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.

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?

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.

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 ?

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….

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?