Nebius Stock Surged 200% in Just 1 Year. Is It Still a Buy?

Nebius Group's (NASDAQ: NBIS) stock has surged after the artificial intelligence infrastructure company delivered a blockbuster second quarter.

Revenue jumped 454% year over year to $582 million,while adjusted EBITDA reached $236 million. The company also signed four AI cloud contracts worth more than $1 billion each.

The business is clearly moving fast. But so is the stock.

With shares trading at more than 200% return in just one year and the company valued at roughly $60 billion (as of writing), investors are asking an important question: Has Nebius already gone too far, or could the stock still have room to run?

Image source: Getty Images.

The AI opportunity is enormous

Nebius doesn't build AI models like ChatGPT. Instead, it provides the computing infrastructure needed to build and run them. Think of Nebius as a company that rents out extremely powerful computers to businesses developing artificial intelligence.

Those computers require expensive Nvidia GPUs, data centers, electricity, cooling systems, and high-speed networks.

And demand is exploding. Nebius' AI cloud business generated about $575 million of revenue in the second quarter, more than five times the amount generated a year earlier. Management also expects full-year 2026 revenue of $3 billion to $3.4 billion and year-end annual recurring revenue of $7 billion to $9 billion.

The customer demand is equally impressive. Nebius now has more than $40 billion of customer commitments, while management expects more than $9 billion of customer prepayments during 2026. It also said it could sell all of its planned 2027 capacity at current terms.

In simple terms, companies are lining up to buy Nebius' computing capacity. That's the core reason investors are so excited.

The economics are getting better, too

Growth for the sake of growth is never a good thing. But here's where Nebius's business gets particularly interesting.

But first, some basics. Building AI infrastructure is incredibly expensive. Nebius spent about $5.7 billion on it in the second quarter alone. That raises a critical question: How quickly does Nebius get that money back?

Therein lies the good news. The company said the expected payback period for infrastructure tied to contracts signed in the second quarter had fallen to about one year and 10 months, compared with roughly two to three years historically.

That's a big improvement. Imagine Nebius spends $1 billion building AI infrastructure. If it takes three years to recoup that investment, growth requires substantial capital. But if the investment can be recovered in less than two years, Nebius can potentially put that money back to work much sooner.

In other words, it's improving its capital efficiency, which should lead to shareholder value creation.

But there are still big risks

The biggest risk is that AI infrastructure becomes a victim of its own success.

Right now, demand for computing power is extremely strong. But companies across the industry are rushing to build more data centers and buy more GPUs. What happens if they eventually build too much? Prices could fall. Customers could have more bargaining power.

Moreover, Nebius's stock may appear to be quite expensive, even after accounting for all the prospects ahead. For perspective, the company is now worth roughly $60 billion and is expected to generate around $3.4 billion in revenue (at the top end of guidance) for 2026. That's a price-to-sales (PS) ratio of 18 times, which is anything but cheap! On one end, traditional valuation measures don't tell the whole story because Nebius is growing extraordinarily quickly. Investors aren't buying the company for what it earns today. They're paying for what they believe Nebius could become in several years.

If the company continues to win enormous contracts and keeps improving its profitability, today's valuation could eventually look much more reasonable.

But there isn't much room for disappointment. When investors pay a premium price for a rapidly growing company, even a small hiccup can cause the stock to fall sharply. For instance, the stock fell more than 20% just last week as the company announced $5 billion private offering of convertible senior notes, triggering severe investor fears regarding equity dilution and debt accumulation.

So, should investors buy Nebius stock?

Overall, I'm bullish on the business, but more cautious about the stock at this price.

Nebius is growing rapidly, customers are committing billions of dollars, and its infrastructure expenses appear to be paying back faster. But the stock has already climbed dramatically, and investors are now expecting a lot. And that brings us to an important idea: A great company isn't always a great stock at any price.

For someone who already owns Nebius, I wouldn't sell simply because the stock has delivered good returns. The company's fundamentals are moving in the right direction.

For investors who don't own it, however, I wouldn't rush to invest a large amount in the stock at once. A smaller initial position, followed by additional purchases if the valuation becomes more attractive or the company continues exceeding expectations, could offer a better balance between opportunity and risk.

Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.