$NBIS (-1,34Â %)
$NVDA (+1,3Â %)
My dears,
Jensen Huang is increasingly building up a second mainstay. And Nvidia is increasingly becoming an AI holding company.
Ingenious Jensen Huang
The AI and data center specialist Nebius, in which Nvidia also holds a stake, presented its quarterly figures on Tuesday. They were strong.
Just a few days ago, AI hyperscaler CoreWeave presented strong quarterly results and has since been celebrated by investors: The share price has risen by almost 40 percent in just 5 days. The increase compared to a month ago is as much as 145.6%.
The shares of Nebius have recorded a similarly impressive performance with an increase of almost 89% in four weeks. The Netherlands-based AI infrastructure company pursues a dual strategy: on the one hand, Nebius, like CoreWeave, provides computing power to other companies, while on the other hand it is also used to train its own AI models.
Up 385.1 percent: explosive sales growth!
On Tuesday, the company, in which AI hardware pioneer Nvidia also holds 1.2 million shares (current market value around 47 million US dollars), presented its annual report - which was more than impressive!
Compared to the same quarter of the previous year, revenue climbed by an incredible 385.1 percent to 55.3 million US dollars. Twelve months ago, turnover was just 11.4 million US dollars. Annual recurring revenues (AAR) recorded an even stronger increase, exploding by 684 percent to 249 million US dollars.
These are considered particularly important for software and cloud computing companies, as they ensure high-margin and financially visible sales. The strong increase in business activity was primarily made possible by high demand, which was met with the help of new data centers in Iceland and the US states of Kansas and New Jersey.
Losses grow after increase in operating costs
However, the company is not yet profitable. The adjusted loss climbed by 19 percent from USD -77.6 million to USD 92.5 million. At least there was an improvement in operating income (EBITDA). Here, losses were reduced by 12 percent to 62.6 million US dollars.
The reason for the increase in the net loss is the sharp rise in operating costs in connection with the commissioning of new data centers. Expenses for share-based payments also rose sharply, but at USD 17.6 million were kept within limits.
Rapid growth and EBITDA profitability targeted
Nebius has confirmed its forecast for the current financial year. The company is aiming for a consolidated turnover of 500 to 700 million US dollars. Nebius even estimates annual recurring revenue in the AI business at up to USD 1 billion.
In terms of profitability, the company is aiming to achieve positive EBITDA in the second half of the year, taking adjustments into account. The medium-term target is an EBITDA margin of 20 to 30 percent.
Up to 2 billion US dollars are to be invested in order to achieve further strong growth. The company can easily afford this luxury thanks to its ample cash and liquidity reserves of around USD 2.5 billion.
Share price doubles in just a few weeks
Investors were enthusiastic about the company's steep growth path and at times rewarded the share with price increases of eight percent. However, the share gave up some of its gains over the course of the trading day and ultimately closed the day up 4.2 percent.
Profit-taking is no surprise given that the share price has doubled in just a few weeks and could occur more frequently in the coming days given the RSI value of 78 points (a share is considered overbought at 70 points). Overall, however, the share makes a strong impression and should return to its annual high of USD 50.87 in the medium term.
Conclusion: An AI high-flyer in the making?
Nebius has a vertically integrated AI business model with data centers whose computing power is both rented out and used in-house. This allows the company to participate in the entire value chain.
This ensures explosive revenue growth, which Nebius hopes will enable it to achieve EBITDA profitability this year. If this is the case, the share's recovery after its crash in April is likely to continue and soon surpass its high for the year to date. However, as with CoreWeave, investors should bear in mind the still very speculative nature of the company's valuation in particular.
Author: Max Gross, wallstreetONLINE editorial team
