Nebius (NBIS) Q1 2026 Earnings Transcript

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Date

Wednesday, May 13, 2026 at 8 a.m. ET

Call participants

• Chairman & CEO — Arkady Volozh
• Chief Financial Officer — Dado Alonso
• Chief Product Officer — Roman Chernin
• Chief Revenue Officer — Marc Boroditsky
• Chief Operating Officer — Andrey Korolenko
• Chief Communications Officer — Tom Blackwell
• Head of Investor Relations — Gili Naftalovich

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Takeaways

• Contracted power capacity -- Over 3.5 gigawatts secured, surpassing previous targets, with a new 1.2 gigawatt owned site announced in Pennsylvania.
• Owned energy share -- More than 75% of total power is now from owned contracted capacity.
• Acquisitions completed -- Tavily, Eigen AI, and Clarifai acquired, enhancing inference optimization and agentic search capabilities for the AI platform.
• NVIDIA partnership -- Achieved NVIDIA (NASDAQ: NVDA) Exemplar Cloud status on GB300 for training; received $2 billion equity investment from NVIDIA in March.
• Record pipeline generation -- AI cloud business pipeline increased 3.5x quarter over quarter, not including hyperscaler deals such as Meta.
• Group revenue -- $399 million, growing 684% year over year and 75% quarter over quarter from fiscal Q4 ended Dec. 31, 2025.
• Nebius AI revenue -- $390 million, up 841% year over year and 82% from fiscal Q4 ended Dec. 31, 2025, accounting for 98% of group revenue.
• Run rate revenue -- Nebius AI business annualized run rate revenue reached $1.9 billion, up over 50% from $1.25 billion in the previous quarter.
• Adjusted EBITDA -- Group adjusted EBITDA was $130 million, a margin of 32%, versus $15 million last quarter and a $54 million loss one year ago.
• Nebius AI adjusted EBITDA margin -- Expanded to 45% from 24% in fiscal Q4 ended Dec. 31, 2025, driven by revenue growth.
• Net income -- $621 million, boosted by a noncash valuation adjustment from the ClickHouse funding round.
• Operating cash flow -- $2.3 billion, versus an outflow of $198 million the prior year, due mainly to increased customer prepayments.
• Liquidity position -- $9.3 billion in cash and cash equivalents at quarter end.
• Capital raised -- Over $6 billion for the year; $4.3 billion in convertible senior notes at 1.25% and 2.60% coupons, plus $2 billion NVIDIA equity.
• 2026 CapEx guidance -- Increased to $20 billion-$25 billion from prior $16 billion-$20 billion, reflecting new capacity investments for 2027 commitments.
• Meta agreement -- Signed a $27 billion, 5-year capacity contract with Meta (NASDAQ: META): $12 billion in dedicated compute, plus a $15 billion capacity option at Nebius’ discretion.
• Contract durations and values -- Average contract length and contract values both increased across new and existing customers; prepayments also grew meaningfully.
• Capacity utilization -- Capacity continues to sell out, with several customers competing for each GPU brought online.
• 2026 guidance -- Reiterated annualized run rate revenue of $7 billion-$9 billion, group revenue of $3 billion-$3.4 billion, and group adjusted EBITDA margin of around 40%.
• Pennsylvania capacity schedule -- First 250-300 megawatts go live by end of 2027; site reaches full 1.2 gigawatts by 2030 as per power contract.
• Microsoft and Meta delivery schedules -- All current capacity commitments fully delivered; future volumes for Microsoft (NASDAQ: MSFT) ramp up in fiscal Q3 and Q4 this year, consistent with contract timelines.
• Component cost inflation -- Low single-digit percentage impact on 2026 CapEx, mostly avoided by early procurement in 2025.
• Margin progression -- Group margin expected to be around 40% for 2026, but fiscal Q2 margins to be lower due to timing of investments; fiscal Q3 margins should return to fiscal Q1 levels, moving higher in fiscal Q4.
• Financing strategy -- Additional CapEx to be funded by asset-backed financing on Meta and Microsoft contracts, corporate debt, and potential use of an at-the-market equity program (not yet utilized).
• Customer diversification -- Despite large contracts, company maintains a broad AI cloud customer base across industries, with strong demand from enterprises, fintech, manufacturing, and life sciences.
• Software role and inference focus -- Inference is the fastest-growing segment; Token Factory is the core inference product, benefiting from cloud-scale and full-stack optimization.
• M&A rationale -- Acquisitions executed to accelerate road map, bring proprietary talent, and deepen customer engagement and lifetime value for the platform.
• Prepayment model -- Customer prepayments rose sharply and are a growing source of working capital.
• Expansion roadmap -- Major capacity expansions planned for fiscal Q3 and Q4, with additional large projects coming online in early 2027 (e.g., Alabama, Missouri).
• Community engagement -- U.S. data center buildouts involve local government and community partnerships, prioritizing transparent communication and long-term local investment.

Summary

Nebius Group (NASDAQ:NBIS) reported accelerating revenue and pipeline growth, robust profitability improvement, and expanding infrastructure capacity in the latest quarter. Management announced a $27 billion, 5-year contractual partnership with Meta, structured to allow optionality in cloud utilization and enabling favorable asset-backed financing. The company increased 2026 CapEx guidance to $20 billion-$25 billion in response to pre-committed customer demand for 2027 capacity, with broadening exposure to diverse enterprise verticals through software-driven product expansion. Executives stated that more than $6 billion of new capital was raised, greatly strengthening liquidity and supporting a wide suite of forthcoming debt and equity funding initiatives. Recent strategic acquisitions, a material NVIDIA equity investment, and enhanced customer prepayment flows further reinforced the capital base and validated Nebius’ positioning as a full-stack, AI-native hyperscaler.

• Management clarified that strong AI cloud demand drives continued pricing power, with several customers vying for each available GPU across all chip generations, and contract durations extending meaningfully.
• Executives identified nonlinear margin progression in 2026 due to heavily back-end-weighted capacity deployment, guiding for sequentially lower fiscal Q2 group margin before returning to fiscal Q1 levels in fiscal Q3 and growing further in fiscal Q4.
• Component cost inflation was described as having a low single-digit percentage impact on current CapEx, mitigated through early procurement.
• Company highlighted increasing customer prepayments and contract win rates, signaling improved conversion of a record pipeline (3.5x quarter over quarter growth) into durable, diversified revenue streams excluding hyperscaler agreements.
• Nebius Group stated that financing for raised CapEx will leverage Meta and Microsoft contracts for asset-backed loans, corporate debt, and the possible activation of an at-the-market equity program of up to 25 million Class A shares, balancing debt, equity, and prepayments.
• Executives detailed that the newly acquired Pennsylvania site targets 250-300 megawatts by end-2027 and full 1.2 gigawatts by 2030, forming a key anchor for U.S. expansion.
• Strategic M&A (Eigen, Clarifai, Tavily) was undertaken to extend platform differentiation and accelerate product roadmap rather than generate standalone software revenues.
• Collaboration with NVIDIA results in privileged hardware access, alignment with future GPU and CPU product cycles, and priority for integrating next-generation SKUs including Vera Rubin.
• The company stressed deliberate customer base diversification beyond hyperscalers, balancing large contracts with a wide-ranging AI cloud client mix and maintaining high utilization across all segments.

Industry glossary

• Token Factory: Nebius’ proprietary offering for AI inference, delivering tokens (output units from language models) as a service to enterprise clients.
• Agentic search / agentic workloads: AI systems designed to autonomously execute tasks or workflows end-to-end beyond simple inference, addressing complex, multi-step operations for developers.
• NVIDIA Exemplar Cloud status: A recognition awarded to select partners demonstrating industry-leading GPU cloud infrastructure for advanced AI training and inference workloads.

Full Conference Call Transcript

Arkady Volozh: Thanks, Gili, and welcome, everyone, to our call. We have had a great start to the year. We're building an AI-native hyperscaler. And I would say we are developing it across 4 dimensions. The first is capacity and scale; second, product and functionality; third dimension is customers and demand; and finally, capital, our fourth dimension. All our focus is on execution across all 4 of these dimensions. Let me put our results of the quarter in this context. First, on capacity. As you see, we are building big. Last quarter, we told you that we already contracted more than 2-gigawatt of power while targeting more than 3 gigawatts by the end of the year.

3 months later today, we have already contracted more than 3.5 gigawatts, and we are now targeting at least 4 gigawatts of contracted power this year. Today, we announced a new site in Pennsylvania to support 1.2 gigawatt of power once fully live. This is our second owned gigawatt scale site in the United States. Our platform is most efficient when we own the full stack, and we are building towards that. Our owned contracted capacity now accounts for more than 75% of our total power. But more importantly, we continue to build our full stack platform, and this is our second dimension. What does it mean? It means we don't just offer compute.

We offer cloud services, services that span across the AI life cycle from bare-metal to multi-tenancy to inference to agentic and more. And we have made significant progress on that front. And it's not just developing our platform and launching Aether version 3.5 this quarter. Our 3 acquisitions this year, Tavily, Eigen and Clarifai demonstrate the uniqueness of what we're building. All 3 companies bring industry-leading engineers and researchers to Nebius. Eigen AI and Clarifai strengthened our inference optimization solutions. Eigen was recognized as the #1 speed inference provider by NVIDIA. While Eigen optimizes at the model level, Clarifai optimizes at the system level, and they both strengthen our in-house Token Factory offering.

We also acquired Tavily earlier this year, extending our platform reach to agentic search, an increasingly significant part of the market. This acquisition brought us rarer capabilities of what this new class of developers need. We also expanded our technology partnership with NVIDIA. We again achieved NVIDIA Exemplar Cloud status this time on our GB300 for training workloads. We are among a small group of providers to achieve this status across multiple GPU generations. At our core, we're a technology company. We have top AI engineers and deep proprietary expertise across every layer of the stack, both hardware and software. We're quickly becoming a magnet for top talent. We're happy with our ability to enlarge our offering through strategic acquisitions.

Our clients appreciate the full extent of our offering. This is not common in our market. This is our strengths, and this is our uniqueness. And we believe this is what will enable us to win. Demand is our third image, and it continues to be increasingly strong, but more importantly, our full stack platform allows us to capture and service a large and diverse range of hundreds of customers, not just several big bare metal offtakers. Our pipeline generation in the first quarter grew 3.5x over the fourth quarter, and this is a record for us. And the demand is broadening across industries. Today, we typically see several customers competing for every GPU we bring online.

We're building to support this demand with scale and discipline. New customers across a number of use cases are using our full range of offerings to solve their most challenging problems. For example, European fintech leader, Revolut, recently began using our Token Factory. In physical AI, 1X Technologies is using our cloud platform to build general purpose robots. In life sciences, our cloud platform is enabling start-ups to build more powerful models that accelerate drug discovery and advance the fight against the leaders in ways that were previously impossible. And beyond technology sectors, larger companies in industries such as manufacturing, energy, heavy equipment and pharmaceuticals are increasingly engaging with us. Demand is high. Everything we build with is sold.

That is what is driving us to build more and to raise our 2026 CapEx guidance to between $20 billion and $25 billion, which is up from our prior range of $16 billion to $20 billion. We increase -- this increase reflects investments in our 2027 capacity that will come online early next year. We expect these investments to contribute positively to revenue in the first half of 2027, where we already have customer commitments in place. Meta is one such customer. We need to invest to fully realize this. This requires capital, which is our fourth dimension. We're doing a very good job in tapping the market at scale. We raised significant capital this year, more than $6 billion.

More than $4 billion of that came from converts and $2 billion from NVIDIA equity investment. This leaves us with a strong cash position of more than $9 billion. More importantly, we have laid the foundation to raise substantial further capital this year. There are a variety of ways for us to do this. There is our recent Meta contract. First, let me just say that we are very proud of our relationship with Meta, and there is tremendous respect between our tech teams. Formally, this is a $27 billion contract with Meta. But in fact, it's worth a lot more for us.

This contract alone can unlock billions of dollars of capital for our own multi-tenant cloud at attractive rates that may not otherwise be available to us. On top of this, we also have our first contract with Meta and our Microsoft agreement that will provide additional financing opportunities. Obviously, there are many other untapped options for us to finance our public cloud build-out from the significant prepayments we get from customers to asset-backed financing of our payment contracts to corporate debt and so on. So to close, it has been a great quarter. We are even more focused on what is ahead.

We will continue to execute, expanding capacity, building our cloud platform, expanding our customer reach and financing growth diligently. Everything we build, we sell, and we are still in the very early days. I want to thank our team for the incredible work day after day and night after night and to thank our shareholders for your continued support. And with that, let me hand it over to Dado.

Dado Alonso: Thank you, Arkady. Indeed, we are off to a strong start to the year with a number of important achievements. First, we accelerated revenue growth during the quarter. We also significantly expanded our margins, and we strengthened our balance sheet. I will touch on each of these, share some color on our results and conclude with guidance. Please note that all comparisons are year-over-year unless noted otherwise. So let's start with the revenue and ARR. In Q1, we grew the group revenue by 684% year-on-year to $399 million, up 75% from Q4. Once again, we sold out our capacity as demand continued to exceed available supply.

Our Nebius AI business, which excludes our consolidated investments in TripleTen and Avride delivered even stronger results. Revenue grew 841% from last year to $390 million, representing an 82% quarter-over-quarter increase and 98% of group revenue. Growth was driven by capacity scaling and was further supported by strong utilization of pricing. Annualized run rate revenue for our Nebius AI business reached $1.9 billion at the end of March, up over 50% from $1.25 billion in the previous quarter. As we delivered strong top line growth, we also remain focused on profitability. Group adjusted EBITDA was $130 million compared to $15 million last quarter and compared to a loss of $54 million a year ago.

Group adjusted EBITDA margin was 32%, continuing the inflection in Q4 and reflecting operating leverage in our model. Nebius AI business adjusted EBITDA margin expanded to 45%, up from 24% in Q4. This improvement was driven by strong revenue growth. The gap between group and Nebius margin essentially reflects our investments in Avride and TripleTen. Both are still early-stage companies and require substantial operating investments as they scale. We expect Nebius to represent the significant majority of group adjusted EBITDA for the foreseeable future. As mentioned in the past, our intention is to find strategic and financial partners for these businesses and they consolidate them in the future.

Net income of $621 million benefited from a valuation adjustment on the back of ClickHouse recent [ funding round ]. This is a noncash item that captures the growth in the underlying value of the asset. And now turning to our balance sheet. Since our last call, we have continued to strengthen our financial position. In March, we closed a private offering of convertible senior notes, raising $4.3 billion in gross proceeds at attractive premiums and coupons of 1.25% and [ 2.60% ]. In the same month, we announced a $2 billion equity investment from NVIDIA, reinforcing our alignment with one of our key strategic partners. Prepayments from our customers also reached a new quarterly record.

Operating cash flow of $2.3 billion was up from an operating cash outflow of $198 million in Q1 last year. The sharp increase was primarily driven by upfront payments from our customers. Together, these sources of capital increased cash and cash equivalents to $9.3 billion at quarter end. Now let's speak about our CapEx. As Arkady mentioned, today, we are raising our CapEx expectations to $20 billion to $25 billion for the year. The expansion of our infrastructure footprint remains one of our highest priorities given the strength of market demand and customer activity. We are building for 2027 demand where we have customer commitments already in place.

And so we have near-term visibility into future revenue associated with this investment. As always, we will invest in capacity with discipline and rigor, including the capacity we are bringing online in 2026. In terms of how we deal and how we will fund the capacity in the year ahead, we will continue to leverage a diversified range of funding sources. On the debt side, during the past year, we built our ability to take on debt capacity. For example, with our Microsoft contract and our 2 Meta contracts, we expect to unlock the ability to raise significant capital through asset-backed financing.

We expect this to be at attractive terms based on Microsoft and Meta credit ratings, and we will inject this capital into building our cloud business. In addition, we expect to raise corporate level debt. We plan to start tapping into these financing options in the near term. And on top of that, our financing options include our at-the-market program. We have not utilized this program to date, but we are evaluating change on it. Obviously, we are very focused on generating prepayments from our current and future customers in order to reduce the capital needed from equity and debt financing.

We may also evaluate other financing options, but we'll ultimately pursue whichever vehicles have best the long-term interest of the business to support our expected capital spending in 2026. The bottom line is that as of now, given our strong balance sheet and the work we have done putting in place the various long-term contracts, we have laid the foundation to enable us to access a wide range of potential funding sources. And now turning to our outlook for the year. While it remains early in the year, our strong Q1 performance reinforces our confidence in our annual targets.

As such, we are reiterating our full year 2026 guidance for annualized run rate revenue of $7 billion to $9 billion, group revenue of between $3 billion and $3.4 billion and group adjusted EBITDA margin of around 40%. 3 key parameters will determine our growth profile and margin progression throughout the year, utilization, pricing and capacity. At present, neither of the first 2 parameters is limiting our growth. The third, capacity will play an important role in unlocking our growth potential and driving margin flow-through. On utilization, we continue to sell out our capacity. and we expect this to be the case for the foreseeable future due to strong market demand and our healthy pipeline.

On pricing, strong market demand is translating into pricing gains in our latest sales. On capacity, the time line of deploying the new capacity impacts both top and bottom line results from quarter-to-quarter. We anticipate a nonlinear quarterly adjusted EBITDA margin progression during 2026. We will see this in Q2 given the back-end weighted nature of the capacity we bring online. These investments unlock growth by increasing capacity substantially from Q2 to Q3, leading us to be confident in our adjusted EBITDA margin returning to Q1 levels in Q3 before moving even higher in Q4. Overall, we are confident in our full year targets. In closing, Q1 was another quarter of rigorous execution across the business.

We delivered a strong revenue growth, margin expansion, new business wins and continued capital discipline. As we look ahead, we will continue to scale rapidly to capture the tremendous market opportunity ahead, while remaining balanced, disciplined and focused on delivering long-term value for our shareholders. With that, I'll turn the call back over to Gili for Q&A.

Operator: [Operator Instructions]

Gili Naftalovich: The first question from our investors on the portal is from Alex Duval at Goldman Sachs. To what extent have you started to see the impact of stronger GPU pricing reflecting in your core AI business? Additionally, is there a way for us to think about the share of older shorter-term contracts that could benefit from this pricing dynamic? Marc, would you be able to answer this one for us?

Marc Boroditsky: Thank you, Alex. We continue to see strong pricing across both old and new GPU generations as demand continues to exceed our available capacity. We just raised prices again in the latest quarter, and we are still selling out across all chip types at the higher prices. We're in a very dynamic market, and we have built a resilient set of processes that allow us to adapt and respond accordingly in any market environment for both new and existing customers. The strength is showing up in a number of ways beyond just price. Contract durations are extending with the average duration of contracts growing meaningfully over the past few quarters.

Also, average contract values continue to increase across new logos and existing accounts where we are seeing strong expansion as well. And finally, prepayments are becoming more significant. Customers of all types are prepaying in order to lock in future capacity, including the hyperscalers. This improves our working capital position and gives us flexibility around external financing needs. Our go-to-market model is being built to be agile and adapt to the market and yield outcomes that can best help us continue to scale our business.

Gili Naftalovich: Thanks, Marc. We have a few questions coming in on the CapEx guide and cost inflation. Andrey, can you please discuss how much our raise in CapEx is driven by higher capacity growth versus component cost inflation?

Andrey Korolenko: Sure. Thanks, Gili. Well, the increase in this spending is driven by visibility into 2027 and our need to invest ahead of capacity that we expect to bring online. We will add much more capacity in first half of '27 than this year. And that requires more CapEx spend in the -- well, starting from now in the later part of this year. We have been able to secure sites and power and customer commitments for 2027. And so we are ramping up construction activities accordingly. And in short, the high number reflects confidence in our contracted demand pipeline and our ability to secure the infrastructure that we were against it. It's not the cost pressure.

The impact of the component inflation in our 2026 program was quite material, around low single digits as a percentage of total spend also because we secured a lot of 2026 back in 2025 at the previous price levels.

Gili Naftalovich: Thank you, Andrey. Next question we have is from James Kisner at Water Tower Research. Nebius said AI cloud adjusted EBITDA margin nearly doubled quarter-over-quarter to 45% in Q1, while you're targeting around 40% for the full year. What's driving the implied step down? Can you walk us through the adjusted EBITDA margin progression for the year? Dado, please.

Dado Alonso: Thanks, James. Indeed. As you saw in the quarter, our Q1 margins were really strong. Nebius AI adjusted EBITDA margin reached 45%, nearly doubling from Q4. And that really reflects the underlying strength of the business. On the one hand side, the demand we are seeing in the market, then the terms that we are also able to negotiate with our contracts and the unit economics of the platform itself. So as I mentioned earlier, as we move throughout the year, you will see some quarter-to-quarter variability. And I think this is worth taking a moment to explain the dynamic.

We have made a number of important investments in the first half of the year, hiring across go-to-market and engineering, our recent acquisitions and continued development of new product capabilities. And those investments are already in the cost base today. And we expect them to actually benefit from the business going forward. On the capacity side, our delivery this year is back-end weighted, and we have a meaningful step-up coming in Q3. We have very clear visibility into both the investments that we have made and also the capacity that we are bringing online. So really, what you are seeing across the quarters is a timing dynamic, not a structural one.

The investments land first and the capacity and the revenue it supports come online shortly after. So given the timing of our investments in Q2 and the timing of the deployment towards the end of the quarter, we actually expect those margins in Q2 to go a little bit lower, returning to Q1 levels in Q3 and stepping even higher in Q4. So for the full year, group, we expect a margin around 40% as we have guided. And on the longer term, those dynamics will smooth over time and our capacity footprint continues to scale and higher-value software solutions will become a larger part of the mix.

Gili Naftalovich: Thank you, Dado. The next question is around capacity from Andrew Beale at Arete. Andrey, maybe I can come to you here. Can you talk about the timing of capacity additions beginning in Q2 and when you expect key sites such as Pennsylvania to reach full capacity?

Andrey Korolenko: Thanks, Gili. So Andrew, first, about the Pennsylvania. Pennsylvania is going to have lights up by the end of 2027 with the first around 250 to 300 megawatts probably. And then the schedule looks like adding 300 megawatts each year up to 1.2 gigawatts in total actually and 1.2 gigawatts according to our power contract we have in our concession by mid-2030 or the beginning of 2030 to be more correct, more precise. But overall, our capacity schedule is just ramping up. This year is heavily towards the second half of the year. Q3 is much -- is a very significant improvement for us in terms of the capacity and going online.

Q4, also very significant and then Q1 next year is where our bigger projects like Alabama and probably the first Missouri will kick in also.

Gili Naftalovich: Great. Thank you. We'll probably stick with you, Andrey. We have a question from Josh Baer, Morgan Stanley. Can you address the media reports indicating delays at the Vineland, New Jersey site? Understanding you deliver commitments so far, are there any delays to note for the remainder of the Microsoft contract?

Andrey Korolenko: So we delivered all our capacity commitments across our Microsoft and Meta customers. So the first Meta as we already spoke, I believe the first Meta contract was fully delivered in Q1 this year. The Microsoft contract is way more stretched, and we have the delivery schedule up to the end of this year. We delivered the first tranche in November last year. We -- yes, and so we continue to be in the contract schedule. Again, it ramps up starting from the midyear and most of the volumes will be coming in Q3 and Q4.

Gili Naftalovich: Great. Thank you. So we have a number of questions around the Meta contract. A question from Alex Platt is, can you provide more details on the recently announced Meta deal? Can you explain how the $15 billion capacity option works? Should we view this as Meta backstopping $15 billion with a set attractive margin? And if you can get a customer with better unit economics on that capacity, would you take that instead? Marc, let me come to you here to walk us through this.

Marc Boroditsky: Thank you, Alex. First, I want to say that we love working with Meta, and we're excited that they chose to buy more capacity from us. This expanded new agreement is to make sure that we all understand this, a 5-year contract for a total of $27 billion, and it is structured in 2 parts. First, there's a $12 billion commitment to dedicated compute capacity with delivery starting in early '27. And then second, as you pointed out, there's another $15 billion of additional capacity that we, at our discretion, can either allocate to Meta or sell to our AI cloud customers as it comes online for the duration of the 5-year contract.

Let me explain this in a bit more detail. Meta is committed to buy up to $15 billion of any capacity in these clusters at our option during the entire 5-year contract. This commitment will likely allow us to finance the clusters with asset-based -- asset-backed financing at attractive terms, while selling them to, as I think you pointed out, to our AI cloud customers at potentially higher market prices. The unique combination of being able to sell at a premium, along with the commitment by Meta to purchase any capacity during the contract should provide us with higher margins, less risk and more visibility in our revenue.

If the market remains strong, we should generate more than $27 billion in revenue from this great agreement.

Gili Naftalovich: Thank you, Marc. We have a question from Alex Duval of Goldman Sachs about M&A. Could you explain the rationale behind your move to acquire Eigen AI and Clarifai? How does this move improve your AI cloud platform capabilities? To what extent does this move mean that you could improve customer stickiness? Roman, I think we'll go to you.

Roman Chernin: Yes. Thank you, Gili. Thank you, Alex, for the question. First of all, I want to say that we are super excited with these 2 incredible teams of talented people from Eigen and Clarifai will join us. And to deep dive in rationale, let's start from foundations. Our view is that we should own the compute stack. That is where our vertical integration, our supply chain depth and our hardware engineering generate advantage and it's also the layer that drives the bulk of our economics. But the compute stack, we built the full cloud solution and software plays the role of enabler. By the way, we partner where partnership is the right path.

And as you see now, we use M&A selectively where it accelerates our road map, brings in proven developer adoption or as capabilities complementary to what we are building. Acceleration is the key lens we apply to every potential transaction where we can find rare talent or proven adoption. This is, by the way, the example of Tavily that has incredible developer adoption that would, in general, take us meaningfully longer to build organically, acquisition is the fastest path. And we evaluate every potential deal against the clear criteria.

Does it deepen customer engagement, increase lifetime value, unlock the new category of the customers or use cases we can address and in general, strengthen our position as a full stack AI cloud.

Gili Naftalovich: Thanks, Roman. We are getting more questions on M&A, so we'll likely stay with you here. Several participants are asking on whether Token Factory and software more broadly are distinctly different from the infrastructure layer and training. I would love to get your insights around agentic monetization and the opportunity there.

Roman Chernin: Yes. Thank you for the question. As I said, we look at the software as an enabler. So it's not that we build the software to generate a separate revenue stream. The software first of all plays the role of unlocking the new capabilities for us, unlocking the new opportunities in the types of the workloads that are growing on the market and the types of the customers that we can address. Software changed the shape of the customer relationship. Every layer of the software unlocks another group of users and the customers.

We want to meet customers where they need us and let them consume our vertically integrated solution in the way that they need, and it might be a different way for different types of the customers. Customers come to our platform for different needs. In essence, they all need to run AI at scale that need -- which means that they need compute. But for example, people who use our multi-tenant cloud, they -- big extent come for large training jobs. People who -- and these are like research-driven, data scientist-driven workloads. People who come to Token Factory, they build vertically integrated vertical AI products or apply AI in their enterprises. And they come for the tokens.

And moving forward, we'll see new ways to consume infrastructure at scale that will be the agentic -- end-to-end agentic workloads.

Gili Naftalovich: Thanks, Roman. We have a question from Tal Liani at Bank of America. How do you plan to finance this additional CapEx? And are you considering disposing some of your noncore holdings? Dado, over to you.

Dado Alonso: Happy to take this question, Tal. Well, look, our balance sheet is strong. At the end of the quarter, $9.3 billion of cash and cash equivalents, and this was supported by $2.3 billion of operating cash flow, which was generated in the quarter, right, mainly coming from upfront payments from our customers. So currently, more than 90% of the CapEx range that we projected in February is already secured by cash and contractual commitments. The incremental capacity reflected in our raised $20 billion to $25 billion guidance will be funded through additional financing. And as we have -- as I have mentioned in previous calls, right, so we have a wide range of sources available to us.

On the debt side, we expect to use asset-backed financing against our contracts with Microsoft and Meta. And we will -- we may also raise corporate level debt. On the equity side, we have established an at-the-market program from up to 25 million Class A shares. We have not utilized this program to date, but we are evaluating the program regularly. In any case, as we have done today, we will apply consistent guardrails on cost of capital and shareholder dilution, while maintaining a disciplined capital structure.

Gili Naftalovich: Thanks, Dado. We have gotten a few questions on pipeline. One from Nehal Chokshi at Northland Capital. Your pipeline is up 3.5x quarter-over-quarter in 1Q '26. Does this pipeline include hyperscales like Meta -- like the Meta deal? Can you also provide more details on what this number represents? And how likely are you to convert pipeline to revenue? Marc?

Marc Boroditsky: Thank you, Gili, and thank you, Nehal. The referenced pipeline growth of 3.5x a quarter, which -- 3.5x quarter-over-quarter, which we're very proud of, is for our AI cloud business, and it does not include any strategic hyperscaler deals like the Meta deal. It does include qualified opportunities across our core AI cloud and Token Factory products as well as across all of our key customer segments, including AI natives, software vendors and enterprises. What we can share about conversion is that we have maintained our solid win rates at the same time as we've accelerated our sales cycles and increased our average selling prices.

And you can see this with some of the strong wins that we have, such as Sword Health in healthcare, life sciences and Rhoda and 1X in physical AI and core automation in one of our AI-native model builders as well as Revolut and monday.com, new customer wins for Token Factory. What we are doing is enabling our go-to-market teams to have a consultative conversation with our customers about their plans and for current and future workloads, including, as an example, what they're thinking about with regard to Vera Rubin's. We're also focusing and scaling our go-to-market and success teams to help customers to realize their plans, which turns into durable revenue for us.

Speaking about scaling, by the way, we have a number of recent appointments, including key leaders for the Americas, Dan Lawrence, who is our SVP and GM for the Americas; and John Haarer, who is joining -- who has joined as GM for Asia Pacific and Japan; and Raja Agrawal, our VP for the Middle East.

Gili Naftalovich: Thanks, Marc. Another question that we have from the portal is saying that you emphasize the momentum in your software stack. Where are you seeing the most momentum across the stack today? Why are customers choosing Nebius? Roman, over to you.

Roman Chernin: Thank you, Gili. I think it said so many times by different people that now the time of inference, and we see the same. Inference is the fastest-growing segment, new segment in our stack. And we see a very lucrative place where Nebius is positioned. We have the winning combination with capacity and customers need scale. We have the strong software stack, and we invest in-house and with the new announced acquisitions to be on the top performance of supporting the most popular open source models and specialized models. We can provide the best total cost of ownership and cost of tokens for our customers through the full stack optimization of the stack.

And of course, we care a lot about the developer experience. So we think that in a way, we combine the best from different worlds of specialized inference platforms, the scale of AI specialized cloud -- the scale of hyperscalers and specialization of AI specialized cloud. So Token Factory is our primary inference product now, and we are seeing good product market fit. If we look on the next layer, on agentic, it's still to be defined what is the final shape of the product and who will be the winners.

We expect that Nebius will play the same role of foundation for people to build at scale and will provide the set of tools and platforms to optimize workloads in agentic world.

Gili Naftalovich: Thanks, Roman. We have a question on customer concentration. Marc, how do you think about concentration risk given how large your contracts are with Meta and Microsoft? What does the rest of your revenue base look like in terms of customer diversification?

Marc Boroditsky: Thank you, Gili. As a reminder, I think we say this over and over again, but I think it's important to recognize that our priority is our AI cloud business. As such, we are very intentional about how we are pairing these key strategic relationships with the likes of Meta and Microsoft with a diversified core of our AI cloud customer base. We do not take these big strategic deals lightly and only take them when we see terms favorable for our core mission, again, serving our AI cloud business. We also very diligently capacity plan, and we're always looking to add capacity to best serve our core AI cloud customers from developers all the way through to enterprises.

Our AI cloud business is experiencing strong traction across all of the products that we're offering as well as customer segments and the verticals that we're chasing. The diversified AI cloud book of business as well gives us both customer and use case visibility that helps to fuel our go-to-market and drives our pipeline and revenue diversification overall.

Gili Naftalovich: Thanks, Marc. We have a question from James Kisner at Water Tower Research. On the $2 billion investment from NVIDIA and extended collaboration on inference and agentic software around Token Factory. What concrete deliverables should we expect over the next few quarters? And does the partnership affect the timing or scale of your Vera Rubin deployments in the second half of 2026? Andrey?

Andrey Korolenko: Okay, Gili. Thanks, James, for the question. So first of all, the NVIDIA strategic investment is meaningful across several dimensions beyond the $2 billion of equity and line of sight to 5 gigawatts of capacity commitment by the end of 2030 that we've done. It really gives us a multiyear partnership with our most important hardware supplier at the moment when access to GPU supplies competitive advantage, so to say. We gain differentiated supply chain certainty on the future Rubin, Vera CPUs and the networking. We also have a close collaboration with NVIDIA for the design and early support of the future SKUs. As of today, this is Rubin's and Vera CPU platforms.

And we are able actually to have an early deployment that supports on our cloud platform as soon as they will be publicly available. Again, it reinforces our position as a preferred builder of AI infrastructure and aligns our road map with the NVIDIA product cycle, which is very critical for the price and performance and utilization and just leadership overall. We are also expanding our software integration. Our announcement around physical AI is one example, and we are very excited about our partnership driving vertical specific advancements. We are also partnering with them to build software for inference and agentic part and just recently achieved NVIDIA Exemplar Cloud status on GB300 for training.

We are very much one of the first cloud providers globally to receive for all the NVIDIA generation where the status is available. Yes, that's it.

Gili Naftalovich: Thanks, Andrey. Marc, maybe this one for you, the questions on the portal. Some of your competitors have mentioned they are sold out for most of 2026 and even into 2027. If you are future selling, how much of your future capacity is sold out for this year and next?

Marc Boroditsky: Thank you, Gili. First of all, we are sold out again in Q1 as we have for several quarters as demand continues to significantly exceed available capacity. The vast majority of capacity coming online over the next several quarters to 12 months is already under contract or earmarked for our AI cloud customers. We do retain a portion of capacity for self-service to serve those AI builders that Roman mentioned earlier. And then we proactively manage those allocations to keep the segment supply as demand evolves. Separately, we are typically seeing 4 or more customers competing for every GPU we bring online.

We have significant expansion planned for 2027, including Vera Rubin's, and we'll start selling that capacity as we move into the second half of this year.

Gili Naftalovich: Thank you, Marc. We also have a question on U.S. data center opposition. Tom, can you touch on some of the political opposition here in the U.S. related to data center construction?

Tom Blackwell: Yes. For sure, Gili. I mean, so definitely, this is a big topic. It's something that we pay a lot of attention to. But overall, I think what I would say is that the approach that we've taken so far, we found to be quite effective. And I would basically say there's a few sort of components of that approach and how we think about this. Number one, I think, first of all, not all companies that build data centers build in the same way. We're not alike.

And I think you've heard kind of Andrey and team talk about how we build the efficiencies that we're able to achieve, what we do around create interesting technological ways of heat reuse and so on and so forth. So we built very efficiently and very effectively, and I think that's an important part of our story and what we talk about when we come into new regions. But of course, that's not enough. I think that we also -- the second thing is that we take a very transparent approach to what we do and how we talk about ourselves. I think that's not something that's necessarily universal in our industry.

But it's -- from the very beginning when we're looking at a site and we're engaging strategically who we are, we engage very actively in communities and talking about what our plans are, what we do, how we build, how we contribute. You can see us showing up at community town hall meetings or I'm looking actually right now at Andrey Korolenko across the table in Amsterdam it has just blown in from our event in Independence, Missouri yesterday, where we're engaging with the local government and communities. So we're trying to just be very clear and transparent about what we do, how we do and what the benefit that we brings -- that it brings.

And I think the last thing is that, look, when we come into a new region to build, we don't just build and then move on to the next city. These are long-term investments. And so therefore, we have to look at these relationships with communities as long-term partnerships and relationships. So we think very much beyond what we do in terms of the building, but where else we can contribute through it, whether it's through our Nebius Academy, academic offerings, working with local universities, helping to train, reskill, retool and so on. So we view this very much holistically as a long-term partnership. And so far, we found that this approach resonates well.

But there's no room for complacency here. So we continue to pay attention and make sure that we're doing the best we can to be a positive contributor to the local ecosystems.

Operator: This concludes today's call. Thank you, everyone, for joining. You may now disconnect.

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