Nebius Earnings: Customers Prefund the Build of a Bill That Comes Due Later

Key Morningstar Metrics for Nebius Group

• Fair Value Estimate: $150.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Nebius Group’s Earnings

Nebius Group NBIS reported third-quarter revenue of $981 million, up 571%, including $325 million of one-time fees. It trimmed 2026 revenue guidance to the low end of its $3.0 billion-$3.4 billion range, and guided 2027 revenue of $12 billion-$13 billion and $40 billion-$45 billion of capital expenditures.

Why it matters: We believe investors were disappointed by the 2027 revenue guidance, which is in line with consensus, and worry about the massive increase in 2027 capex, 52% higher than FactSet consensus at the midpoint. Customers keep prepaying for capacity, with contracts signed in the third quarter being 100% covered by prepayments. Nebius expects $17 billion-$20 billion in 2027 prepayments, which should cover 40%-50% of 2027 capex. Another incremental 25%-45% should be covered by debt.

• While customer prepayments alleviate short-term financing needs, Nebius is effectively borrowing money from customers that it will repay in future computing services. This helps cash burn in years with massive capex like 2027, but this will become a large working capital drag in the future as deferred revenue unwinds.

The bottom line: We maintain our $150 per share fair value estimate for no-moat Nebius. Shares fell about 19% at market open Nov. 12. Given our Very High Morningstar Uncertainty Rating, we still see little margin of safety, and we remind investors that value hinges on distant terminal assumptions.

Big picture: During the earnings call, management mentioned it is still discovering the price of what it sells, and the market tells Nebius what its capacity is worth. To us, this means Nebius (and all neoclouds) are price-takers. In our view, GPU renting is a commodity business that works while capacity is scarce. Comments from neoclouds contrast with those of Amazon on Oct. 29, which mentioned that Amazon has a long-term platform strategy with attractive long-term economics regardless of supply scarcity.