CoreWeave Is Growing Revenue at 168%. But Is It Actually Making Money?

CoreWeave (NASDAQ:CRWV) is growing at a remarkable pace. In the third quarter, its revenue surged 168% year over year to $3.66 billion.

But there's a less encouraging side to the story. The neocloud company also reported a quarterly net loss of $709 million and had $846 million in net interest expenses.

I'd remain interested in CoreWeave, but investors should look beyond its impressive revenue growth. The real question is whether the company can turn its investments in artificial intelligence infrastructure into meaningful profits and attractive returns for shareholders.

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Revenue is growing faster than most investors expected

CoreWeave's third-quarter performance was impressive. In addition to its revenue growth, adjusted EBITDA increased 169% to $2.26 billion, while its backlog expanded to $132.5 billion.

These figures demonstrate that demand for AI computing remains strong. CoreWeave is securing customers and converting that demand into revenue.

Impressive EBITDA doesn't tell the whole story

CoreWeave also reported $2.26 billion in adjusted EBITDA, equivalent to a 62% margin. This figure might make it sound like an exceptionally profitable business.

But EBITDA as a metric excludes interest, taxes, depreciation, and amortization. That can be useful, as it helps investors understand how much a business is generating from its operations before these expenses, but it doesn't tell us how much money is ultimately left in real income that’s available for distribution to shareholders.

For CoreWeave, depreciation is a particularly important expense. The company must purchase expensive graphics processing units (GPUs), build data centers, and maintain the infrastructure needed to serve customers. These assets — particularly the chips — lose value over time and need to be replaced within a few years.

In the third quarter, depreciation and amortization reached approximately $1.89 billion. After accounting for operating expenses, CoreWeave reported just $207 million in GAAP operating income. It then incurred $846 million in net interest expense, contributing to its $709 million net loss.

This reveals the challenge of its business model. CoreWeave generates substantial revenue from its data center infrastructure, but the cost of building, financing, and owning that infrastructure consumes much of the economic benefit.

Investors shouldn't dismiss EBITDA, but they shouldn't mistake it for cash available to shareholders either.

The bigger challenge is funding growth going forward

CoreWeave expects to spend between $37 billion and $39 billion on capital expenditures in 2026. That's almost three times its expected annual revenue.

Why spend so much? Because CoreWeave has a backlog of contracts to deliver compute on, but it needs to build the capacity before it can deliver it. If demand for AI compute continues growing, today's investments could generate revenue for the company for years.

Still, the expected capex is enormous when compared to CoreWeave's current size. On top of that, it must fund that spending by taking on more debt, which creates an additional problem. For perspective, its interest expenses increased from $310 million in Q3 2025 to $846 million in Q3 2026. Management expects fourth-quarter interest expenses to land between $1.05 billion and $1.15 billion.

That's a substantial burden for a company whose quarterly operating income is just $207 million.

CoreWeave is exploring customer prepayments and financing backed by customer contracts to fund its infrastructure expansion. These arrangements could help reduce its reliance on traditional borrowing, but they don't eliminate the underlying capital requirements.

What investors should watch next?

I wouldn't judge CoreWeave solely by whether it continues growing revenue at triple-digit percentage rates. Instead, I'd monitor three developments.

First, can it improve its operating margins? Revenue growth should eventually translate into stronger operating profits as existing infrastructure becomes more productive. CoreWeave's adjusted operating margin was 10% this quarter, down from 16% a year earlier. That's an important metric to monitor.

Second, can financing costs grow more slowly than operating earnings? Otherwise, shareholders may see limited benefits even as the business expands.

Third, can the company narrow the gap between operating cash flows and capital expenditures? In Q3, CoreWeave generated approximately $1.98 billion in operating cash flow but spent $9.44 billion in cash on property and equipment. That left a substantial funding gap.

Ultimately, CoreWeave needs to demonstrate that its infrastructure can generate enough cash to fund a meaningful portion of its expansion.

What does it mean for investors?

CoreWeave is clearly benefiting from the AI infrastructure boom. Its revenue growth, expanding backlog, and customer demand make it an important company to watch.

But the latest results also reveal the challenge of its business model. Building AI infrastructure requires enormous amounts of capital, and the cost of financing that expansion can consume much of the returns.

I think it's still too early to tell whether CoreWeave's business model is sustainable over time. Investors should track how it fares over the next few quarters to better gauge whether its extraordinary growth can translate into lasting shareholder value.

Lawrence Nga 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.