Nebius (NBIS) has emerged as a significant player in the artificial intelligence (AI) infrastructure sector, recently selling out all of its available cloud capacity. This surge in popularity has led to its stock price jumping by 218% since the year began, outpacing larger tech companies. Many see this as just the beginning of an exciting growth journey, especially since Nebius has secured massive deals with both Microsoft (MSFT) and Meta Platform (META).
So, is now a good time to consider investing in Nebius stock?
About Nebius
Nebius has developed a comprehensive AI infrastructure and operates a cloud platform tailored for demanding AI workloads. Its capabilities largely rely on Nvidia hardware, offering cloud capacity to major tech firms and AI startups alike, enabling them to effectively train and execute AI models on a large scale.
In addition to its primary business, Nebius also runs brands like the autonomous driving company Avride and the tech education provider TripleTen. It has investments in other firms such as ClickHouse and Toloka.
Nebius Achieves Remarkable Growth in Q3
The third quarter results revealed that burgeoning AI cloud firms are working hard to meet unprecedented demand. Nebius’ total revenue reached $146 million, marking a staggering growth of 355% year-over-year and 39% from the previous quarter. The infrastructure segment, which contributes over 90% to overall revenue, alone saw a 400% increase, with adjusted EBITDA margins nearing 19%. Management noted that revenue growth was primarily constrained by the pace at which new capacity became available.
CEO Arkady Volosh indicated that demand for capacity surged even further in Q3, with all infrastructure deployed being quickly filled. He highlighted that while demand remains robust, supply constraints continue to limit revenue potential.
For investors, what’s particularly promising is that this demand has translated into multibillion-dollar partnerships. Recently, Nebius announced a new five-year agreement worth $3 billion with Meta Platforms, following a previous deal with Microsoft. Volosh pointed out that the size of transactions with Meta hinges solely on the available capacity, indicating a large, unmet demand for Nvidia-fueled AI infrastructure as the latest generation of Blackwells becomes available.
Back in September, Nebius revealed a long-term deal with Microsoft, wherein Nebius will supply specialized AI capabilities from a new data center set to open in Vineland, New Jersey, later this year. Volosh anticipates that this agreement will significantly boost Nebius’ AI cloud business growth from 2026 onwards.
While there’s considerable focus on these major partnerships, Nebius remains committed to its primary AI cloud platform, which is expected to be a long-term value driver. The company has introduced two significant product offerings: Aether 3.0, an enterprise-ready platform designed for control and trust, and Nebius Token Factory, an advanced solution for deploying open-source models efficiently.
Nebius anticipates that its contracted power will hit 2.5 GW by 2026, which is better than its initial goal of 1 GW. By the end of 2026, the aim is to have 800 MW to 1 GW of operational capacity connected to its data centers. This accelerated development is aimed at reaching an annual operating rate (ARR) between $7 billion and $9 billion by the end of next year. Funding for this ambitious growth will come from a mix of debt, asset-backed financing, and a new market equity initiative involving up to 25 million shares. Still, they have stressed that existing shareholders’ ownership dilution can be avoided.
Expectations for the full year are set at $500 million to $550 million in revenue, reflecting a 346% year-over-year growth at the midpoint. Analysts project that sales will continue to climb, forecasting a 454% increase to $3.07 billion in 2026. Looking ahead, management is confident that ARR will be in the range of $900 million to $1.1 billion by the end of 2025, with substantial revenue growth anticipated from Microsoft and Meta in 2026.
Wall Street’s Take on Nebius Stock
The general consensus on Nebius stock is a “Moderate Buy.” Among the six analysts covering it, five have assigned a “strong buy” rating, while one considers it a “moderate buy” and two categorize it as a “hold.” Wall Street analysts see an upside potential of 81% from current levels, with an average price target set at $150.83. The highest price forecast suggests there could be a 153.4% upside over the next year.
Nebius identifies a vast and expanding AI cloud market ahead and is building the necessary infrastructure, signing clients, and rapidly expanding its offerings. Despite the impressive growth in sales, Nebius remains unprofitable, which may make it more fitting for investors willing to take on higher risks.
