Generated Title: Nebius: Millionaire Maker or Mirage? A Data Analyst's Skeptical Take
Nebius Group (NBIS) is the darling of the AI cloud infrastructure world right now. Up 350% in the last year, it's got investors dreaming of turning ten grand into a million. But before you mortgage the house, let's inject some data-driven skepticism into the hype. Could Investing $10,000 in Nebius Stock Make You a Millionaire?
The Revenue Rocket
The core argument for Nebius is its explosive revenue growth. Third-quarter revenue jumped 355% year-over-year to $146 million. Impressive, no doubt. Management claims they're selling out capacity as fast as they can bring it online. Meta and Microsoft are throwing billions at them – a $17.4 billion contract from Microsoft, potentially rising to $19.4 billion, and $3 billion from Meta. These are eye-watering numbers.
But here's where we need to dig deeper. Nebius's gross margin is listed as -1312.43%. Yes, that's a negative thirteen hundred and twelve percent. This isn't a typo; the number appears in multiple sources. What does it mean? It means they're spending far more to deliver their services than they're actually earning. It's like selling dollar bills for fifty cents—you might move a lot of volume, but you're bleeding cash. This is not sustainable.
This could be due to aggressive expansion costs, sure. But even with rapid growth, that kind of negative margin raises serious questions about their pricing power and operational efficiency. Can they actually deliver these services profitably, even at scale? The market seems to be ignoring this glaring red flag, focusing solely on the top-line revenue number. This is a mistake.
Capacity Constraints and Capital Expenditures
Nebius is scrambling to expand capacity, aiming for 2.5 GW of contracted electrical power capacity by the end of 2026 (up from an earlier plan of 1 GW). They're revising their full-year 2025 revenue guidance to $500–$550 million. They also upped their CapEx guidance from $2 billion to $5 billion. That's a serious increase in spending.
The company is funding this expansion through debt, asset-backed financing, and equity. This is where I find it genuinely puzzling. Why are they so reliant on external funding when they have these massive contracts with tech giants? Shouldn’t those contracts provide a more secure financial runway? The reliance on debt financing, especially, adds considerable risk. Any hiccup in execution, any delay in bringing capacity online, and they could find themselves in a very tight spot.
And let's talk about competition. Microsoft and CoreWeave are also aggressively expanding their AI infrastructure. Microsoft expects Azure revenue to grow about 37% in constant currency, and CoreWeave is projecting revenues of around $5 billion in 2025. The AI cloud market is getting crowded, and Nebius isn't the only player with big ambitions. The claim that "hyperscalers are rushing to purchase new capacity" needs to be viewed through the lens of this intensifying competition.
The Valuation Question
Nebius stock is trading at roughly 54 times sales. That's an extremely rich valuation, even for a high-growth company. Analysts are projecting significant revenue growth in the coming years, which could justify that valuation. If Nebius trades at 9 times sales and achieves $4.34 billion in revenue in 2027, its market cap could jump to just over $39 billion. That would be a 64% increase from current levels.
But here's the rub: those projections are based on a lot of "ifs." If Nebius can successfully execute its expansion plans. If they can improve their gross margins. If they can fend off competition from larger, better-funded rivals. If the demand for AI cloud infrastructure continues to grow at its current pace.
I've looked at hundreds of these filings, and this particular situation reminds me of the dot-com bubble. High revenue growth, massive capital expenditures, and a sky-high valuation based on future potential rather than current profitability. The market is pricing in perfection, leaving little room for error.
A Data Analyst's Verdict
The narrative of Nebius as a surefire millionaire-maker relies on a best-case scenario that ignores significant risks. The negative gross margins, the reliance on debt financing, and the increasing competition paint a more complex picture. While the company undoubtedly has potential, the current valuation is far too rich for my taste.
A Glimpse of Tomorrow
While Nebius is aggressively prioritizing an accelerated capacity expansion strategy to fuel explosive revenue growth, those structural expansions are likely to dramatically increase NBIS’s capacity to serve large-scale AI workloads.
Is the Market Asleep at the Wheel?
Nebius is a high-risk, high-reward play. It could be a huge winner, but it could also be a spectacular flameout. The market is currently treating it like a sure thing. I believe a healthy dose of skepticism is warranted.