Cerebras slumps as mixed quarterly results test AI growth narrative

Cerebras Systems experienced a significant 18% drop in its stock price early Thursday following the release of its quarterly earnings report. The technology company, known for its AI chips, reported mixed results despite a surge in cloud revenue. While cloud revenue increased fourfold to $126 million, hardware sales, including AI chips, fell to $54.1 million from $70.3 million a year earlier.

Cerebras' adjusted gross margin for the quarter declined to 40.6% from 46.5% in the previous period. The company's revenue, however, exceeded analyst expectations, with projections now set at over $740 billion for the year.

Despite the positive outlook for AI-linked companies, Cerebras' performance has raised questions about the effectiveness of its AI chips in competing with Nvidia. The company's stock had previously surged by 41% since its IPO at $185 per share. Morgan Stanley analysts voiced concerns over execution, given the scale of capacity building required to support the growth. Citi and Mizuho also cut their price targets slightly, with the median target suggesting a 15% upside from the previous close.

Cisco Systems, another AI-related stock, saw its shares fall around 8% due to missing projections tied to its involvement in the AI data center buildout. Cisco expects $7.5 billion in revenue from AI infrastructure orders from hyperscalers in fiscal 2027.