Nebius ups capex for 2027 as revenue slips in Q4

Neocloud Nebius said it will spend $40 billion to $45 billion on capital expenditures in 2027, but argued that much of that funding will be prepayments. The company also said revenue expected in the fourth quarter will bleed into 2027.

The company's third quarter and outlook were a mixed bag. Nebius reported a third quarter net loss of $37.5 million, or 13 cents a share, on revenue of $980.8 million, up 571% from a year ago. On a non-GAAP basis, Nebius reported earnings of $90.9 million. Those results were ahead of Wall Street expectations.

Nebius said that revenue expected in 2026 was pushed into 2027. The company now expects revenue to be at the end of its previous projection of $3 billion to $3.4 billion. Why? Annual recurring revenue expected in December will slip until February. The issue is Nebius Vineland NJ data center was delayed over power delays. Nebius was switching to Bloom Energy generation and expected to have a bridge in power from DataOne, which wound down temporary generation faster than expected.

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For 2027, Nebius said it expects to reach pre-tax breakeven by the end of 2027 and deliver revenue of $12 billion to $13 billion.

Simply put, Nebius' quarter and outlook wouldn't have had such a big impact if not for broader concerns. Neocloud financing has been under the microscope and Nvidia's financial support may be called into question without CEO Jensen Huang at the helm.

Arkady Volozh, CEO of Nebius, was upbeat in a shareholder letter. "We do not just build and operate data centers and compute, like neoclouds. Nor do we only provide cloud services on top of rented compute, like inference providers," he said. "Nebius does both: we design, build and run the infrastructure, the cloud software, and the managed AI services that run on it. This is a hyperscaler model, engineered as one system for every compute-intensive AI workload – from training and post-training to inference, agentic search and execution. That lets us focus on how we capture the growth in front of us."

Welcome to the game called don't call me a neocloud.

On the earnings call, Volozh acknowledged that capital markets have been unsettled, but noted demand was strong. Nebius saw pricing power in the third quarter and is signing large contracts.

He added that the company is working spot pricing as well as building a full stack for inference and agentic AI. Volozh said:

"We build the infrastructure ourselves. We design and build our racks, we design and build our storage, and these costs will also fall further as more of our capacity comes from our own sites. The premium prices for our products and the low cost makes our margins. This is what we have always focused on to build a healthy and profitable business and having such margins is a fundamental part of that. Our margins are also supported by lower cost of funding. On top of prepayments, we have the financing that we can raise on our investment-grade contracts.

Together, all this reduces our costs, expands the market we can serve and lets us go after higher-value customers."

Sentiment on Nebius' earnings call was mixed. Most of the questions from Wall Street analysts revolved around prepayments and capital expenses.

CFO Dado Alonso said:

"At the end of the day, prepayments are covering 100% of the CapEx and puts us in a very good place with respect to our financing needs. Look, if markets -- in financing markets are not attractive, we can do more core and long-term contracts and less on spot and short-term deliveries. If we can raise more, we may allocate more to the short-term and spot market. We have then the flexibility to optimize the mix. To be in a position where you can cover 100% of the CapEx, including data center, this is a very good place to be."