Market Share Expansion Will Drive Sustained Gains From Accelerating AI Adoption

Catalysts

About CoreWeave
CoreWeave is a leading provider of purpose-built cloud infrastructure optimized for artificial intelligence workloads.

What are the underlying business or industry changes driving this perspective?

• Increasing global adoption of AI across enterprises and public sectors is driving sustained demand. This is likely to boost CoreWeave's revenue and backlog over time.
• The company's rapid expansion of contracted power capacity and data center footprint enables future scalability. This positions CoreWeave to capture a larger market share and realize higher earnings as capacity comes online.
• Diversification of the customer base, with growing contracts from major organizations and declining revenue concentration, reduces risk and can improve the predictability of cash flows and margins.
• Development of proprietary software suites and differentiated AI storage solutions strengthens competitive advantages. This can support margin expansion as customers adopt value-added services.
• Innovative contract structures, such as interruptible agreements with NVIDIA, unlock revenue opportunities from both large and emerging AI customers. These improvements can enhance utilization rates and overall profitability.
• Substantial investments in infrastructure, along with a strong balance sheet and access to diverse capital sources, provide financial flexibility to support accelerated growth and sustain long-term earnings momentum.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming CoreWeave's revenue will grow by 84.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from -19.2% today to 5.9% in 3 years time.
• Analysts expect earnings to reach $1.6 billion (and earnings per share of $1.87) by about December 2028, up from $-824.7 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.9 billion in earnings, and the most bearish expecting $-692.5 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 67.1x on those 2028 earnings, up from -45.9x today. This future PE is greater than the current PE for the US IT industry at 28.3x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.65%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Persistent supply chain constraints, particularly related to third-party data center partners and powered shell availability, could cause ongoing delivery delays for CoreWeave. This would have a direct negative impact on recognized revenue and could hinder the company’s ability to fulfill its fast-growing backlog.
• Increasing capital expenditure requirements and rising interest expenses driven by rapid infrastructure expansion heighten the company’s financial leverage. If customer demand were to moderate unexpectedly or funding costs rise further, CoreWeave’s net margins and earnings could be pressured significantly.
• Intense competition from hyperscalers and other large AI infrastructure providers as the market matures could compress CoreWeave’s market share, limit pricing power for its differentiated solutions, and threaten revenue growth and long-term profitability.
• Customer concentration risks, despite recent improvements in diversification, remain significant. A loss or reduction in activity from one or more major customers could lead to volatile cash flows and earnings, especially as these relationships still make up a notable portion of the revenue backlog.
• The highly specialized nature of CoreWeave’s infrastructure may present fungibility risks if the AI industry’s needs shift or if a forecasted expansion in demand fails to materialize. This could lead to underutilized capacity and negative impacts on revenue and asset efficiency.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $133.12 for CoreWeave based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $208.0, and the most bearish reporting a price target of just $36.0.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $26.9 billion, earnings will come to $1.6 billion, and it would be trading on a PE ratio of 67.1x, assuming you use a discount rate of 9.6%.
  
• Given the current share price of $76.03, the analyst price target of $133.12 is 42.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.