Fermi Must Prove Its TensorFlow Deal Is Closing As Shares Sit Near Lows

Three months ago, Fermi looked like a company that had finally turned a corner. The Amarillo-based developer of private, gigawatt-scale power grids for AI data centers signed its first binding tenant, doubled the power available at Project Matador, named a construction veteran as CEO and raised fresh capital. The stock has since lost about 71% of its value, trailing the S&P 500 by nearly 69 percentage points. That gap between an improving story and a collapsing share price is the setup heading into the third-quarter report before the open on November 12. The question is not whether Fermi beats an earnings number. It is whether the deal-making from last quarter has turned into signed, financed and funded projects.

The usual yardsticks offer little help. Fermi has no meaningful revenue consensus, and the published per-share estimate does not look reliable enough to set a real bar. Management has given no formal guidance. The income statement matters less for a pre-revenue developer than the balance sheet and project milestones. Last quarter's loss narrowed to $0.04 a share from $0.84 a year earlier, but the more telling figure was cash, which fell by roughly half from the prior quarter even as the company prepared for heavy spending.

The most important item is the TensorFlow agreement. That contract covers up to 650 MW over three phases, and its first 222 MW phase carries about $6.5 billion of revenue over 15 years. At the time of the last call, however, two key pieces were still unsigned. These were an investment-grade backstop guaranteeing the full 15-year term and the project financing behind it. Management said the backstop announcement was days away. Shareholders need confirmation that both are in place and that mobilization has begun. Signed financing, active work by Primoris on phase one balance of plant and early works by TSK on phase two would support the narrative. Any further delay would raise the question of whether the anchor contract is as firm as it was presented.

Execution scope is the second test. The TensorFlow deal is a full turnkey build that extends all the way up to the chips, which goes well beyond Fermi's original model of powered land and powered shells. Management admitted turnkey will not be the norm, and it is relying on a data-center partner it has not yet named. Naming that partner, and showing how per-MW capital costs will be funded, would ease the concern. Management cited roughly $3 million to $4 million per MW for power and $10 million to $12 million per MW for a turnkey build. Investors should also look for progress on the Hillcore alliance, which adds about 2.6 GW without upfront capital from Fermi, and on the Siemens turbines that cleared customs in Houston. Further phase two and three discussions with TensorFlow, or a second tenant from the pipeline management called far along, would show that demand extends beyond a single customer.

Sentiment has soured sharply, swinging from mildly bullish before the last report to firmly bearish now. The stock trades around $2.04, just above its post-earnings low of $2.00. That is far below its 200-day moving average of $6.41 and well under the $5.34 to $10.14 range of the prior quarter. Expectations are depressed, which lowers the bar for a positive surprise. It also means the market wants concrete proof rather than more announcements.

Ultimately, this report hinges on conversion. If Fermi can show a closed backstop, secured project financing and a cash position matched to its build schedule, last quarter's de-risking story stays intact. If those items remain pending while cash keeps falling, the market's skepticism will look justified, whatever the headline earnings figure says.

This earnings preview was originally published on Earnings Whispers.

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