The AI cloud provider has huge contracts with Microsoft and Meta, but investors are questioning the cost of reaching its targets
Nebius Group fell roughly 30% in October, and the selloff has left the AI cloud provider nearly 36% below its recent peak near $300. The company is posting enormous growth. Investors are now asking what that growth will cost.
The pressure comes ahead of a November 10 earnings report. That report could show whether Nebius is scaling fast enough to justify one of the most aggressive spending plans in AI infrastructure.
Big numbers, bigger promises
On paper, Nebius (NASDAQ: NBIS) is not a company in trouble. Its Q2 2026 revenue came in at $582.3 million, up 454% from the same quarter a year earlier.
Management has guided for full-year revenue between $3.0 billion and $3.4 billion. It is also targeting annualized run-rate revenue, or ARR, of $7 billion to $9 billion by the end of 2026.
ARR is a snapshot metric. It takes current revenue and projects it across a full year. Nebius hit $3.0 billion in ARR in June 2026, so the year-end goal implies more than doubling that figure in about six months.
For the third quarter, analyst estimates point to revenue of around $906 million. That would be a sizable step up from the second quarter. It would also be the first real checkpoint on whether the steep growth curve is holding.
The price of capacity
Nebius expects capital expenditures between $20 billion and $25 billion this year.
Put that next to the full-year revenue guidance and the gap is stark. The company plans to spend several times what it expects to bring in this year, betting the capacity pays off later.
The funding plan has three legs. Customer prepayments are expected to exceed $9 billion in 2026, and the rest is slated to come from a mix of debt and equity financing.
Each leg carries its own risk. Prepayments depend on customers staying committed. Debt adds interest costs and leverage. Equity can mean dilution for existing shareholders.
Microsoft and Meta as anchors
Nebius has a deal with Microsoft valued between $17.4 billion and $19.4 billion.
Meta could add up to $27 billion in commitments. Together, these arrangements give Nebius more than $40 billion in confirmed customer contracts.
It also creates concentration risk. When a large share of future revenue rests on two customers, the company’s fortunes become closely tied to their spending decisions.
What this means for investors
Opinion is split on whether the pullback is a warning or an opening. Some see the stock, now trading around 6 to 7 times forward sales, as a more reasonable entry point for a company growing this quickly with this much contracted revenue.
Others point to execution risk, possible dilution, and the durability of AI spending as reasons to stay cautious.
That data point arrives November 10. The Q3 report will be judged less on the headline revenue figure and more on trajectory.
Investors will want evidence that ARR is moving fast enough toward the $7 billion to $9 billion range. They will also watch for updates on capacity coming online and on how the company plans to fund the rest of its $20 billion to $25 billion buildout.
Any sign that new financing will lean more on equity could reignite dilution concerns. Conversely, strong prepayment inflows would ease worries about the balance sheet.
Updates on the Microsoft and Meta relationships will matter too. Progress on delivering those contracts is the clearest proof that the backlog is converting into actual revenue.
