Neocloud firm Nebius Group (NBIS) exited the second quarter with some of its strongest growth yet. Revenue reached $582.3 million, up 454% year over year, while its core AI cloud business generated $574.9 million and a 49.7% adjusted EBITDA margin. Annualized run-rate revenue climbed to $3 billion from $1.9 billion at the end of Q1. Nebius still expects to reach $7 billion to $9 billion of annualized revenue by the end of 2026. Those numbers show that demand is clearly there.
However, the bigger question for investors is whether Nebius can build enough computing capacity to turn that demand into revenue without spending so aggressively that the risks begin to outweigh the growth.
Catalysts that May Push the Stock Higher
The strongest reason Nebius stock could keep climbing is that customers currently want more computing power than the company can provide. During Q2, Nebius signed four major AI cloud agreements with an average total contract value above $1 billion. Importantly, total contract value signed during the quarter was nearly 4 times higher than in Q1, while contracts from new customers increased more than ninefold.
Because demand is growing so quickly, Nebius is expanding its infrastructure just as aggressively. Management raised its year-end target for contracted power to 5 GW and expects to add more than 1 GW of capacity each year starting in 2027. That additional capacity matters because Nebius cannot recognize revenue from customers until the necessary servers and data-center space are actually available.
In addition, production workloads on Nebius’ Token Factory inference platform more than tripled during Q2, which means that customers are increasingly using its infrastructure to actually run AI models, not just train them.
That demand has also created unusually strong revenue visibility. Nebius has more than $40 billion of customer commitments, including major agreements with Microsoft (MSFT) and Meta (META). Importantly, its newest Meta agreement could be worth as much as $27 billion over five years. Better yet, roughly 70% of Q2 deals included upfront payments, and Nebius expects more than $9 billion of customer prepayments in 2026.
Those upfront payments help fund the company’s expansion. However, the need for them also leads directly to the biggest risk in the investment case.
Risks to Watch Out For
Nebius has to spend enormous amounts of money today to generate that future revenue. Q2 capital spending reached roughly $5.7 billion, almost 10 times its $582 million of quarterly revenue. Customer prepayments help, but Nebius is also using debt and issuing shares. Indeed, it sold 12.7 million shares for about $2.8 billion during Q2, while another 12.3 million remained available under its stock-sale program at quarter-end. As a result, existing shareholders could face even more dilution.
That spending also creates execution risk because much of Nebius’ future growth depends on infrastructure that has not been completed yet. Many Q2 contracts depend on computing capacity arriving late in 2026 and are expected to contribute to revenue mainly during 2027. Therefore, any delays could push expected revenue further into the future.
Finally, the firm’s fast revenue growth has not yet translated into GAAP profitability. Nebius recorded a $190.4 million net loss from continuing operations in Q2, while depreciation reached $259.7 million as billions of dollars of new computing equipment entered service. Therefore, if AI infrastructure prices eventually fall while those fixed costs remain high, Nebius could find it much harder to maintain today’s impressive adjusted margins.
Is NBIS Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on NBIS stock based on six Buys, four Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average NBIS price target of $264.22 per share implies 4.9% downside risk. (See NBIS Stock Forecast).
