CoreWeave beats quarterly revenue estimates as AI demand defies growing doubts

On November 10, CoreWeave surpassed Wall Street's revenue expectations for the third quarter, driven by robust demand for its cloud services. Despite concerns about the sustainability of AI infrastructure demand, the company's shares rose more than 7% in extended trading following a significant decline the previous month. The company reported a revenue of $3.66 billion for the quarter, up from $1.37 billion a year earlier, exceeding analysts' average estimate of $3.55 billion.

CoreWeave also increased its annual revenue forecast to between $13.0 billion and $13.3 billion, up from the previous range of $12.4 billion to $13.2 billion.

CEO Mike Intrator emphasized that customer contracts are prioritized, with investments following suit. This approach provides lenders with concrete assets to lend against, and customers typically contribute to buildouts through prepayments. The company's stock has plummeted more than 40% in the past month due to fears surrounding a potential AI bubble, fueled by investors' worries about heavy borrowing for chip purchases, land acquisition, and energy for AI data centers that yield returns only after lease agreements are established.

CoreWeave, a $27 billion AI cloud company backed by Nvidia, has yet to turn a profit and carries over $50 billion in debt as of June. Its 2030 bonds currently yield around 15.2%, while its five-year credit-default swaps, which measure default risk, trade at 1,135 points. The stock sell-off triggered a broader crisis of confidence in AI stocks, exacerbated by the Democrats' victory in the US midterms, as investors scrutinize the potential for stricter regulation in the data-center build-out.

Among CoreWeave's clientele are Microsoft, Meta, OpenAI, and Anthropic. Microsoft has intensified its oversight of data-center projects from the so-called neocloud companies Nebius, IREN, and Nscale as the tech giant concentrates on expanding its own data centers, according to Bloomberg News. CoreWeave operates approximately 52 data centers worldwide, utilizing advanced Nvidia chips, with a global active capacity exceeding 1.7 gigawatts — enough to power over 1.2 million US homes.

Some analysts argue that financing concerns surrounding CoreWeave are overstated, citing its execution and financing history. Brokerage Truist posited that market sentiment has become detached from the improving economics of AI cloud providers, predicting that higher pricing and increasing prepayments from customers will lessen their reliance on external capital.