NBIS: AI Power Demand May Not Justify Elevated Share Price

Nebius Group's analyst price target has been modestly reduced to $170 from $175 as analysts factor in a slightly higher discount rate and a slimmer margin outlook, even as they highlight accelerating AI-driven revenue growth, expanding contracted power capacity, and continued Outperform ratings across the Street.

Analyst Commentary

Street research remains broadly constructive on Nebius Group, with multiple firms reiterating or initiating Outperform ratings and, in some cases, lifting price targets alongside rising power capacity expectations and AI related demand. Analysts point to Nebius's reliable infrastructure, sold out capacity in upcoming quarters, and long duration contracts as supporting evidence for durable growth and higher monetization of its power footprint.

Recent initiations highlight Nebius's strategic positioning as a provider of critically scarce power and high performance compute capacity, with GPU cluster deployments seen as a key lever to unlock incremental value. Coverage notes also emphasize the significance of Nebius's contracted power additions through 2026 and the potential upside from large scale customer wins in hyperscale and enterprise AI workloads.

The company's landmark capacity agreement with a major cloud and software provider is framed as a validation of Nebius's development capabilities and balance sheet optionality. Research commentary suggests the deal could materially accelerate annual recurring revenue relative to prior guidance, while reinforcing Nebius's competitive advantage in securing multi hundred megawatt sites that are ready to deploy.

At the same time, new coverage from more cautious voices underscores that the neocloud and AI infrastructure space is evolving rapidly. Business model durability and capital discipline are likely to be key differentiators as the market consolidates. These perspectives stress that, despite favorable near term demand, investors must weigh execution and balance sheet risks against the premium valuations now embedded in the shares.

Bearish Takeaways

• Bearish analysts flag that Nebius's valuation already discounts aggressive AI driven growth, leaving less room for error if contracted power ramps or ARR contributions from new deals fall short of expectations.
• Some commentary highlights execution risk around bringing incremental megawatts online on time and on budget, warning that delays or cost overruns on large scale sites could pressure margins and constrain free cash flow.
• Cautious research notes stress that the neocloud market may see consolidation and pricing pressure over the medium term, which could challenge Nebius's ability to sustain current pricing power and high growth multiples.
• Bearish analysts also point to capital intensity and balance sheet leverage as ongoing concerns, arguing that sustained high levels of investment in data centers and power infrastructure could cap near term returns and increase downside risk if demand normalizes.

What's in the News

• Nebius Inc., a wholly owned subsidiary of Nebius Group N.V., entered into a five year commercial agreement with Meta to provide two dedicated GPU infrastructure clusters, with an initial order valued at approximately $2.9 billion and deployment tranches scheduled for December 2025 and February 2026 (Client Announcements).
• Nebius Group N.V. announced a new agreement to deliver AI infrastructure to Meta valued at approximately $3 billion over five years, underscoring growing demand from hyperscale AI customers (Client Announcements).
• Nebius Group N.V. filed a follow on equity offering for its Class A ordinary shares as an at the market program, providing additional financing flexibility for its capital intensive AI infrastructure buildout (Follow on Equity Offerings).
• The company unveiled its first deployment of NVIDIA Blackwell Ultra AI infrastructure in the UK, expanding domestic compute capacity and supporting the UK Government's AI Opportunities Action Plan while extending Nebius AI Cloud 3.0 Aether to UK customers (Client Announcements).
• Nebius launched Nebius Token Factory, a production inference platform built on Nebius AI Cloud 3.0 Aether to help enterprises deploy and govern open source and custom AI models at scale with enterprise grade security and cost control (Product Related Announcements).

Valuation Changes

• The fair value estimate has been reduced slightly, moving from $75.00 to $70.00 per share. This reflects a modestly more conservative outlook.
• The discount rate has risen slightly from 8.12% to approximately 8.47%, contributing to a lower present value of future cash flows.
• The revenue growth forecast has increased meaningfully, from about 123.1% to roughly 145.7%. This indicates higher expectations for AI driven top line expansion.
• The net profit margin assumption has edged down from approximately 13.03% to about 12.41%, implying a somewhat slimmer profitability profile despite stronger growth.
• The future P/E multiple has fallen significantly, from roughly 76.7x to about 40.9x. This suggests a more tempered valuation framework for Nebius Group's forward earnings.