Equity Research · Earnings Update
Nebius Group N.V. (NASDAQ: NBIS)
Summary and key takeaways
Nebius Group delivered a decisive beat-and-raise Q1 2026 print, with group revenue of $399.0 million (+684% year-over-year, +75% sequentially) surpassing consensus of roughly $392 million, and adjusted EPS of ($0.33) coming in well ahead of the ($0.73) consensus estimate. The core Nebius AI cloud segment, now 98% of group revenue, grew 841% year-over-year to $389.7 million as newly commissioned GPU capacity was absorbed almost immediately — management indicated the company effectively sold out available capacity during the quarter. Adjusted EBITDA turned sharply positive at $129.5 million (from a $53.7 million loss a year ago), aided by material operating leverage as cost of revenue fell to 26% of revenue from 49%.
The headline GAAP net income figure of $621.2 million and diluted EPS of $2.11 were driven almost entirely by a $780.6 million non-cash gain on the revaluation of Nebius's equity stake in ClickHouse following that company's Series D financing round, and should not be read as a signal of underlying profitability — the cleaner read on the operating business is the adjusted EBITDA and adjusted net loss lines.
Management raised FY2026 capex guidance to $20–$25 billion (from $16–$20 billion) to fund 2027 capacity, disclosed a new 1.2 GW owned data center site in Pennsylvania, and reiterated FY2026 targets of $7–9 billion core AI cloud ARR, $3.0–$3.4 billion group revenue, and roughly 40% adjusted EBITDA margin. Contracted power scaled to 3.5+ GW from just over 2 GW disclosed the prior quarter, with a new year-end target of at least 4 GW. The quarter also featured the disclosure of a landmark $27 billion capacity agreement with Meta ($12 billion firm commitment beginning early 2027, plus $15 billion of optional capacity), underscoring the durability of hyperscaler demand for third-party AI infrastructure.
- Revenue and adjusted EPS both beat consensus; AI cloud segment growth accelerated sequentially (82% QoQ) rather than decelerating off a larger base.
- Adjusted EBITDA inflected to solidly positive for a second consecutive quarter, evidence that unit economics improve with scale and utilization.
- Core AI cloud ARR reached $1.92 billion exiting Q1, up 54% quarter-over-quarter and tracking toward the low end of the $7–9 billion FY26 exit target, which still requires a steep back-half ramp.
- Balance sheet was fortified with $4.34 billion of convertible notes and $2.0 billion of prefunded warrants, leaving $9.3 billion of cash — ample dry powder against the raised $20–$25 billion capex plan, but leverage and dilution are rising.
- The Meta capacity agreement and continued NVIDIA backing validate Nebius's position as a credible, differentiated neocloud alternative to CoreWeave, even as the stock has been volatile amid broader hyperscaler capex/competition headlines.
Q1 2026 results snapshot
| ($ millions unless noted) | Q1 2025 | Q1 2026 | YoY change |
|---|---|---|---|
| Group revenue | $50.9 | $399.0 | +684% |
| Nebius AI cloud segment revenue | $41.4 | $389.7 | +841% |
| Adjusted EBITDA / (loss) | ($53.7) | $129.5 | n/m |
| Adjusted net income / (loss) | ($83.6) | ($100.3) | -20% |
| GAAP net income / (loss) from cont. ops. | ($104.3) | $621.2* | n/m |
| Diluted GAAP EPS from cont. ops. | ($0.44) | $2.11* | n/m |
| Adjusted EPS (est. basis) | n/a | ($0.33) | n/a |
| Cost of revenue (% of revenue) | 49% | 26% | -23 pts |
| Capex (property & equipment) | $543.9 | $2,472.9 | +355% |
| Cash & cash equivalents (period end) | $1,447.0 | $9,298.2 | +543% |
| Core AI cloud ARR (exit run-rate) | $249 | $1,920 | +671% |
Beat / miss vs. consensus
| Metric | Consensus | Actual | Beat / (miss) |
|---|---|---|---|
| Revenue ($M) | ~$392 | $399.0 | +1.8% |
| Adjusted EPS | ($0.73) | ($0.33) | +55% narrower loss |
Detailed results analysis
Revenue: broad-based acceleration, capacity sold out
Group revenue of $399.0 million grew 684% year-over-year and 75% sequentially from $227.7 million in Q4 2025, marking the fifth consecutive quarter of sequential acceleration in dollar terms. The Nebius AI cloud segment contributed $389.7 million (98% of group revenue), up 841% year-over-year and 82% quarter-over-quarter, as previously contracted GPU capacity came online and was immediately monetized. Management characterized available capacity as effectively sold out during the quarter, consistent with commentary of a persistent excess-demand environment across the sector. TripleTen, the Group's edtech business, grew a more modest 10% year-over-year to $11.6 million on roughly 5,000 new student enrollments, while Avride, the autonomous vehicle unit, remains a de minimis revenue contributor.
Margins and profitability: clear operating leverage
The quarter's most important underlying signal was operating leverage. Cost of revenue fell to 26% of revenue from 49% a year earlier, and SG&A fell to 36% of revenue from 120%, even as absolute dollar spend grew substantially to support the larger operating footprint. Depreciation and amortization rose to 53% of revenue from 96%, reflecting the scaling GPU fleet, partially offset by a change in estimated useful life for servers and networking equipment (extended from four to five years, effective prospectively from Q1 2026), which reduced the depreciation run-rate. Adjusted EBITDA of $129.5 million (a 32% margin) followed a first positive EBITDA quarter in Q4 2025 ($15.0 million), evidence that the inflection is durable rather than a one-quarter anomaly.
Below the operating line, results were distorted by non-operating items. GAAP net income of $621.2 million reflected a $780.6 million non-cash gain from remeasuring the Group's investment in ClickHouse following that company's $400 million Series D round at an approximate $15 billion valuation. Interest expense of $63.7 million (versus nil in the prior-year period) reflects the growing convertible note stack. Adjusted net loss, which excludes the ClickHouse gain, share-based compensation, and other one-off items, widened modestly to $100.3 million from $83.6 million, reflecting the heavy pace of infrastructure investment relative to still-scaling revenue.
Capacity, capex, and the guidance raise
Management raised FY2026 capex guidance to $20–$25 billion from $16–$20 billion, explicitly earmarking the incremental spend for 2027 capacity expected to come online in early 2027 and contribute to revenue from the first half of that year. Q1 capex (purchases of property, equipment and intangible assets) was $2.47 billion, more than four times the $543.9 million spent in Q1 2025. Contracted power capacity increased to more than 3.5 GW, up from just over 2 GW disclosed the prior quarter, with owned/contracted capacity now representing more than 75% of the total. The company disclosed a new 1.2 GW owned AI factory site in Pennsylvania and now targets at least 4 GW of contracted power by year-end 2026.
Balance sheet and liquidity
Nebius ended the quarter with $9.3 billion of cash and cash equivalents, up from $3.68 billion at year-end 2025, after raising $4.34 billion of gross proceeds from convertible notes and $2.0 billion from the issuance of prefunded warrants during the quarter. Total debt, non-current, rose to $8.43 billion from $4.10 billion. Deferred revenue (current and non-current) increased sharply to $4.78 billion from $1.58 billion, reflecting large customer prepayments and advances that are also captured in the $3.20 billion positive swing in deferred revenue within operating cash flow — a structural feature of Nebius's capacity-contracting model that materially de-risks the funding of the capex ramp. Total shares outstanding were 253.9 million (220.4 million Class A, 33.5 million Class B, excluding 68.1 million Class A shares held in treasury); the diluted share count used for EPS purposes was 309.0 million, reflecting dilution from the convertible instruments.
Key metrics and guidance
Core AI cloud ARR and the path to FY26 targets
Core AI cloud annualized run-rate revenue (ARR) exited Q1 2026 at approximately $1.92 billion, up 54% quarter-over-quarter from roughly $1.25 billion at year-end 2025 and up sharply from $249 million exiting Q1 2025. Management reiterated FY2026 exit ARR guidance of $7–9 billion, which implies the business must roughly quadruple to quintuple current run-rate revenue over the remaining three quarters of the year — an aggressive bar, though one supported by the 3.5+ GW of already-contracted power and the newly signed Meta capacity agreement, which begins contributing in early 2027 and therefore sits mostly outside the FY26 ARR base.
FY2026 guidance (reiterated)
- Core AI cloud ARR (exit run-rate): $7–9 billion
- Group revenue: $3.0–3.4 billion
- Group adjusted EBITDA margin: approximately 40%
- Capex: $20–25 billion (raised from $16–20 billion prior guidance)
- Contracted power: at least 4 GW by year-end (raised from prior 2+ GW disclosure)
On our math, the $3.0–3.4 billion FY26 group revenue guide implies roughly 12–13x current-quarter run-rate ($399.0 million x 4 = $1.60 billion annualized), underscoring how much sequential ramp is still assumed for the back half of the year. We view this guidance as achievable but not conservative, given (1) the step-up already visible in Q1's 75% sequential growth, (2) the large contracted backlog implied by $4.78 billion of deferred revenue, and (3) the Meta agreement providing incremental demand visibility into 2027, but flag capacity delivery timing and power/land constraints as the primary execution risks to the guide.
The Meta agreement
Nebius disclosed a capacity agreement with Meta valued at up to $27 billion in aggregate: a $12 billion firm commitment for dedicated compute capacity beginning in early 2027, plus $15 billion of additional capacity that Nebius can allocate to Meta or sell to other AI cloud customers at its discretion. This is among the largest disclosed neocloud capacity agreements to date and, together with existing large customer relationships, materially extends Nebius's revenue visibility beyond the FY2026 guidance window. Because the firm commitment begins in early 2027, it is largely not reflected in the FY2026 ARR or revenue guidance reiterated this quarter, representing potential upside to out-year estimates rather than to 2026 numbers.
Updated investment thesis
We view Nebius as one of the best-positioned "neocloud" challengers to the hyperscalers and to fellow independent AI infrastructure providers such as CoreWeave, on the combination of (1) an owned-infrastructure model (as opposed to a colocation-heavy footprint), (2) a demonstrated path to positive adjusted EBITDA at a much earlier revenue scale than peers, (3) a fortress balance sheet with $9.3 billion of cash and large customer prepayments funding a meaningful share of the capex program, and (4) blue-chip demand signals including the NVIDIA equity relationship and the new Meta capacity agreement.
The core debate for the stock is less about near-term demand — which appears robust and, per management commentary, effectively sold out — and more about (a) whether Nebius can execute the capacity build-out (power, land, GPUs, construction) fast enough to convert backlog and contracted power into recognized revenue on the timeline guided, (b) whether returns on the now $20–25 billion FY26 capex program hold up as the AI infrastructure buildout matures and pricing normalizes, and (c) dilution and leverage from the growing convertible note and warrant stack. Recent share price volatility — including a sharp pullback tied to reports of Meta's broader cloud capacity strategy — illustrates how sensitive the stock remains to shifting perceptions of hyperscaler capex intentions, even when, as in this case, Meta itself is also a Nebius customer.
Bull case
Execution continues on pace, FY26 ARR guidance of $7–9B is met or exceeded, adjusted EBITDA margin expands toward the 40% target, and the Meta relationship becomes a template for further large-customer capacity deals — supportive of a re-rating toward hyperscaler-like multiples on a much larger, profitable revenue base.
Bear case
Power, land, and supply chain constraints delay capacity delivery, elongating the path to the ARR guide; heavy capex intensity and rising interest expense keep adjusted net income negative for longer than the market is willing to tolerate; and increased in-house buildout by hyperscalers (including Meta) eventually competes away third-party neocloud demand.
We initiate coverage with a BUY rating and a $250 price target, based on approximately 15–17x our FY2026 group revenue estimate of $3.2 billion (midpoint of guidance), a premium to CoreWeave's roughly 8x trailing sales multiple that we believe is justified by Nebius's superior EBITDA margin trajectory, net-cash-funded (rather than debt/lease-heavy) capacity model, and faster underlying segment growth off a smaller base. We would look for evidence of ARR re-acceleration and continued adjusted EBITDA margin expansion in the Q2 2026 print, expected in early-to-mid August 2026, as the next major catalyst.
Valuation
At a share price of $195.19 (July 7, 2026 close) and approximately 253.9 million shares outstanding, Nebius carries a market capitalization of roughly $49–50 billion. Against the reiterated FY2026 group revenue guidance of $3.0–3.4 billion, this implies a forward multiple of approximately 14.7x to 16.7x FY26E revenue — a substantial premium to CoreWeave's roughly 8x trailing sales multiple, but one we believe is warranted given Nebius's faster growth, positive and inflecting EBITDA margin, and stronger net cash position relative to peers still working through GAAP losses in the hundreds of millions of dollars per quarter.
We caution that neocloud valuations remain highly sensitive to sentiment around AI infrastructure capex durability, and that the stock has already shown material volatility (a reported 12–17% single-day decline in early July 2026 tied to hyperscaler cloud-strategy headlines) even absent company-specific news. Our $250 price target should be read in that context: it reflects our fundamental view of the Q1 2026 print and reiterated guidance, not a prediction of near-term price stability.
Risks to our rating
- Execution risk on the $20–25 billion FY26 capex program, including power and land availability, construction timelines, and GPU supply.
- Customer concentration risk: a small number of very large contracts (including the Meta agreement) represent an outsized share of contracted backlog and future revenue visibility.
- Financing and dilution risk from continued reliance on convertible notes and warrants to fund the capex program.
- Competitive risk from hyperscalers increasing in-house capacity build-out, potentially reducing third-party neocloud demand over time.
- Valuation risk: shares trade at a premium multiple to peers that assumes continued execution; any guidance shortfall could compress the multiple sharply, as evidenced by recent volatility.
- Non-GAAP measure risk: large non-cash and non-operating items (equity revaluation gains, interest expense on converts) create a wide gap between GAAP and adjusted results that investors must track carefully quarter to quarter.
Sources & references
All figures in this report are sourced from Nebius Group N.V.'s public SEC filings, company press releases, and the earnings call transcript for the quarter ended March 31, 2026, supplemented by third-party market data and consensus estimate providers.
- Q1 2026 earnings press release (May 13, 2026) — SEC 6-K Exhibit 99.1
- Q1 2026 Operating and Financial Review and Prospects (Form 6-K, filed May 20, 2026) — SEC 6-K Exhibit 99.1
- Nebius newsroom — Q1 2026 financial results release (nebius.com/newsroom)
- Q1 2026 earnings call transcript (May 13, 2026) — Seeking Alpha, Motley Fool
- 2025 Annual Report on Form 20-F (filed April 30, 2026) — SEC EDGAR
- Q4 & FY2025 results commentary and prior guidance — StockTitan / SEC filing summary
- Consensus estimates and beat/miss data (Q1 2026) — Tickeron / Seeking Alpha
- Analyst ratings and price targets (as of July 11, 2026) — TipRanks
- CoreWeave peer comparison and neocloud valuation context — The Motley Fool
- Meta $27B AI cloud capacity agreement coverage — TradingKey
- Current stock price and trading data (July 7–8, 2026) — MarketBeat