Nebius Stock Has Fallen About 40% From Its Record. Here's Why I'm Still Waiting to Buy.

On June 18, Nebius Group (NASDAQ:NBIS) stock ended the day at $286.69, a record. Right now, shares trade around $165 -- about 40% lower. Most of that drop is recent, with the stock falling about 30% in October alone.

Sure, it's still been a great year for anybody who bought the artificial intelligence (AI) cloud provider's stock in January. Even after the slide, the stock has nearly doubled this year.

But the stock arguably isn't cheap enough yet. Nebius is calling for a sharp gain in revenue in the next two quarters, and I think the price already assumes it gets there.

Image source: The Motley Fool.

No company news explains the drop

Nebius itself hasn't given investors much new to worry about. Its October announcements included a small software acquisition and a developer-training program. And the company hasn't changed its forecast since it reaffirmed its 2026 guidance with its second-quarter report in August.

Instead, the selling looks broader. Fellow AI cloud provider CoreWeave has dropped about as much as Nebius in October, as investors seem to have soured on companies that rent out AI computing power. I can't pin down a single reason.

Put another way, the price has changed far more than the business has over the last few weeks.

Can the second half deliver?

Nebius' growth has been remarkable. Revenue climbed from around $228 million in the last three months of 2025 to $399 million in the first quarter of 2026, then $582 million in the second quarter, up 454% year over year. Compared to the previous quarter, growth slowed from 75% to 46%. But every quarter still added over $170 million in revenue. Annualized run-rate revenue (the last month of the quarter's AI cloud revenue, times 12) rose from $1.9 billion in March to $3.0 billion in June.

Management, though, is calling for a much steeper climb. Nebius expects revenue of $3.0 billion to $3.4 billion for 2026, and year-end annualized run-rate revenue of $7 billion to $9 billion.

With $981 million of revenue in the first half, reaching even the bottom of that range means taking in around $2 billion in the second half, more than twice the first half's total. Put differently, Nebius has to average about $1 billion a quarter, or about 75% more than it took in during the second quarter.

If it just kept adding revenue at its second-quarter rate, full-year revenue might be closer to $2.7 billion.

Management expects new capacity to bridge that gap. On the August earnings call, chief financial officer Dado Alonso said Nebius expects "capacity deployed late in Q2 to begin contributing to revenue in Q3."

The third-quarter report should show if it does.

Meanwhile, building that capacity is expensive. Capital expenditures were around $5.7 billion in the second quarter alone. And Nebius swung to a net loss from continuing operations of around $190 million, since a big investment gain from a year earlier didn't repeat.

The price still assumes a lot

Nebius often points to more than $40 billion in customer commitments. The amount in its financial statements is a little lower. Remaining performance obligations (signed contract revenue it hasn't recognized yet) were around $37.5 billion on June 30, and Nebius expects just 36% of that to become revenue over the two years through June 2028. That total was up from about $33.6 billion at the end of March.

Plus, revenue is concentrated. Three customers made up 24%, 21%, and 14% of second-quarter revenue, or 59% combined, though Nebius labels them just by letter. The only investment-grade clients it names, Microsoft and Meta Platforms, have each signed deals worth over $10 billion.

At around $47 billion, Nebius trades at about 15 times the sales it expects this year, using the midpoint of its forecast. At the June peak, it was closer to 24 times sales.

True, that multiple has fallen a lot. But around 15 times sales is still pricey for a company that lost money in the second quarter and is spending heavily to add capacity.

Is a 40% drop enough to make Nebius a buy? Not yet, in my view. The company is growing exceptionally fast. But at this price, I'd want to see the second-half ramp show up in the results before buying.

What would change my mind is a third-quarter report showing revenue heading toward $1 billion a quarter, plus backlog growth from customers besides Microsoft and Meta. A lower stock price would help, too.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Microsoft. The Motley Fool has a disclosure policy.