Cerebras stock plunges 18% after Q2 earnings miss on margins

Cerebras Systems reported Q2 GAAP revenue of $180.1 million, missing the $194.2 million consensus by 7.3%, sending shares down 18% in extended trading.

"This was an outstanding quarter for Cerebras. Core revenue more than doubled to $210 million, and our cloud business nearly quadrupled year-over-year," Andrew Feldman, co-founder and CEO, said. "Speed changes what AI can do. It makes AI more useful, more productive, and opens entirely new markets."

Core revenue, which excludes pass-through revenue, rose 103% year over year to $209.9 million. Core cloud and services revenue jumped 287% to $127.7 million as OpenAI deployments and customer usage expanded. The company posted a net loss of $450.5 million, driven largely by $386.6 million in stock-compensation costs, versus a $309.5 million profit a year earlier.

The stock closed up 11.6% at $262.06 before falling about 18% in extended trading. Management raised full-year core revenue guidance to $880-$890 million from $855-$865 million, but core gross margin fell to 40.6% from 46.5% in the first quarter. The company guided Q3 core gross margin to 38%-40% as it rents systems back from cloud customers while its own data-center capacity comes online.

Cerebras ended June with $25.4 billion in remaining performance obligations, a contracted revenue pipeline that signals "extraordinary future demand," the company said. It has more than 600 megawatts of data-center capacity live or under contract through 2027 and plans to expand manufacturing capacity more than tenfold this year. The balance sheet holds $8.6 billion in cash, restricted cash and short-term investments after the May IPO that priced at $185 and raised $6.4 billion.

The margin squeeze stems from a capacity bottleneck, not demand weakness. Cerebras is renting systems back from cloud customers to serve inference workloads while its own infrastructure ramps, making current revenue more expensive to deliver. Management expects margins to improve significantly in Q4 as more Cerebras-owned systems come online.

The company counts OpenAI, AWS, AMD and CrowdStrike among partners or customers. Cerebras said it expects revenue to more than triple in the next fiscal year, and Q3 core revenue guidance of $214-$216 million tops the $212.6 million analysts expected.

The selloff reflects investor concern that explosive demand is not yet translating into explosive profits. The stock remains up 42% from its IPO price of $185. Investors will watch the Q3 earnings call for evidence that owned-capacity expansion restores gross margins toward the 46.5% level seen in Q1.

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