Will the Federal Market Entry Enhance CoreWeave's Competitive Lead?

CoreWeave (CRWV) continues to scale at breakneck speed with revenues surging 134% year over year to $1.4 billion in the third quarter of 2025. While the company continues to post strong operational results, its entry into the federal market emerges as a meaningful development.

CoreWeave has expanded into the U.S. public sector through the launch of CoreWeave Federal, a new initiative designed to deliver its AI cloud services to government agencies and the broader defense industrial base. CoreWeave Federal is built to deliver compliant, secure and high-performance infrastructure that enables government agencies to adopt AI safely and at scale. This platform also meets the U.S. government’s evolving cybersecurity standards and compliance requirements.

Early traction appears strong as NASA's Jet Propulsion Lab is already leveraging CoreWeave services to advance scientific exploration. Adoption by a renowned federal institution validates the platform’s capabilities and signals wider potential across agencies dealing with scientific, defense and intelligence workloads.

Entering the public sector expands the company’s addressable market at a crucial moment when AI adoption is accelerating globally. Government agencies across defense, research and infrastructure are now pursuing an AI-first strategy. This, combined with its success in the commercial sector, is expected to drive long-term growth and improve the competitive edge for CoreWeave.

At the end of the third quarter, CoreWeave had a backlog of $55.6 billion, including $50 billion in RPO. This scale, combined with rapid diversification across frontier labs, enterprises, AI-native startups, hyperscalers and now government agencies, bodes well for CoreWeave.

CoreWeave already operates nearly 590 megawatts of active power and holds 2.9 gigawatts of contracted capacity, leaving more than 1 gigawatt available to be sold to customers going forward. As government contracts often require long-term commitments, CoreWeave’s expanding capacity, alongside its growing suite of software innovations (Mission Control and AI Object Storage), makes the platform increasingly attractive for federal workloads that demand both scale and performance.

Nonetheless, CoreWeave operates within a fiercely competitive AI infrastructure market, where established hyperscalers like Microsoft (MSFT) and emerging players such as Nebius (NBIS) are racing to capture a growing share of next-generation compute demand.

Let’s Look at the Competitors' Moats

Microsoft has a significant presence in the public sector market through Microsoft Federal, spanning civilian, intelligence and defense agencies. MSFT has a decades-long partnership with the U.S. government, giving it a strong competitive moat. At the center of its strategy is Azure for US Government, a fully isolated, sovereign cloud environment tailored particularly for U.S. federal workloads. Azure Government has several critical accreditations, including FedRAMP High, Department of Defense’s (DoD) IL5 and IL6, enabling it to support both unclassified and classified missions. Microsoft also plays a significant role in the DOD’s Joint Warfighting Cloud Capability program.

Nebius is another rapidly growing AI infrastructure company. In the third quarter, Nebius' group revenues increased 355% year over year to $146.1 million, with the core infrastructure segment (which accounted for 90% of total revenues) growing 400%. However, its federal penetration is still in the early stages compared with giants like Microsoft. NBIS is focused on building partnerships with diverse customers, including AI start-ups, software vendors and enterprises.

Nebius added several new customers in the third quarter, such as Cursor AI, Black Forest Labs and World Labs, which are developing innovative AI-powered solutions. It is also expanding in markets such as healthcare, life sciences, physical AI, and media and entertainment. Nebius is also focused on becoming enterprise-ready, as demonstrated by the launch of Aether, a next-generation cloud platform purpose-built for enterprise-scale AI.

CRWV Price Performance, Valuation and Estimates

In terms of Price/Book, CRWV’s shares are trading at 10.8X, way higher than the Internet Software industry’s ratio of 5.82X,

Shares of CoreWeave have lost 19.8% over the past month compared with the Internet Software industry’s decline of 0.3%.

The Zacks Consensus Estimate for CRWV’s earnings for 2025 has been revised upwards 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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