We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can Nebius Overcome Its Capacity Bottleneck to Drive Higher Revenues?
Read MoreHide Full Article
Key Takeaways
Nebius is accelerating a major capacity expansion after selling out all available power in the third quarter.
The company lifted its 2025 CapEx outlook to about $5B to secure infrastructure and support rapid scaling.
Nebius raised 2025 revenue guidance and reiterated ambitious ARR targets tied to new capacity coming online.
Nebius Group N.V. ((NBIS - Free Report) ) is aggressively prioritizing an accelerated capacity expansion strategy to fuel explosive revenue growth. With strong third-quarter demand, Nebius sold out all available capacity. This trend continues with every new round of capacity being fully absorbed as soon as it becomes available. With NVIDIA’s Blackwell generation ramping, more customers are locking in capacity earlier and for longer terms.
However, on its latest earnings call, management highlighted that capacity constraints are limiting revenue generation. To address the bottleneck, NBIS has laid out an aggressive buildout plan. By 2026, it expects contracted power to reach 2.5 GW, up from the 1 GW outlined on its August earnings call. It also plans to have 800 MW to 1 GW of power fully connected to its data centers by year-end 2026. These structural expansions are likely to dramatically increase NBIS’s capacity to serve large-scale AI workloads.
Scaling to this level requires substantial capital investments and strategic execution. Nebius has raised its 2025 CapEx guidance from approximately $2 billion to around $5 billion, reflecting strong demand and its effort to secure critical infrastructure, hardware, power, land and key sites. These strategic investments enhance its growth prospects and position the company to seize emerging opportunities. Additionally, to fund this expansion, NBIS is utilizing multiple sources such as corporate debt, asset-backed financing and equity.
All of this capacity expansion directly fuels NBIS’ revenue engine. For 2025, NBIS has revised its full-year group revenue guidance to $500–$550 million from the previous $450-$630 million. NBIS is positioned in the middle of this range mainly due to the timing of capacity coming online, while its underlying momentum and long-term growth remain very strong. It is on track to achieve its $900 million to $1.1 billion ARR target by the end of 2025 and $7–$9 billion ARR by the end of 2026.
However, in the near term, the main hurdles to expanding capacity are obtaining sufficient power and stabilizing the supply chain. Also, the AI infrastructure market is getting more competitive, with many players scaling up, leading to broader capacity shortages. Cut-throat rivalry in this space, especially from tech giants like Microsoft ((MSFT - Free Report) ) and strong contenders like CoreWeave, Inc. ((CRWV - Free Report) ), continues to challenge its potential.
How NBIS’s Competitors are Advancing in AI
Microsoft is capitalizing on the momentum of the AI business, fueled by strong Copilot adoption and the rapid expansion of its Azure cloud infrastructure. Recently, it announced plans to increase total AI capacity by more than 80% in 2025 and roughly double the total data center footprint over the next two years. For the fiscal second quarter, MSFT expects Azure revenue to grow about 37% in constant currency, as demand continues to exceed available capacity far. Even with accelerated buildouts, Microsoft now anticipates being capacity-constrained through the end of its fiscal year. Growth may also show quarterly volatility due to the timing of capacity additions and contract mix, adding further uncertainty to near-term results. However, revenues are anticipated in the $79.5-$80.6 billion band, implying growth of 14% to 16%, driven by solid AI platform adoption and record cloud bookings.
CoreWeave has rapidly expanded its footprint, benefiting from product innovations, deep customer engagements, strategic hyperscaler ties and federal-sector opportunities roll out. It is poised to capitalize on surging enterprise adoption, fueled by heightened demand across cloud, AI and data-centric workloads. However, the company remains supply-constrained, with demand for its AI cloud platform far outpacing available capacity. Delays in powered-shell delivery from a data center partner are expected to weigh on its fourth-quarter results, prompting a reduction in its 2025 outlook. Revenue is now projected at $5.05–$5.15 billion (down from $5.15–$5.35 billion), and adjusted operating income at $690–$720 million (previously $800–$830 million).
Image: Bigstock
Can Nebius Overcome Its Capacity Bottleneck to Drive Higher Revenues?
Key Takeaways
Nebius Group N.V. ((NBIS - Free Report) ) is aggressively prioritizing an accelerated capacity expansion strategy to fuel explosive revenue growth. With strong third-quarter demand, Nebius sold out all available capacity. This trend continues with every new round of capacity being fully absorbed as soon as it becomes available. With NVIDIA’s Blackwell generation ramping, more customers are locking in capacity earlier and for longer terms.
However, on its latest earnings call, management highlighted that capacity constraints are limiting revenue generation. To address the bottleneck, NBIS has laid out an aggressive buildout plan. By 2026, it expects contracted power to reach 2.5 GW, up from the 1 GW outlined on its August earnings call. It also plans to have 800 MW to 1 GW of power fully connected to its data centers by year-end 2026. These structural expansions are likely to dramatically increase NBIS’s capacity to serve large-scale AI workloads.
Scaling to this level requires substantial capital investments and strategic execution. Nebius has raised its 2025 CapEx guidance from approximately $2 billion to around $5 billion, reflecting strong demand and its effort to secure critical infrastructure, hardware, power, land and key sites. These strategic investments enhance its growth prospects and position the company to seize emerging opportunities. Additionally, to fund this expansion, NBIS is utilizing multiple sources such as corporate debt, asset-backed financing and equity.
All of this capacity expansion directly fuels NBIS’ revenue engine. For 2025, NBIS has revised its full-year group revenue guidance to $500–$550 million from the previous $450-$630 million. NBIS is positioned in the middle of this range mainly due to the timing of capacity coming online, while its underlying momentum and long-term growth remain very strong. It is on track to achieve its $900 million to $1.1 billion ARR target by the end of 2025 and $7–$9 billion ARR by the end of 2026.
However, in the near term, the main hurdles to expanding capacity are obtaining sufficient power and stabilizing the supply chain. Also, the AI infrastructure market is getting more competitive, with many players scaling up, leading to broader capacity shortages. Cut-throat rivalry in this space, especially from tech giants like Microsoft ((MSFT - Free Report) ) and strong contenders like CoreWeave, Inc. ((CRWV - Free Report) ), continues to challenge its potential.
How NBIS’s Competitors are Advancing in AI
Microsoft is capitalizing on the momentum of the AI business, fueled by strong Copilot adoption and the rapid expansion of its Azure cloud infrastructure. Recently, it announced plans to increase total AI capacity by more than 80% in 2025 and roughly double the total data center footprint over the next two years. For the fiscal second quarter, MSFT expects Azure revenue to grow about 37% in constant currency, as demand continues to exceed available capacity far. Even with accelerated buildouts, Microsoft now anticipates being capacity-constrained through the end of its fiscal year. Growth may also show quarterly volatility due to the timing of capacity additions and contract mix, adding further uncertainty to near-term results. However, revenues are anticipated in the $79.5-$80.6 billion band, implying growth of 14% to 16%, driven by solid AI platform adoption and record cloud bookings.
CoreWeave has rapidly expanded its footprint, benefiting from product innovations, deep customer engagements, strategic hyperscaler ties and federal-sector opportunities roll out. It is poised to capitalize on surging enterprise adoption, fueled by heightened demand across cloud, AI and data-centric workloads. However, the company remains supply-constrained, with demand for its AI cloud platform far outpacing available capacity. Delays in powered-shell delivery from a data center partner are expected to weigh on its fourth-quarter results, prompting a reduction in its 2025 outlook. Revenue is now projected at $5.05–$5.15 billion (down from $5.15–$5.35 billion), and adjusted operating income at $690–$720 million (previously $800–$830 million).
NBIS’ Price Performance, Valuation and Estimates
Shares of Nebius have surged 144.2% in the past six months compared with the Internet – Software and Services industry’s growth of 6.9%.
Image Source: Zacks Investment Research
In terms of price/book, NBIS’ shares are trading at 4.66X, lower than the Internet Software Services industry’s 39.95X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for NBIS’ 2025 earnings has seen a downward revision over the past 60 days.
Image Source: Zacks Investment Research
NBIS currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.