AI Infrastructure Capacity Leadership Will Drive Massive Long Term Earnings Power

Catalysts

About CoreWeave

CoreWeave operates a specialized AI cloud platform designed to deliver high performance compute, storage and networking for advanced artificial intelligence workloads.

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

• Explosive global adoption of AI across enterprises, AI-native startups and the public sector is driving sustained, demand led expansion of CoreWeave revenue, supported by a $55.6 billion revenue backlog and rapidly growing RPO that provide multi year visibility into top line growth and cash flows.
• Capacity leadership through 2.9 gigawatts of contracted power, accelerating self build projects and a growing network of more than 30 data centers positions CoreWeave to monetize the structural shortage of AI infrastructure, supporting continued hypergrowth in revenue and improving asset utilization that can bolster earnings power.
• Deep, expanding relationships with frontier AI labs, hyperscalers and blue chip enterprises, including multi contract deals with Meta, OpenAI and a leading hyperscaler, increase wallet share, reduce concentration risk and create a durable, diversified customer mix that supports more stable revenue and stronger long term margins.
• CoreWeave’s technical edge in cutting edge GPUs such as GB200 and GB300, industry leading MLPerf benchmarks and a differentiated software stack including Mission Control and AI Object Storage reinforce pricing power and premium performance, supporting high adjusted EBITDA margins and the potential for further net margin expansion as scale increases.
• Innovative financing structures, declining cost of capital and flexible contracts such as the NVIDIA arrangement enable CoreWeave to fund outsized CapEx and construction in progress while preserving balance sheet strength, which supports faster capacity deployment, higher future revenue and improved earnings as interest expense moderates over time.

Assumptions

This narrative explores a more optimistic perspective on CoreWeave compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming CoreWeave's revenue will grow by 105.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -19.2% today to 9.6% in 3 years time.
• The bullish analysts expect earnings to reach $3.6 billion (and earnings per share of $3.48) by about December 2028, up from $-824.7 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $-706.4 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 45.1x on those 2028 earnings, up from -47.7x today. This future PE is greater than the current PE for the US IT industry at 29.6x.
• The bullish 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 9.83%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Persistent industry wide bottlenecks at the powered shell layer and broader data center supply chain could lead to repeated delays in bringing capacity online beyond the current single provider issue. This could push out recognition of the $55.6 billion revenue backlog and slow the trajectory of reported revenue and earnings growth over the next several years.
• The company’s demand led CapEx strategy, with $12 billion to $14 billion of CapEx in 2025 and an expectation that 2026 CapEx will be well in excess of double that level, is being financed by rapidly rising debt and senior notes. This could structurally elevate interest expense above the projected $1.21 billion to $1.25 billion range and constrain future net margins and earnings if capital markets tighten or the cost of capital stops falling.
• While management highlights a more diversified and higher quality customer base, including hyperscalers, frontier AI labs and the public sector, long-term AI spending patterns may normalize or shift to larger hyperscalers with greater scale advantages. This could reduce utilization of CoreWeave’s 2.9 gigawatts of contracted power and negatively impact revenue growth, operating leverage and adjusted EBITDA margins.
• The strategy of aggressively scaling a full stack AI cloud, expanding via acquisitions such as OpenPipe, Marimo, Monolith and building new software suites and self build projects increases execution complexity and operational risk. Any missteps in integrating these assets or managing 30 plus data centers globally could erode the current 61% adjusted EBITDA margin and delay the path to sustained GAAP profitability and stronger net margins.

Valuation

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

• The assumed bullish price target for CoreWeave is $202.35, which represents up to two standard deviations above the consensus price target of $127.69. This valuation is based on what can be assumed as the expectations of CoreWeave's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• 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 more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $37.6 billion, earnings will come to $3.6 billion, and it would be trading on a PE ratio of 45.1x, assuming you use a discount rate of 9.8%.
  
• Given the current share price of $78.87, the analyst price target of $202.35 is 61.0% 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.