Can CoreWeave Sustain Its Impressive EBITDA Margin Performance?

CoreWeave, Inc CRWV highlighted the strength of its business model by delivering both hyper top-line growth and impressive profitability numbers in the second quarter of 2025. Revenues jumped 207% year over year to $1.2 billion, marking the company’s first billion-dollar quarter. Adjusted EBITDA was $753.2 million compared with $249.8 million in the prior-year quarter. This translated to an EBITDA margin of 62%, only a shade below last year’s 63%.

Despite the rapid scaling and focus on product innovation, margins being almost in line with the year-ago quarter reflect CoreWeave’s differentiated position in the structurally undersupplied AI-cloud market. Management emphasized that growth remains constrained by capacity, not demand, as backlog expanded to $30.1 billion, up $4 billion from the first quarter and doubling year to date. Expansion with OpenAI contract and other contracts with hyperscalers while increasing foothold in sectors like finance and healthcare, and AI start-ups, is driving backlog increase.

Nonetheless, going ahead, sustaining margins at such high levels will be tested by CoreWeave’s increasingly aggressive expansion strategy. The company had 470 megawatts (“MW”) of active power and contracted power of 2.2 gigawatts at the end of the second quarter. It targets more than 900 MW of active power by year-end. 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.

CoreWeave needs to watch out for increasing expenditures. In the last reported quarter, total operating expenses were $1.2 billion compared with $317.7 million in the year-ago quarter. Capex was $2.9 billion, an increase of $1 billion from the last quarter. Interest expense climbed to $267 million in the second quarter, reflecting heavy use of debt to finance growth, while net loss totaled $291 million.

For the third quarter, it expects interest expenses to be between $350 million and $390 million, owing to high leverage. Higher interest expenses can exert pressure on the adjusted net income and potentially affect free cash flow generation and undermine near-term profitability.

As the AI infrastructure race gains pace, investors will closely scrutinize CoreWeave's ability to manage massive capex and rising costs while maintaining consistent margins. The recent deal with NVIDIA for residual unused capacity is likely to offer some cushioning.

Taking a Look at Profitability Numbers for Competitors

Nebius N.V. Group NBIS, while smaller in scale, has emerged as an intriguing challenger to CoreWeave. The company’s revenues surged 625% year over year to $105.1 million in the second quarter of 2025. NBIS achieved positive EBITDA in its core AI infrastructure business, driven by hyper revenue growth earlier than expected in the second quarter.

Despite this, management reaffirmed that adjusted EBITDA will be negative for 2025. However, it added that adjusted EBITDA will turn slightly positive by the end of the year at the group level. NBIS is also investing heavily in capacity expansion and expects capex to be $2 billion for 2025.

Amazon AMZN is a structurally dominant force in the tech space. Amazon Web Services is one of the top growth drivers for the company. AWS is the market leader in the cloud compute space and now aggressively moving into AI infrastructure. To stay ahead of rivals, Amazon has launched custom AI chips (Trainium and Inferentia) and strengthened partnerships with the likes of NVIDIA while forging new collaborations with other AI developers to train and deploy models on AWS.

In the last reported quarter, AWS segment sales were $30.8 billion, up 17.5% year over year. The cloud division generated $10.2 billion in operating income.

CRWV Price Performance, Valuation and Estimates

Shares of CoreWeave have gained 45.9% over the past month compared with the Internet Software industry’s growth of 4.2%.

In terms of Price/Book, CRWV’s shares are trading at 23X, way higher than the Internet Software Services industry’s ratio of 6.95X, 

The Zacks Consensus Estimate for CRWV’s earnings for 2025 has been revised downwards over the past 60 days.

CRWV 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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