Why Cerebras Systems Stock Just Sank
Key Points
Cerebras's missed Wall Street's sales and earnings targets for the second quarter.
Despite the Q2 misses, the company delivered significant upward revisions to its full-year targets.
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Cerebras Systems (NASDAQ: CBRS) stock fell in Thursday's trading on the heels of the artificial intelligence (AI) chip specialist's second-quarter report. The company's share price had moved 11.9% lower in the day's session as of 3:45 p.m. ET despite a 0.7% gain for the S&P 500 and a 0.9% gain for the Nasdaq Composite.
Cerebras published its Q2 results after yesterday's market close, reporting sales and earnings that were below Wall Street's expectations. On the other hand, the company raised full-year sales and margin targets.
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Cerebras's Q2 performance disappointed investors
In the second quarter, Cerebras recorded a net loss of $2.98 per share on revenue of $180.11 million. The company's loss came in significantly higher than anticipated, exceeding the average analyst target by $1.31 per share. Meanwhile, sales for the period came in roughly $13.4 million below the average forecast. Even though the business still recorded 74% year over year revenue growth in the period, investors were expecting stronger expansion and less red ink on the bottom line.
What's next for Cerebras?
While Cerebras's Q2 performance missed the mark, there was some good news for investors with the report. The company now expects that non-GAAP (adjusted) core full-year sales will be between $880 million and $890 million, a core gross margin between 41% and 43%, and a core operating margin between -17% and -19%. Previously, the company had targeted sales between $855 million and $865 million, a gross margin between 38% and 41%, and a core operating margin between -38% and -41%.
With the company significantly raising its outlook on key fronts, long-term investors shouldn't worry too much about the market's reaction to the business's misses in Q2. For those willing to embrace volatility and uncertainty, the sell-off could be a buying opportunity.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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