NBIS: Strong Multi-Billion Dollar Contracts Will Drive Capacity Demand Higher

Nebius Group's fair value estimate rose from $156 million to $166 million after analysts raised their price targets. They cited strong demand for capacity, recent large-scale contracts, and improving profitability metrics.

Analyst Commentary

Analyst sentiment on Nebius Group remains dynamic, with both bullish and neutral outlooks reflecting the company's evolving growth trajectory. Recent research updates highlight notable developments in contracts, guidance, and strategic opportunities.

• Bullish analysts have raised their price targets following the landmark multi-billion dollar contract Nebius secured with Microsoft, underscoring the company's distinctive positioning in delivering large-scale dedicated capacity.
• Strong reliability metrics are regarded as a significant and possibly underappreciated driver behind Nebius selling out much of its available capacity for the upcoming quarters, supporting robust utilization and pricing power.
• Guidance for incremental megawatt growth and a substantial year-end increase in contracted power suggest Nebius is executing well on capacity expansion, which could translate to meaningful revenue gains.
• New coverage initiations with Outperform and Buy ratings point to broadening confidence in Nebius's ability to maintain advantageous long-term economics and capitalize on data center demand amid industry supply constraints.

• Some analysts maintain a Neutral stance, noting that while neocloud demand is strong in the near term, the long-term success of companies in this space will hinge on the sustainability of their business models as industry consolidation takes hold.
• There is caution that rapid growth projections rely heavily on the continued successful execution of large contract deployments and the scalability of ongoing expansion, introducing risks if operational hurdles arise.
• Rising estimates and accelerated build-outs could pressure Nebius to deliver on aggressive timelines, with execution risk particularly acute as the company brings new capacity online to fulfill recent contracts.

What's in the News

• Nebius Group filed a follow-on equity offering of Class A Ordinary Shares as an at-the-market offering. (Key Developments)
• A new $3 billion, 5-year agreement was announced for Nebius to deliver AI infrastructure to Meta. (Key Developments)
• Nebius unveiled Token Factory, a production inference platform for deploying and optimizing open-source and custom AI models at scale. (Key Developments)
• The company launched its latest AI Cloud 3.0 "Aether" with enterprise-grade security, compliance, and performance enhancements for AI workloads. (Key Developments)
• Nebius approved amendments to its Articles of Association at the latest Annual General Meeting of Shareholders. (Key Developments)

Valuation Changes

• The Fair Value Estimate has increased from $156.4 million to $166.0 million, reflecting a moderate upward revision.
• The Discount Rate rose slightly from 8.03% to 8.44%, indicating a minor adjustment to the risk profile.
• The Revenue Growth projection decreased moderately from 208.10% to 203.51%, suggesting marginally more cautious expectations.
• The Net Profit Margin improved significantly from 0.05% to 2.49%, indicating meaningfully higher anticipated profitability.
• The Future P/E ratio has declined sharply from 14,579.56x to 258.31x, pointing to improved anticipated earnings and reduced valuation multiples.