Three big things from Nebius’s rally-sparking earnings update

• Nebius reported second-quarter results that were up 105% compared to last quarter and 625% compared to the same period a year ago. It also estimated that its annualised recurring revenue would be higher by the end of the year – between $900 million and $1.1 billion (£662 million and £809 million)
• The firm estimates it will have a gigawatt of contracted power by the end of 2026, far more than the 250 megawatts it now expects to have at the end of 2025. And that’s because it says it’s close to reaching a deal on two major undeveloped sites in the US
• The stock jumped nearly 20% after the earnings report, and if the growth continues on the current track, you can expect it to move higher still.

Last week, I wrote a Research piece about Nebius Group NV Shs Class-A- (NASDAQ:NBIS), Europe’s beguiling NVIDIA Corp (NASDAQ:NVDA)-backed neocloud provider. And, whattayaknow, this scrappy artificial intelligence (AI) infrastructure company just delivered a quarterly report that absolutely knocked the lights out (and sent the company’s shares up 19% in the process).

Here are three stellar points from Nebius’s hot-off-the-presses quarterly report.

First, a little background on Nebius

As you’re probably keenly aware: AI data centres are core for AI’s expansion. And, well, Nebius provides a cloud infrastructure and software platform that’s specially designed to handle AI’s super-intense computing needs. It’s one of few businesses in this niche field, and that puts this European-headquartered, Nasdaq-listed firm in an attractive market position. What’s more, Nebius’s strong balance sheet and the technical expertise it gleaned from its legacy businesses have enabled it to create a low-cost, high-performing, and flexible customer-focused service.

Next, the big points

On Thursday, the company said that demand for AI infrastructure – that’s computing power, software, and services – would only get stronger as use cases multiply. And that makes sense. But here are the key points of the earnings report that stood out for me.

• Nebius’s revenue for the second quarter was $105.1 million, up 106% from the first quarter, and up 625% compared to the same period last year
• The firm revised its annualised run-rate revenue (ARR) guidance higher, to $900 million to $1.1 billion for the end of this year (from the earlier forecast $750 million to $1 billion)
• Its core business achieved positive adjusted earnings before interest, tax, depreciation, and amortization, (EBITDA) in the second quarter – that’s three months ahead of schedule.

What really excites me is the acceleration in Nebius’ planned expansion and its ability to access power. After all, power capacity is a key potential bottleneck in the roll-out of new data centres. And this makes it seem like Nebius has the issue well in hand. The firm estimates that it will have a full gigawatt (GW) of contracted power by the end of 2026, a big jump from its revised 250 megawatts (MW) target by the end of 2025. Nebius had initially planned to reach a minimum of 100MW in AI-focused capacity by the end of 2025.

The surge in power in 2026 is expected to come from expanding its New Jersey and Finnish sites, and two significant new major undeveloped, greenfield sites in the US, which are currently in advanced negotiations, and hopes to announce one of them soon.

At Nebius, teamwork really does make the dream work: its group of savvy engineers enables the firm to compete with hyperscalers like Amazon.com Inc (NASDAQ:AMZN)’s AWS and Microsoft Corp (NASDAQ:MSFT)’s Azure. And that, along with its ability to deploy large-scale GPU clusters has attracted big customers such as Cloudflare Inc (NYSE:NET) and Shopify Inc Registered Shs -A- Subord Vtg (NASDAQ:SHOP).

The company’s still forecasting revenues in the mid-single-digit billions over the next few years – and it’s not willing to be more specific than that for 2026. Nebius management told shareholders on Thursday that those estimates were based on current expectations of your regular-sized customers. If the firm lands a “whale” account like frontier AI firm OpenAI or Anthropic, well, that could change all that. And with 1GW of capacity potentially lined up, that does become a possibility, rather than a dream.

I explained in that research drop, the firm would need around 500MW of power to hit $5 billion in revenue. However, if the company can sign the dotted line on those two greenfield sites and reach 1GW of contracted power by the end of 2026, then hitting a run rate of $10 billion revenue is by no means out of the question.

And, look, even I thought $10 billion was a blue sky scenario when I did the research, but this sped-up capacity expansion has already started to make that look like a realistic, base case scenario – assuming the firm bags those greenfield sites and customer demand remains strong.

And, finally, what’s it worth?

Let’s do some calculations.

If we use a price-to-sales ratio of 4x (that’s lower than its current levels and its peers), and assume it makes $10 billion in revenues, that would make for a $40 billion market capitalization – and $168 per share based on the 238 million shares outstanding. That said, there’s likely an 8% dilution from the firm’s convertible bonds, so that would make for $154, compared to the current price $67.

But it’s also worthwhile looking at the firm’s enterprise value to earnings before interest and tax (EBIT). So, the company estimates an EBIT margin between 20% and 30% in the medium term. And if we use the lower end of the range, we know that $10 billion in revenues would produce EBIT of around $2 billion. A 16x EV/EBIT multiple (I picked that figure because IT companies typically trade at EV/EBIT multiples in the 14x to 23x range) would put a market capitalization at $32 billion, or $134 (or $123 post-dilution) per share.

Now, a more optimistic 25% EBIT margin and a 16x EV/EBIT multiple would justify a $40 billion market cap, meanwhile – and the same $168 and $154 as the price-to-sales calculation above.

But don’t forget all those construction costs. Building out data centres and buying all the Nvidia advanced chips they need won’t come cheap – but that’s where Nebius is sitting pretty. With $1.6 billion in cash at the end of the second quarter – and a stash of investments that are currently valued at roughly $2 billion, the firm has the funding for its required capital investment for now, even without leveraging up.

And that sets this firm apart from its top competitor, the debt-laden CoreWeave Inc Ordinary Shares - Class A (NASDAQ:CRWV). For more on Nebius’s story, read the Research.

Russell Burns is an analyst at finimize.

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