Nebius Stock: The Bull Case, the Bear Case, and My Call Before Nov. 12

When I last covered Nebius Group (NASDAQ:NBIS) in mid-October, the stock was near $165, and I said I was still waiting to buy. Shares have kept falling since then.

Even after jumping about 7% on Nov. 3, the stock is near $152 as I write -- off about 47% from June 18, when it closed at a record $286.69.

Two more things have changed. The artificial intelligence (AI) cloud provider announced a $3.5 billion financing facility from Citigroup on Oct. 22. And it'll post third-quarter results on Thursday, Nov. 12, before the open.

Image source: Getty Images.

The bull case

The strongest argument for the stock is Nebius' own target. Management expects to finish 2026 with annualized run-rate revenue of $7 billion to $9 billion. (Nebius multiplies a quarter's last month of AI cloud revenue by 12 to get it.) At the end of June, it was $3.0 billion.

That seems like a big jump. But Nebius has arguably been growing at close to the pace it needs.

Showing how fast the company is scaling, Nebius' run-rate revenue went from $1.25 billion at the end of 2025 to $1.9 billion in March, a gain of around 54%. Growth then sped up a little, with run-rate revenue climbing 56% to $3.0 billion by the end of June. Second-quarter revenue, meanwhile, jumped 454% year over year. Two more quarters at the recent pace would take run-rate revenue to around $7 billion, the low end of the company's range.

And Nebius has topped a goal like this before, finishing 2025 above its own forecast for $900 million to $1.1 billion in run-rate revenue.

What's more, pricing might help it go further. Deals Nebius signed in the second quarter averaged over $20 million in annual contract value per megawatt of capacity, compared with around $12 million across its 2026 base. Most of them were signed for capacity due late this year, so the bigger boost might show up in 2027 revenue.

Demand doesn't look like the problem, either.

"We could sell our entire 2027 capacity on these terms today," founder and CEO Arkady Volozh said in his second-quarter letter to shareholders.

Valued at around $44 billion, Nebius trades at about 5.5 times the annualized revenue it's targeting by year-end, using the midpoint. If management pulls it off, I think that price is modest for a company growing so fast.

The bear case

The problem is what all this costs to build. Nebius expects capital expenditures of $20 billion to $25 billion this year, and it spent around $8.1 billion on equipment and other capital purchases in the first half. That leaves around $12 billion to $17 billion to spend in just six months.

So far, Nebius has filled much of that gap with outside money. It sold 12.7 million shares in the second quarter at an average price of around $224. It raised about $5.75 billion with convertible notes in August. And the new Citigroup facility lasts for just 364 days, so it will have to be repaid or replaced within a year.

Yes, customer prepayments help. Nebius expects to collect over $9 billion of them this year.

But with the stock around $152, any extra share sales could dilute current holders more than the second-quarter sales did. And if lenders become more cautious about AI data center projects, the rest of the build-out could cost more to fund.

Revenue is also concentrated. Three customers accounted for 59% of second-quarter revenue, and Microsoft alone has a contract worth up to $19.4 billion.

Is Nebius stock a buy before Nov. 12?

The lower price helps a bit. In October, I put Nebius at around 15 times the revenue it expects for 2026. It's about 14 times that revenue now, using the midpoint of its $3.0 billion to $3.4 billion outlook.

But price wasn't the biggest thing holding me back. The year-end target needs the next two quarters to grow about as fast as the past two, while Nebius funds capital spending of around seven times this year's expected revenue.

The third-quarter report should give the September run-rate. A figure around $4.6 billion would keep Nebius on track for the low end of its target. Anything well under that might put the year-end target out of reach.

My call is to wait another week for that number. Nebius is growing extremely fast, and I think the stock might look cheap in hindsight if management delivers. Sure, waiting could mean paying a higher price if the quarter is strong. With the report so close, I'm willing to run that risk.

Citigroup is an advertising partner of Motley Fool Money. Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.