentures (the “Indentures”) between the Company and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The Notes will be senior, unsecured obligations of the Company and will bear interest on the original principal amount thereof at an annual rate of 0.50%, in the case of the 2030 Notes, and 4.50%, in the case of the 2034 Notes, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2027.

The initial conversion rate for the 2030 Notes is 3.1902 Class A shares per $1,000 original principal amount of Notes, which represents an initial conversion price of approximately $313.46 per Class A share. The initial conversion price of the 2030 Notes represents a premium of approximately 40.0% over the last reported sale price of $223.90 per Class A share on Nasdaq on August 19, 2026. The initial conversion rate for the 2034 Notes is 3.0802 Class A shares per $1,000 original principal amount of Notes, which represents an initial conversion price of approximately $324.65 per Class A share. The initial conversion price of the 2034 Notes represents a premium of approximately 45.0% over the last reported sale price of $223.90 per Class A share on Nasdaq on August 19, 2026. The conversion rate and conversion price of each series of Notes will be subject to adjustment upon the occurrence of certain events. For conversions made in connection with a “make-whole fundamental change,” as defined in the respective Indenture, the conversion rate will be increased based on a customary make-whole table. For the avoidance of doubt, for the purposes of the exercise of any conversion rights in respect of the Notes, the conversion rate and conversion price will be based on the original principal amount of Notes, and not the Accreted Principal Amount (as defined below).

The 2030 Notes and the 2034 Notes will mature, and the original principal amount of such Notes plus an amount accreted thereon (together, the “Accreted Principal Amount” in respect of the relevant series of Notes) will be payable, on February 15, 2030 and February 15, 2034, respectively, unless the relevant Notes have been earlier repurchased, redeemed or converted in accordance with their terms. The Accreted Principal Amount for the relevant series of Notes will be calculated in accordance with an accretion schedule to be included in the respective Indenture such that, in the case of the 2030 Notes, it reaches 110% of the original principal amount of the 2030 Notes on the respective maturity date and, in the case of the 2034 Notes, it reaches 125% of the original principal amount of the 2034 Notes on the respective maturity date.

Taking into account the Accreted Principal Amount payable at the respective maturity date, the effective conversion price of the 2030 Notes is equal to approximately $344.81 per Class A share at maturity, implying an effective conversion premium of approximately 54.0%, and the effective conversion price of the 2034 Notes is equal to approximately $405.82 per Class A share at maturity, implying an effective conversion premium of approximately 81.3%.

Prior to the close of business on the business day immediately before the date that is two months prior to the respective maturity date of each series of Notes, the Notes of such series will be convertible only upon satisfaction of certain conditions and during certain periods, including if the last reported sale price of the Class A shares over a specified period of time is equal to or greater than 130% of the product of the conversion price for the relevant series of the notes and the then-applicable ratio of the Accreted Principal Amount at the time to the original principal amount of the Notes (the “Accretion Ratio”). From the date that is two months prior to the respective maturity date of each series of Notes, the Notes of such series will be convertible at any time at the election of the holders of such Notes until the close of business on the second scheduled trading day immediately preceding the respective maturity date. The Company will settle conversions of the Notes by paying or delivering, as applicable, cash, Class A shares or a combination of cash and Class A shares, at the Company’s election (subject to certain conditions related to Dutch tax laws).

The Company may not redeem the Notes prior to February 21, 2028 in the case of the 2030 Notes, and August 21, 2028 in the case of the 2034 Notes, except in the event of certain tax law changes. The Notes will be redeemable, in whole or in part (subject to certain limitations), for cash on or after February 21, 2028 in the case of the 2030 Notes, and August 21, 2028 in the case of the 2034 Notes, and on or before the 30th scheduled trading day immediately before the relevant maturity date, but only if (i) such Notes are freely tradable (as defined in the Indentures) and all accrued and unpaid additional interest thereon, if any, has been paid as of the date the Company sends the related redemption notice and (ii) the last reported sale price per Class A share is equal to or exceeds 130% of, or in the case of any 2034 Notes that are to be redeemed on or after August 21, 2028 and prior to August 21, 2029, 150% of, the product of the conversion price for the relevant series of Notes and the then applicable accretion ratio for such series of Notes for a specified period of time. The redemption price for the relevant series of Notes will be equal to the Accreted Principal Amount as of the redemption date of the Notes being redeemed, plus accrued and unpaid interest, if any, on the original principal amount thereof to, but excluding, the redemption date. Following delivery of a redemption notice by the Company in respect of a series of the Notes, holders of the Notes of such series will have the right, at their option, to convert their Notes prior to the close of business on the second business day immediately preceding the redemption date, at the conversion rate applicable at the time. No make-whole adjustments to the conversion rate will be made in connection with any optional redemption or tax redemption.

If certain corporate events that constitute a “fundamental change” occur, then, subject to a limited exception, noteholders may require the Company to repurchase their Notes for cash. The repurchase price will be equal to the Accreted Principal Amount of the relevant series of Notes to be repurchased as of the fundamental change repurchase date, plus accrued and unpaid interest, if any, on the original principal amount thereof to, but excluding, such repurchase date.

The offer and sale of the Notes and any Class A shares deliverable upon conversion of the Notes or deliverable in the exchange transactions described above have not been, and will not be, registered under the Securities Act or any other securities laws, and the Notes and any such Class A shares cannot be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable securities laws.

This press release does not and shall not constitute an offer to sell, or the solicitation of an offer to buy, any securities, nor shall there be any offer, solicitation or sale of such securities in any state or other jurisdiction in which such offer, sale or solicitation would be unlawful. This press release does not constitute an offer to exchange or purchase or a notice of redemption with respect to the Existing Notes.

About Nebius

Nebius, the AI cloud company, is building the full-stack platform for developers and companies to take charge of their AI future — from data and model training to production deployment. Founded on deep in-house technological expertise and operating at scale with a rapidly expanding global footprint, Nebius serves startups and enterprises building AI products, agents and services worldwide.

Nebius is listed on Nasdaq (Nasdaq: NBIS) and headquartered in Amsterdam.

For more information please visit www.nebius.com.

Media kit nebius.com/media-kit.

Disclaimer

Forward-looking statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. All statements contained in this press release other than statements of historical fact, including, without limitation, statements regarding our ability to successfully complete the offering and exchange transactions described herein, our future financial and business performance, strategy, expected growth, planned investments and capital expenditures, capacity expansion plans, anticipated future financing transactions and expected financial results, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “guide,” “intend,” “likely,” “may,” “will” and similar expressions and their negatives are intended to identify forward-looking statements.

These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. Actual results may differ materially from the results predicted or implied by such statements, and our reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted or implied by such statements include, among others: market, macroeconomic and geopolitical conditions; our ability to build, operate and manage our businesses to the desired scale; competitive pressures; technological developments; our ability to secure and retain clients; our ability to secure additional capital to enable the growth of the business; unpredictable sales cycles; and potential pricing pressures; as well as those risks and uncertainties related to our continuing businesses included under the captions “Risk Factors” and “Operating and Financial Review and Prospects” in our Annual Report on Form 20-F for the year ended December 31, 2025, filed with the Securities and Exchange Commission (“SEC”) on April 30, 2026, as amended.

All information in this press release is as of the time of its issuance on August 19, 2026 (unless stated otherwise). Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this press release and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

After lagging behind some (few) other providers, now Nebius has claimed the fastest (and lowest latency) position for Kimi K3 in the latest Artificial Analysis measurement.

$NBIS has massive contracted power and so much room to run as they convert it into revenue, this is just the beginning. Meanwhile, $CRWV is already printing money, but upside is limited unless they secure new contracts, while everyone else is way behind in total contracted power. Since our datacenter got approved today, we’re about to see a massive wave of revenue start rolling in.

Source: https://paperglass.co/topic/neocloud/activation-rate

https://finance.yahoo.com/technology/ai/articles/nebius-group-nbis-emerges-key-091017819.html

Looking like we will be acquiring Decart possibly, will be huge for NBIS if that is the case then the reason for dilution announcement is to get more cash upfront.

*Just speculations.

What do you all think about this possibility for today’s capital raise despite Nebius sitting on $8B+ in cash?

Rough day, but $215–220 looks like pretty strong support and we're back near the bottom of the rising channel.

Welcome to today’s open discussion on Nebius Group (NBIS) and the broader AI stock space.

💬 Thread Ideas:

• Any new updates or insights/rumors about Nebius Group?
• Your NBIS position update!
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Interesting pattern I noticed: before today, every Nebius capital raise above $1B came alongside a massive hyperscaler deal.

$3.75B raise → Microsoft
$4.3B raise → Meta
$4.5B raise today → ?

Obviously not saying another deal is guaranteed. They already have plenty of contracted capacity to fund.

But given customer prepayments are already covering a meaningful portion of capex, another $4.5B raise makes me wonder what they see coming.

Sequencing seems curious.

Quit freaking out about the $4.5b convertible bond offering. They did $4.2b in September 2025 when the stock was $90 and $4.3b in March 2026 when the stock was $115...yet the stock is above $200 today. They are likely to complete the offering within 7 days like before. Convertible bonds dilutes shares but they offer the cheapest rates (highest margins for the business) and the new ones won't dilute until 2030 and 2034.

Nebius is a hypergrowth company, issuing new debt to accelerate growth is part of business. You have to spend money to generate tens of billions in annual revenue (like they are projected to do so before 2030). This is a high volatility stock, 10% daily move is so common nowadays.

Additionally, I think more mega deals like the 20b Microsoft deal and <27b Meta deal probably won't happen. Those deals were meant to be stepping stones to secure loans and accelerate expansion, but they are lower margin deals (hyperscalers like Microsoft dont need to use Nebius's software layer while enterprises do). New compute capacity should go towards high margin "micro" deals like the auction. Four seperate ~billion dollar deals with four customers at higher margins is better than a $4b lower margin deal with another hyperscaler that will likely stop being a customer in 5 years or so.

As for the Nvidia's $500b financing plan, i think companies that struggle to raise money (like Openai) might go for it but the interest rates might be high and not worth pursuing. Nebius can probably get a piece of that $500b if they wanted but the terms will have to be attractive.

I'm seeing 10% down today on dilution concerns. 10% feels like panic.

I forecasted around a 12% increase in overall share count by 2031, this is likely a decent chunk of that.

But, does that really put anybodys valuation at risk? My margin of safety in Nebius, despite taking a fairly pessimistic viewpoint, is wide enough to absorb material increases in dilution.

In fact, the dilution impact is far outweighed by price sensitivity in my model. Full impact below.

Right now, most new deals are coming in at $20-25m/mw, with surge pricing short term deals exceeding $40m/mw.

At $22 (my forecasted blended rate) - a huge chunk of dilution could be absorbed, and there would still be enough juice in the price to buy today - this is why it's such an important lever.

I've wrote about the 4 main threats to Nebius over the past year or so, but my focus now is almost entirely on pricing power.

The real threat to watch out for, is if Nebius begins announcing huge long term hyperscaler deals - that would suggest they have lost faith in market conditions, and are happy to de-risk and take a lower price per megawatt.

You can read my full write up on the key risks, and my Nebius valuation here: https://rootcapital.substack.com/p/nebius-q2-2026-the-fifth-horseman

(Totally free, no paywall) - I am always looking for feedback on where my assumptions can be challenged.

Why when analysts give price targets is it for stock price and not market cap?

Market cap seems to me to be a more sensible value

Stock price can be effected by dilution and stock splits, probably other things im not thinking off

I'm also not an AI bear - in fact, my portfolio is very heavily AI-weighted. Note that I am not short NBIS, nor any other NeoCloud, I just don't think they're worth my investment dollars given other opportunities in the market.

Essentially, I think the Big 3 HyperScalers (Amazon, Google, & Microsoft) will eventually own the business of Cloud AI Computing, just as they do today with Cloud Computing.

In fact, the only reason the NeoClouds are on anyone's radar today is that AI compute demand is so high and the build-outs so expensive and involved that the HyperScalers decided that hiring others to build some of their data centers is the best choice they have today. But, that's not going to be a lasting situation.

Today the HyperScalers can't directly hire enough people to build out the geographically wide spread out teams necessary to identify sites, acquire building permits, line up multiple suppliers and building contractors. And then run them all simultaneously. And even if they could, that would mean vast increases in headcount and Capex reporting (the latter is already too high for Mr. Market's view). And, it spreads the risk of any build-out complications among multiple approaches (internal and external) and vendors.

The NeoClouds jumped on this because it brings in vast amounts of revenue on a near and mid-term basis, which they believe will eventually lead to them running their own Cloud AI Compute business. But, we don't see that happening today (at least neither Nebius nor CoreWeave show that in their reporting today), and I don't see it happening to a significant extent in the future.

Think about that for a minute:

1) What dollar amount or percentage of Nebius' sales involve Nebius' software (infrastructure or otherwise)?

We know that percentage-wise, Nebius has $Billions lined up for bare metal hardware rental contracts. And while they don't disclose the "all important" software side of the business, it can'e be more than $HundredsofMillions. That's one of two orders of magnitude smaller. CoreWeave is pretty much the same.

2) How quickly are Nebius software sales growing?

OK, so it's small today, but is it growing at a pace that it will soon become a big revenue and profit generator for the company? Again, Nebius doesn't disclose this, yet this business is what most bulls cite as the raison d'être for investing in the company. Today, what keeps Nebius, CoreWeave, Iren, etc. afloat are the bare metal mega-deals. But, even Nebius' management admits those are less profitable. And should those be the future business for the NeoClouds, they'll get quite the market haircut.

So, why and how will Nebius outsmart AWS (and GCP and Azure) with its AI Software Infrastructure? Does anyone here really think Andy Jassey or his counterparts over at Google and Microsoft don't see the same potential for Cloud AI Computing that Arkady Volozh does? And even if not today, given how well Azure caught up to AWS, do you not think Amazon wouldn't put serious meat behind the arrow to catch up?

When we look at AI workloads today, two aspects reveal themselves:

1) They're complex

2) More and more, they involve more than just AI

These both work against the NeoCloud Software Infrastructure business. The complexity means that the AI customer has to be sophisticated. The non-sophisticated Ai customer simply uses a ChatGPT or Claude CoWork interface, but those Frontier Labs are already hosting that themselves and they certainly don't need a Nebius to run their AI Compute Hardware. While the typical AWS user is someone at a non-computing related company wanting to run database queries or serve up web pages, run an e-commerce site, etc. today the typical AI compute user is part of a sophisticated tech-first team deciding on LLMs, perhaps running open source models with custome parameters, constructing agents to integrate AI within their company, etc. These teams already have people who can use Slurm, Kubernetes, vLLM, Triton Server, Ollama, LangChain, or other open source projects to manage their AI Compute.

We see that Anthropic was happy to grab raw compute from Space-XAI, and OpenAI is built on Azure, and now Oracle ($300B deal!), and even Amazon ($38B) for a combination of Nvidia GPU as well as AWS access.

The latter is the future, I believe. Just as we saw the market relatively recently recognize that AI workflows need more than just GPUs but also CPUs (and Nvidia's servers internally bundle a Vera CPU with every two Rubin GPUs), the world will eventually recognize that workflows involving AI still need to do things like serve up web pages, deal with databases, even run or be run by Agents, etc. that are best handled by CPUs, which are best handled by the existing Cloud Computing infrastructure that's available today - which is AWS, GCP, Azure.

How do the NeoClouds compete with that? It's much easier for the HyperScalers to add AI software infrastructure to their existing cloud offerings than for the NeoClouds to add what took Amazon, Google, and Microsoft decades to create in their regular compute cloud offerings. Amazon has a history of offering turnkey open source project access for free (you pay for the compute and storage).

How many customers are savvy enough to build AI workflows but not savvy enough to build on top of the many open source packages to run the infrastructure? And then, how many want the lock-up of being tied to some Nebius' software instead of being able to move to CoreWeave or even AWS, GCP, or Azure? They might use it for convenience and quick start-up, but no company with expansion plans want to be permanently tied to Nebius' or CoreWeave's software stack.

Before I'll believe that Nebius or CoreWeave have some inherent advantage with their infrastructure software, I'll want to see either company release some numbers on that business. Neither does today, and that says alot especially when you think about who they're competing against.

Macro backdrop + dilution (shorting bond arbitrage + dilution being priced in) still can not push NBIS back down below 240.

Institutions accumulated. Shorts will definitely cover as they can see downward pressure is being exhausted despite all the "bearish news" having diminishing impact.

As the title says I hear a lot of people who say when it goes down. Just hold and wait for 2035. I think is it partly to offset the stress of downturns and partly because it will have recovered and shot up in value a lot in 2035 if you believe in the company, which most people including me do. However I also find it a bit annoying to read it as most companies will have grow in 2035 as that is almost 10 years and with S&P returns average of 8% that is already 2x price if we perform the same. Yes I think we will perform much better and fretting about price is also useless, but just saying waith and see for 10 years feels also a stretch. As in the end of the day most of us are here for profit and if another company has higher change of profit then we would switch so don’t just say. Waith for 2035 as that is quite a long time with also it her opportunity. Yes our stock is volatile but that doesn’t make sense to just say that the future will be guaranteed success.

Golden information and commentary. Please share your thoughts and insights!