Nebius Doesn’t Have a Demand Problem. It Has a Delivery Problem.
Key Points
Demand isn’t the issue: revenue jumped 571% to $980.8 million, topping Wall Street’s expectations.
Delays at third-party data centers pushed some capacity into the first half of 2027, so management now expects 2026 revenue at the low end of its range.
Nebius plans to spend $40 billion to $45 billion building capacity next year, which makes delivering on time even more important.
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Nebius Group (NASDAQ:NBIS) has been one of the stock market's biggest artificial intelligence (AI) success stories this year. Shares are up 84% in 2026, even after a recent sell-off that left the stock 46% below its all-time high.
But investors got another reason to worry Thursday morning. Nebius shares were down more than 15% in midday trading after the AI cloud provider reported third-quarter earnings that revealed some troubling developments in its expansion plans.
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The company's revenue is growing at an extraordinary pace, and demand for its computing capacity remains strong. But Nebius is discovering that meeting that demand is easier said than done.
Image source: Getty Images.
Strong earnings weren't enough
From a revenue standpoint, Nebius had a great quarter. Revenue was $980.8 million, up a whopping 571% from a year ago, and topping Wall Street expectations of $907 million. The neocloud also reported $465.8 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), versus a loss of $5.2 million last year. The company still posted a net loss from continuing operations, but narrowed it from $119.6 million in Q3 2025 to $37.5 million this quarter.
That's more than solid for Nebius, which is investing billions to build AI infrastructure. But the earnings report also exposed a problem that could make its ambitious growth targets increasingly difficult to achieve -- some third-party computing capacity that was to be available by the end of this year has been delayed until the first half of 2027. And management subsequently lowered its full-year revenue expectations to the low end of its previous $3 billion to $3.4 billion guidance range.
Nebius previously expected to reach an annualized revenue run rate (ARR) of $7 billion to $9 billion by December. It was forced to push that forecast back to February 2027. The company says contracts associated with the delayed capacity remain intact, but it won't be able to recognize the revenue yet. And that's a big issue weighing down Nebius stock.
An increasingly expensive expansion
The guidance shortfall is coupled with another problem that some investors may find troublesome -- Nebius increased its expected 2026 capital expenditures to approximately $27 billion, above its previous range of $20 billion to $25 billion. Much of that spending is intended to support additional capacity coming online in 2027.
Next year, Nebius will increase its spending, projecting capex between $40 billion and $45 billion and revenue between $12 billion and $13 billion. It says it expects to reach pre-tax break-even in the fourth quarter of next year.
To help finance its expansion, it secured a $3.5 billion financing facility in October with Citi, adding to billions raised through convertible debt and other financing arrangements.
Management expects to cover much of next year's spending with customer prepayments and asset-backed financing, together with its balance sheet. But as investors are seeing today, Nebius can't control third-party capacity issues. And with billions of dollars on the line, even minor scheduling problems can have major financial consequences.
Is Nebius stock worth buying?
I've owned Nebius stock for more than a year. I think it's the best of the neocloud companies, and I'm still happy with my investment. But the losses today aren't pretty.
I'm not buying more Nebius stock today, but I'm not selling, either. Its revenue is soaring, customer demand remains strong, and management expects another enormous increase in sales next year.
Every company has its bad days, and that's why I think it's a mistake to make snap investment decisions (and why I don’t like day trading, either). Nebius has plenty of customers, and its challenge now is to get enough computing capacity online to serve them.
Nebius needs to start demonstrating it can consistently deliver capacity on schedule. If it continues to lower guidance and push back deadlines, then I'll start looking to offload my stock.
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Citigroup is an advertising partner of Motley Fool Money. Patrick Sanders has positions in Nebius Group. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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