CoreWeave drops 11% as $35B spending plan spooks AI investors

CoreWeave's 11.4% sell-off on Friday was a verdict on what it costs to meet AI demand, not whether that demand exists. The cloud provider guided 2026 capital expenditures of $31 billion to $35 billion — roughly five times its trailing 12-month revenue of $6.2 billion — and investors balked.

"The spending happens this year, the interest accrues every quarter, and about two-thirds of that revenue isn't due until after March 2028," Nitin Agrawal, CoreWeave's chief financial officer, said on the company's first-quarter earnings call, describing the backlog structure.

CoreWeave closed at $71.88 on July 25 after trading above $86 earlier in the week, wiping out its weekly gains. The company reported first-quarter revenue of $2.08 billion, up 112% year over year, and a revenue backlog of $99.4 billion. But adjusted operating income fell to $21 million from $163 million a year earlier, with the margin compressing to 1% from 17%. Net interest expense reached $536 million in the first quarter, more than double the $264 million recorded a year earlier, and management guided for $650 million to $730 million in the second quarter. Total debt stood at $24.9 billion at the end of March, up from $21.4 billion three months earlier.

The sell-off reflects a broader reckoning for AI infrastructure spending. Alphabet burned $5.9 billion in cash during the second quarter even as Google Cloud revenue grew 82%, and the company raised its 2026 capital spending outlook by $15 billion to as much as $205 billion. Big Tech's combined spending is set to top $700 billion this year, according to Reuters, while cash flows at Meta Platforms and Microsoft are expected to shrink sharply. Meta's free cash flow is projected to fall 95.7% to $1.85 billion, and Microsoft's is expected to drop to $25.39 billion — less than half the prior year's $58.74 billion.

The Backlog Gap

CoreWeave's $98.8 billion in remaining performance obligations — contracted work not yet delivered — arrives slowly. The company expects to recognize just 36% within 24 months and 75% within four years, with the remainder stretching as far as seven years. Meanwhile, the capital spending to build that capacity is front-loaded: CoreWeave spent $7.7 billion on property and equipment in the first quarter alone against $2.98 billion in operating cash flow.

The gap between spending and revenue is widening across the sector. CapEx-to-revenue ratios for the largest tech companies are nearly doubling this fiscal year. Meta is expected to hit 54.9%, up from 35.9%; Alphabet 41% from 23%; Microsoft 45% from 31%; and Amazon 25% from 18%, according to analyst estimates cited by Reuters.

Competition From Customers

Adding pressure, one of CoreWeave's largest customers may be preparing to compete with it. Bloomberg reported July 1 that Meta Platforms is building a cloud business to sell surplus AI computing capacity to outside customers. Meta committed $21 billion to CoreWeave earlier this year, making the relationship both a revenue driver and a potential competitive threat.

CoreWeave's market value of roughly $39 billion represents about six times trailing revenue — a premium that looks stretched for a company whose interest costs are climbing faster than its operating income. Alphabet's comment that it would "expand the use of third-party capacity" initially lifted CoreWeave shares in after-hours trading, but the optimism faded as investors focused on the cost of building that capacity.

For investors, the question is whether CoreWeave's revenue can catch up to its spending before the debt burden erodes margins further. With $24.9 billion in debt and net interest expense on track to exceed $1.3 billion in the first half of 2026 alone, the math leaves little room for execution missteps.

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