Can Nebius' Data Center Expansion Sustain Growth as Competition Rises?

Nebius Group N.V. (NBIS) growth trajectory is increasingly defined by its ability to expand and monetize data center capacity in an AI infrastructure market that is becoming more competitive and power-constrained. Management stated that customer demand for AI compute remains robust, but available data center capacity has become the defining growth bottleneck. As a result, the company’s expansion strategy is firmly centered on accelerating data center buildouts and securing long-term power capacity to support sustained AI-driven growth.

The company is investing aggressively in expanding its global data center footprint, with a strong focus on securing power capacity well ahead of deployment. On the last earnings call, management highlighted that it has already contracted substantial power capacity, providing visibility into future expansion and reducing execution risk. This contracted power pipeline positions the company to scale revenue as facilities are completed and equipped with GPUs, particularly as next-generation accelerators become available.

Also, management stated that much of its upcoming data center capacity is effectively presold, with demand commitments in place before facilities go live. This approach improves capital efficiency and lowers the risk associated with large upfront investments. While capital expenditures are rising sharply to support new builds, the company believes these investments are justified by strong customer demand and long-term contracts tied to AI workloads, helping protect returns despite an increasingly crowded AI infrastructure landscape.

The company is rapidly scaling its infrastructure, targeting 2.5 gigawatts of contracted power by 2026, up from its earlier projection of 1 gigawatt. The company also plans to have roughly 800 megawatts to 1 gigawatt of fully built and connected data center power by the end of 2026.

In third-quarter 2025, Nebius launched its Israel data center with B200 GPUs and its U.K. facility with B300s, with much of this capacity presold ahead of opening. The company also highlighted the upcoming launch of GB300s. For 2026, Nebius plans to expand its existing data-center footprint in the U.K., Israel and New Jersey, while commissioning new facilities across the United States and Europe in the first half of the year. The company is also in the process of securing multiple large-scale sites, each capable of supporting several hundred megawatts of power, with a number of these locations expected to become operational before the end of 2026. Management remains confident that data center expansion will continue to be the key driver of growth over the coming years. Nebius is targeting $7–$9 billion in annual recurring revenue by 2026.

However, scaling aggressively (multiple data centers in various regions) involves execution risk. Moreover, macroeconomic uncertainty, rising operating costs, substantial capital outlays and stiff competition from companies such as Microsoft Corporation (MSFT) and CoreWeave, Inc. (CRWV) remain concerns.

Taking a Look at NBIS’ Competitors

CoreWeave continues to aggressively scale its data center footprint to meet surging demand for AI compute, operating in a highly supply-constrained environment where customer demand far exceeds available capacity. In the third quarter, the company expanded its active power footprint to roughly 590 megawatts and increased contracted power capacity to about 2.9 gigawatts.

CoreWeave has diversified its data center providers so that no single partner accounts for more than roughly 20% of contracted power, while also adding new facilities across the United States and expanding its presence in Europe, including developments in partnership with the U.K. government. In the third quarter, the company’s revenues jumped 134% year over year with massive expansions in data center power capacity. However, supply constraints and data center delays are limiting capacity and are expected to weigh on fourth-quarter results. For 2025, revenues are anticipated to be $5.05–$5.15 billion, changed from the earlier estimated $5.15–$5.35 billion.

Microsoft plans to increase total AI capacity by more than 80% in 2025 and roughly double the total data center footprint over the next two years. The company unveiled Fairwater in Wisconsin as the world's most powerful AI data center, which will scale to two gigawatts and go online next year. Microsoft deployed the world's first large-scale cluster of NVIDIA GB300s and is building a fungible fleet that spans all stages of the AI lifecycle, from pre-training to post-training, synthetic data generation and inference.

However, the company expects to remain capacity-constrained through at least the end of fiscal 2026, with demand exceeding current infrastructure buildout. In December 2025, Microsoft unveiled $23 billion in new AI investments, highlighted by a $17.5 billion commitment in India, its largest investment ever in Asia and an additional $5.4 billion earmarked for Canada over the coming years.

NBIS’ Price Performance, Valuation and Estimates

Shares of Nebius have gained 213% in the past year compared with the Internet – Software and Services industry’s growth of 29.4%.

Valuation-wise, Nebius seems overvalued, as suggested by the Value Score of F. In terms of Price/Book, NBIS shares are trading at 5.04X, higher than the Internet Software Services industry’s 3.92X.

The Zacks Consensus Estimate for NBIS’ 2025 earnings has seen a downward revision over the past 60 days.

NBIS currently carries a Zacks Rank #4 (Sell).

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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