Will CoreWeave's Heavy Debt Load Disrupt Its Growth Momentum?

CoreWeave, Inc. (CRWV) recently reported third-quarter 2025 results wherein revenues surged 134% year over year to $1.4 billion, surpassing both management’s guidance ($1.26 billion and $1.3 billion) and the Zacks Consensus Estimate by 6.8%. Yet, as CRWV expands at breakneck speed, investors seem wary of its mounting debt.

On the earnings call, management noted that the company has raised a staggering $14 billion in debt and equity year to date. CoreWeave is using these funds for the rapid expansion of its GPU-based data center, which is crucial to address the soaring AI compute demand. It added eight new data centers across the United States in the third quarter. Further expansions are underway in Europe, including Scotland. CRWV had nearly 590 megawatts (“MW”) of active power and contracted power of 2.9 gigawatts (“GW”) at the quarter-end. With more than 850 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.

Though increasing capital is enabling CRWV to accelerate data-center investments and meet surging AI demand, it is adding financial strain. Interest expense surged to $311 million compared with $104 million a year ago. For 2025, it expects interest expenses to be between $1.21 billion and $1.25 billion, 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. Adjusted net loss for the third quarter was $41 million against breakeven adjusted net income a year ago.

Management is working to mitigate financing risk by strengthening capital structure and lowering the cost of capital. For instance, the company amended the DDTL 2.0 Facility by increasing its remaining drawable capacity by more than $400 million to create a new $3 billion tranche at SOFR plus 4.25%. This is much below the original cost of the facility. Management emphasized that it continues to reduce spreads on the outstanding debt, capitalizing on strong market demand for AI infrastructure exposure.

Nonetheless, whether this funding proves to be a growth driver or a leverage headache will depend on CoreWeave’s execution, which does not look easy. Challenges for CRWV remain plenty as it juggles ballooning interest expense, heavy capex (2026 to be more than double of the figure of 2025) and intense competition from rivals like pure-play Nebius (NBIS) and tech behemoths like Microsoft (MSFT), which are also aggressively ramping up capacity

Capacity Expansion & Debt Profile for MSFT & NBIS

Nebius is another rapidly growing AI infrastructure company. In the third quarter, Nebius's group revenues increased by 355% year over year to $146.1 million, with the core infrastructure segment (making up 90% of total revenues) growing by 400%. Nebius plans to fund its aggressive expansion through corporate debt, asset-backed financing, and equity. Management highlighted that it is in the process of raising asset-backed debt and expects to secure attractive credit terms supported by the creditworthiness of its biggest client.

Nebius is also implementing an at-the-market equity program for up to 25 million Class A shares. NBIS added that the program will enable it to access equity funding efficiently. It targets 800 MW to 1 GW of connected power by the end of 2026 and 2.5 GW of contracted power.

Microsoft plans to boost its total AI capacity by more than 80% for this fiscal year and double its total data center footprint over the next two years, underpinned by strong demand trends. MSFT’s AI data center in Fairwater, WI, is expected to go online next year and can scale to two gigawatts alone.

Microsoft’s financial resources are stupendous. As of Sept. 30, 2025, it had $102 billion in cash, cash equivalents and short-term investments, while long-term debt was $35.4 billion. Microsoft’s global scale, strategic partnerships and financial resilience offer some serious competition. MSFT expects the capex growth rate in fiscal 2026 to be higher than in fiscal 2025

CRWV Price Performance, Valuation and Estimates

Shares of CoreWeave have lost 36.3% over the past month compared with the Internet Software industry’s decline of 6.8%.

In terms of Price/Book, CRWV’s shares are trading at 15.71X, way higher than the Internet Software Services industry’s ratio of 6.15X,

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

CRWV currently carries a Zacks Rank #2 (Buy). 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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