AI cloud infrastructure company Nebius delivered a strong second-quarter performance, with revenue surging 454% year-over-year to $582.3 million, beating market expectations and sending its shares up more than 23% during the session. This follows competitor CoreWeave raising its full-year guidance the day prior, further reinforcing the signal of sustained robust demand for AI computing infrastructure.

AI cloud sales skyrocketed 514% year-over-year to $575 million, accounting for approximately 98% of the company's total quarterly revenue, becoming the core driver of growth. Looking ahead, Nebius reaffirmed its 2026 revenue guidance, projecting full-year revenue of $3 billion to $3.4 billion, and maintaining its annualized revenue run-rate target of $7 billion to $9 billion.

CEO Arkady Volozh stated that the company is converting strong demand into "contracted, profitable growth," noting that all targets set for the quarter were met and, in most cases, exceeded expectations.

Megadeals Emerging, Pricing Power Strengthens

Nebius achieved a breakthrough in contract signing during the quarter. The company inked four core AI cloud contracts with clients including Reflection, Cohere, a US-based Neolab, and a US quantitative trading firm, each with an average value exceeding $1 billion. The total value of these four contracts nearly quadrupled from the previous quarter, while the value of new customer contracts grew more than ninefold year-over-year.

Computing power pricing also strengthened. Volozh revealed that the company's first capacity auction achieved a price 15% higher than the previous highest historical bid for Blackwell GPUs. Chief Revenue Officer Marc Boroditsky stated that this price was 20% above the company's Blackwell pipeline pricing.

Currently, Nebius's annual contract value per megawatt for long-term contracts is approximately $20 million to $25 million, while short-term contracts, typically not exceeding six months, have risen to $40 million to $50 million per megawatt, with some deals fetching even higher prices.

Volozh indicated that under current contract terms, the company could fully sell out all planned capacity for 2027, but management chooses to reserve some supply to capture the higher realized value from short-term contracts.

Profitability Leap, Capital Expenditure Expands

Profitability also showed marked improvement. Adjusted EBITDA reached $236.2 million in the quarter, compared to a loss of $21 million in the same period last year. The adjusted EBITDA margin rose from 32% in the first quarter to 41%. The AI cloud business alone posted an adjusted EBITDA of $286 million, achieving a 50% margin.

CFO Dado Alonso explained that the overall group margin is lower than the AI cloud business because the company continues to invest in early-stage ventures like autonomous driving platform Avride and edtech platform TripleTen.

Meanwhile, capital expenditure is rising rapidly. Quarterly capex was approximately $5.7 billion, above analyst expectations of $4.7 billion, primarily used for GPU purchases and data center expansion. As of the end of June, the company held $8.042 billion in cash and cash equivalents, with operating cash inflow of $2.246 billion for the quarter, a significant turnaround from a $167.8 million cash outflow in the same period last year.

Year-End Signed Capacity Target Raised to 5 Gigawatts

Strong demand is also driving Nebius to accelerate infrastructure expansion. The company raised its target for signed electricity capacity by the end of 2026 from over 4 gigawatts to 5 gigawatts, and plans to add more than 1 gigawatt of capacity annually starting from 2027.

The company expects most of the signed capacity to come online over the next two to three and a half years. However, Nebius also emphasized that there is a time lag between signed capacity and actual revenue, as data center commissioning, network construction, and customer onboarding all take time.

To support the large-scale build-out, the company is raising funds through customer prepayments, debt financing, and cooperative construction models. Nebius anticipates receiving over $9 billion in customer prepayments for the full year 2026, with cumulative customer commitments exceeding $40 billion.

In July, the company completed $775 million in asset-backed debt financing at a rate of SOFR plus 250 basis points, secured by deployed GPU infrastructure and an investment-grade customer contract.

Additionally, the company is advancing an "asset-light" partnership model, where partners finance and operate data centers, while Nebius provides the full-stack platform and customer relationships. Volozh stated that the company has received dozens of partnership proposals, with the earliest expected contribution from this model starting in 2027.

Competition Heats Up, Supply-Demand Dynamics Remain Core

Facing the entry of new players like xAI into the AI cloud market, Nebius management remains optimistic about the demand outlook. Volozh expressed confidence that current AI computing demand still far exceeds supply, and the company is confident it can absorb all planned capacity for 2027 at current prices and contract terms.

According to Reuters, Emarketer analyst Jacob Bourne noted that while market competition is intensifying, demand for AI cloud capacity continues to grow. However, the more critical question is whether this demand can gradually expand beyond the AI industry to form a more diversified and sustainable customer base.

Nebius was spun off from Russian internet giant Yandex in 2024 and has since established partnerships with technology giants including Nvidia, Microsoft, and Meta.

Looking ahead to 2026, the company projects full-year capital expenditure of $20 billion to $25 billion, with an adjusted EBITDA margin of approximately 40%, and plans to announce formal 2027 guidance later this year.