CoreWeave's stock pops as new financing playbook eases debt concerns

By Christine Ji

Revenue beat and $9 billion in planned prepayments give investors renewed confidence in CoreWeave's business

Customer demand outstrips CoreWeave's 2027 capacity by a ratio of 10-to-1, the company said on the earnings call.

CoreWeave shares were up nearly 19% in premarket trading on Wednesday after the company dispelled financing concerns on its third-quarter earnings call.

Booming demand for CoreWeave's (CRWV) artificial-intelligence cloud services led revenue to grow 168% from a year prior to reach $3.66 billion, beating FactSet consensus estimates for $3.54 billion. The company's net loss per share of $1.27 matched consensus estimates.

Management raised its full-year revenue outlook to a range of $13 billion to $13.3 billion and lifted the lower end of its infrastructure investment forecast, projecting $37 billion to $39 billion in total spending.

"The existing business is growing rapidly, the backlog keeps expanding and capacity coming online shows the buildout is progressing. This report gives investors more confidence that customer demand is translating into actual revenue," Joe Tigay, portfolio manager of the Rational Equity Armor Fund, wrote in a note following the earnings release.

Other parts of CoreWeave's business are picking up beyond chip rentals. During the third quarter, the company launched the AI development platform CoreWeave Forge. "We've been focused on reaching up the stack," CEO Michael Intrator told MarketWatch, adding that "70% of our new cloud customers have come from Forge."

But beyond the headline numbers, the company's third-quarter results gave investors increased confidence in CoreWeave's financial trajectory and path to profitability. Shares in the cloud computing company have plunged nearly 60% in the past six months over concerns about the its heavy debt load, which leaves CoreWeave particularly exposed to a rising interest-rate environment.

"We will not use the unsecured debt market to fund our business at current yields, nor do we need to," Intrator said on the earnings call. Instead, the company is opting for delay-draw term loans, a more flexible option that allows CoreWeave to withdraw predetermined amounts over time. The nine-year-old company is also expecting to collect $9 billion in customer prepayments in the next three months.

CoreWeave's strategy of leaning more heavily on prepayments is a positive and less risky move than taking on more debt, MoffettNathanson analyst Nick Del Deo wrote in a Tuesday note. However, he speculated that the company may need to raise more funds next year through an equity raise or equity-linked instruments.

The company's capital expenditures, or infrastructure investments, came out higher than expected for the quarter - at $14.5 billion compared to FactSet estimates of $11.9 billion. But CoreWeave reaffirmed its abilities to pay for its spending with cash flows from customer contracts alone.

Investors were pleased by management's plans to pursue shorter-duration contracts, which boast faster payback periods as spot prices for processing power rise. Customer demand is outstripping 2027 capacity by a factor of 10.

"Overall, the results show CoreWeave continues to execute on the controllables and support our view that the AI compute demand environment remains unquestionably strong," analysts at Citigroup, led by Tyler Radke, co-head of U.S. software equity research, wrote in a note. "We believe increased evidence of demand durability can help alleviate higher financing costs."

CFO Nitin Agrawal said that CoreWeave is charging between $20 million and $25 million per megawatt for its longer-dated contracts, and up to $40 million per megawatt for short-term commitments. Shorter-duration contracts can pay back the initial investment in anywhere from six to 18 months.

"Today's results and the color shared regarding the company's financing plans, data-center pipeline and competitive landscape were quite favorable," Del Deo wrote.

Brad Zelnick, AI and software equity research analyst at Deutsche Bank, said a backdrop of strong demand should should support higher prices, contribution margins and company decisions about where it prioritizes allocation capacity in the final quarter of the financial year as well.

Nora Redmond contributed to this article.

-Christine Ji

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