Will Nebius' 1 GW Capacity Target by 2026 Accelerate Revenue Growth?

Nebius Group N.V. NBIS is positioning itself as a key player in the AI infrastructure space by setting an ambitious target of securing one gigawatt (“GW”) of capacity by 2026. Management remains confident that aggressive capacity buildout will aid in achieving “mid-single digit billions of dollars in revenues” in the mid-term. Scaling capacity is inherent to closing large enterprise and hyperscaler contracts.

It plans to secure 220 megawatts (“MW”) of connected power (active or ready for GPU deployment), including 100 MW of active power by 2025. This also includes new data centers in the United Kingdom, Israel and New Jersey (new site), and capacity expansion in Finland. The company is also finalizing two new large-scale greenfield sites in the United States. Nebius is focusing on greenfield development over build-to-suit due to lower total cost of ownership (nearly 20% below market average). Moreover, building from scratch allows NBIS to have tighter control over design, construction and server installations.

The 1 GW capacity target positions Nebius to capture incremental upside from accelerating demand for AI compute. NBIS highlighted that as it scales up capacity and is also “able to sell it quickly”. Annualized run rate (“ARR”) surged to $430 million in June from $249 million in March. The company expects the additional capacity, which comes online later in the year, to help it achieve updated ARR guidance.

NBIS raised its 2025 ARR guidance from the previous range of $750 million to $1 billion to a new range of $900 million to $1.1 billion. Nebius called the AI infrastructure boom a "once-in-a-generation" opportunity. While the scale-up demands capital, management pointed to significant cash on hand and an opportunistic approach to raising capital. NBIS has reaffirmed its 2025 capex guidance at $2 billion.

However, it needs to watch out for intense competition from other players in the AI infrastructure space, which are also focused on capacity expansion to capture a large share of the demand.

CoreWeave CRWV, a pure play AI infra company, is aggressively ramping up capacity. CRWV had nearly 470 MW of active power and contracted power of 2.2 GW at the quarter-end. With more than 900 MW of active power targeted by year-end, CRWV is positioning itself as a top-tier provider capable of meeting the needs of large-scale AI training and inference workloads. Key projects include a $6 billion data center investment in Lancaster, PA and another data center in Kenilworth, NJ, through a joint venture with Blue Owl.  

Management has raised 2025 revenue guidance to $5.15-$5.35 billion compared with $4.9 billion to $5.1 billion projected earlier, citing accelerating demand and a robust pipeline. Nonetheless, CoreWeave’s aggressive data center buildout is being funded in large part by debt. It has raised a staggering $25 billion in debt and equity since 2024. Heavy leverage and associated interest expenses can undermine profitability.

Microsoft MSFT is a structurally dominant force in the tech space. The company is a leader in the cloud infrastructure space with its Azure platform and is now rapidly making inroads in the AI infrastructure space. OpenAI investment is the crown jewel for MSFT, which has positioned Azure as the ideal platform for AI workloads. It is integrating AI capabilities across Office, GitHub and Dynamics.

MSFT has altered every Azure region into an AI-first environment with liquid cooling capabilities, positioning itself at the forefront of the artificial intelligence infrastructure wave. Over the past year, the company has added more than 2 GW of new datacenter capacity, and now has over 400 datacenters across 70 regions.

NBIS’ Price Performance, Valuation and Estimates

Shares of Nebius gained 161.9% year to date compared with the Internet – Software and Services industry’s growth of 26.2%.

In terms of price/book, NBIS’ shares are trading at 4.53X, down from the Internet Software Services industry’s ratio of 102.14X.

The Zacks Consensus Estimate for NBIS’ earnings for 2025 has been unchanged over the past 30 days.

NBIS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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