Should You Stay Invested in or Sell Nebius Stock Post Q2 Earnings?

Globe and Mail

2 days ago

Nebius Group N.V. NBIS stock has surged 36.7% since reporting blockbuster second-quarter 2025 earnings on Aug. 7. The company's revenues surged 625% year over year to $105.1 million. The increase in sales was primarily driven by strong performance in the company's core business and excellent execution by the TripleTen team.
AI cloud infrastructure revenues grew more than nine times year over year, driven by demand for copper GPUs and near-peak GPU utilization. The company achieved positive EBITDA in its core AI infrastructure business earlier than expected. It raised its guidance for annualized run rate (ARR) revenues from the previous range of $750 million to $1 billion to a new range of $900 million to $1.1 billion. Nebius called the AI infrastructure boom a "once-in-a-generation" opportunity.
Though the bullish tone is unmistakable, challenges remain for NBIS, given a volatile global macroeconomic environment. Tremendous competition in the AI cloud infrastructure space, heavy capital spending and execution risks point to a challenging road ahead. The question is whether investors should remain invested in NBIS stock or book profits and exit.
Factors Driving Growth For NBIS
Explosive revenue growth demonstrates NBIS's ability to capture demand in a rapidly expanding AI infrastructure market. With the new Blackwell GPUs entering the market at scale and its data center capacity expanding significantly in parallel, the company expects a substantial increase in sales by year-end.
As a result, NBIS raised its year-end ARR guidance, which underscores the strength of its contracted pipeline and near-term visibility. On the earnings call, management touted an enviable customer roster expansion, including Cloudflare, Shopify, and other fast-growing AI startups (HeyGen, Lightning.AI, and Photoroom).
Nebius is focused on boosting its data center footprint and its GPU deployments as part of its strategy to ramp up installed capacity across the United States and Europe. It plans to secure 220 megawatts of connected power (active or ready for GPU deployment), and this also includes data centers in New Jersey and Finland. The company is also finalizing two new large-scale greenfield sites in the United States. NBIS plans to build out over 1 gigawatt of power capacity by 2026, setting the stage for sustained growth into the AI compute boom.
Apart from the booming core AI business, investors also need to look at the company's various stakes in some high-growth tech ventures that could emerge as powerful value drivers. ClickHouse stake is a standout. Other stakes include TripleTen, an edtech platform, and Avride, an autonomous vehicle platform. These various stakes give Nebius a unique edge among AI-infrastructure players. Nebius seems confident to effectively monetize these businesses and fuel its core business while minimizing dilution to existing shareholders and keeping debt in check.
Why the Stock is Vulnerable Despite Q2 Revenue Surge
NBIS is building out its data center capacity, and most GPU installations are scheduled for the fourth quarter, making the ARR and revenue growth back-end weighted. Any delays in the supply chain, installation, or customer spending delay could lead to missing the targets.
Despite NBIS achieving positive adjusted EBITDA in the core AI infrastructure business, management reaffirmed that adjusted EBITDA will be negative for the full year 2025. However, it added that adjusted EBITDA will turn slightly positive by the end of the year at the group level.
Nebius also reaffirmed its $2 billion 2025 capex guidance. Now, $2 billion capex is a huge cash outlay even with a $4 billion capital raised to date. Higher capex can be a concern if revenues do not keep up the required pace to sustain such high capital intensity, especially in a macro environment where AI demand cycles could fluctuate due to competitive pricing and regulatory changes. Moreover, scaling aggressively (multiple data centers in various regions) involves execution risk.
While Nebius is rapidly acquiring clients, the AI infrastructure market remains intensely competitive. It faces tremendous competition in the AI cloud infrastructure space, which boasts behemoths like Amazon AMZN, Microsoft MSFT and Alphabet, as well as small players like CoreWeave CRWV. CRWV is another GPU-focused, hyper-growth pure play company in this space. CoreWeave reported 207% year-over-year revenue growth for the second quarter of 2025.
On the other hand, Amazon Web Services and Microsoft's Azure cloud platform together dominate more than half of the cloud infrastructure services market and are now aggressively moving into AI infrastructure. Microsoft's exclusive partnership with OpenAI gives Azure cloud the priority to access leading AI models like GPT-5, while AMZN is ramping up investment to build its technology infrastructure, primarily related to AWS and for custom silicon like Trainium. Moreover, the financial firepower of these tech behemoths is incredible. Nebius, as a smaller player, may face pricing pressure and higher customer acquisition costs.
Also, Nebius deconsolidated Toloka, which eliminates $50-$70 million in revenues from the projected 2025 revenue from group results. For group revenues, the company expects the metric to be between $450 million to $630 million. Analysts have kept their estimates unchanged for NBIS.
NBIS' Stretched Valuation is Concerning
Valuation-wise, Nebius seems overvalued, as suggested by the Value Score of F.
In terms of Price/Book, NBIS shares are trading at 4.7X, lower than the Internet Software Services industry's ratio of 4.21X, but it could mean more risk than opportunity.
Retain NBIS for Now
Nebius's impressive second-quarter results make it an exciting AI infrastructure play to watch for. The growth trajectory is promising, and management is rapidly scaling capacity to meet demand.
Given the stiff competition from hyperscalers like Amazon and Microsoft, NBIS faces significant pricing pressure and execution risks as it scales. Higher capital expenditures carry risk, especially amid a volatile macro environment. For investors already holding shares, the story remains compelling but for new entrants, it may be wise to wait for a better entry point.
At present, NBIS carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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