Cerebras stock falls on earnings release, with profits lower than AI chip competitors

Cerebra Systems Reports on Profit Expectations

Cerebra Systems (CBRS) has released its first financial report as a publicly traded company, indicating that its full-year profit margin is likely to fall short of the numbers seen in the first quarter, and also below those of major semiconductor firms like Nvidia. As a result, shares dropped over 14% in premarket trading on Wednesday.

This chip designer, which recently raised $5.55 billion through an initial public offering, specializes in inference—basically how AI systems react to user requests. A significant portion of its growth is linked to OpenAI, highlighted by a massive $20 billion multi-year agreement that includes deploying a 750-megawatt Cerebras chip for the ChatGPT creator.

In a statement released after hours on Tuesday, Cerebras projected that its adjusted gross profit margin for the year 2026 will be between 38% and 41%, a decrease from the 47% margin reported in the first quarter. While this forecast exceeds analysts’ expectations of 29.58%, it remains notably lower than the margins reported by competitors like NVIDIA, which boast gross margins in the mid-70s, and Advanced Micro Devices, hovering around the mid-50s.

For the second quarter, the company anticipates an adjusted gross margin ranging from 36% to 38%, again below the 47% from the first quarter. This trend raises some eyebrows.

Ben Bajarin, CEO of the technology consultancy Creative Strategies, noted that Cerebras’ strategy of producing some of the largest chips in the world might be detrimental to its gross margins, primarily due to the complications involved in manufacturing such sizable components.

Additionally, Chief Financial Officer Bob Cormin mentioned during a post-earnings call that Cerebras is temporarily renting back its systems from current clients to satisfy immediate demand while bolstering data center capacity. He acknowledged that “the additional cost of renting third-party capacity will temporarily reduce margins on core cloud and other services from current levels.” However, he also conveyed that the company’s long-term objective is to attain 60% gross margins.

CEO Andrew Feldman shared that Cerebras is initiating early discussions for potential data centers in various locations, including Israel, the United Arab Emirates, Australia, Singapore, India, and Indonesia.

The firm reported first-quarter revenue of $193.4 million, up from $99.5 million during the same period last year. While it did announce an adjusted net loss of $2.5 million for the quarter, this was a more favorable outcome compared to the analysts’ expectations of a net loss of $36.75 million.