Nebius stock surges 254% as AI capex needs test valuation

Nebius Group shares have climbed 253.5% in a year as AI infrastructure demand drives a capacity buildout targeting 5 gigawatts of contracted power, yet the capital intensity of that expansion is testing investor patience.

The Amsterdam-based AI cloud provider reported second-quarter revenue of $582.3 million, up from $105.1 million a year earlier, while posting a net loss of $190.4 million. Management on the earnings call said the company raised its year-end contracted power target from more than 3 gigawatts to 5 gigawatts after securing several large AI data center deals with higher contract values per megawatt.

The company signed four landmark AI cloud agreements in the second quarter with Reflection, Cohere, a scaled U.S. new lab and a large U.S.-based quantitative trading firm. These contracts averaged more than $1 billion each and carry yields of roughly $20 million to $25 million per megawatt, with customer prepayments covering 50 percent to 60 percent of associated capital expenditures.

The deals begin coming online later in 2026 and are unlikely to materially affect 2026 revenue guidance, but they are expected to meaningfully contribute to revenues in 2027 and beyond. Nebius also sees opportunities in shorter-duration capacity agreements, generally up to six months, where customers with immediate high-value computing needs pay premiums of roughly $40 million to $50 million per megawatt.

The 5 GW Backlog

The sharp lift in contracted power to 5 gigawatts supports near-term growth visibility, but it also raises the stakes on Nebius's ability to execute large, capital-intensive projects while managing volatile earnings and a still-evolving profitability profile. The company believes its pipeline positions it among the few players capable of adding more than 1 gigawatt of new capacity annually, with management planning to reach that deployment level in 2027.

Nebius has deliberately refrained from pre-selling all of its planned 2027 capacity, betting that selling closer to deployment could capture better pricing while retaining flexibility to serve short-term, higher-margin demand. Management said the company could already have sold out its planned 2027 capacity, a sign of strong customer demand. The company also expects its asset-light model, inference offerings and other high-value services to contribute a growing share of revenues while supporting higher margins.

Valuation vs. Reality

The investment narrative projects $30.3 billion in revenue and $2.4 billion in earnings by 2029, which would require 181.9 percent yearly revenue growth from current levels. Some of the most optimistic analysts assume Nebius could reach about $47.9 billion in revenue and $2.2 billion in earnings by 2029 — a far more ambitious path than the baseline view.

Against this backdrop, the 5 gigawatt power target may either support the expansion story or highlight just how much financing and execution risk investors are willing to accept. If financing conditions tighten or capital needs rise faster than expected, Nebius's dependence on external funding and equity issuance could pressure the stock.

The competitive field is also intensifying. CoreWeave, which counts Meta, Anthropic and Perplexity among its customers, is scaling its AI cloud platform and recently secured a multi-year agreement with Solidigm for priority access to enterprise SSD capacity — a move that could help it align storage expansion with growing compute demand.

Nebius shares trade at a premium that embeds aggressive growth expectations. The question for investors is whether the contracted power backlog and mega-deal wins justify the multiple, or whether the capital intensity of the buildout will eventually outpace the revenue trajectory.

This article is for informational purposes only and does not constitute investment advice.