Cerebras Systems (CBRS) shares tumbled 18.01% in pre-market trading on Thursday, extending a sharp sell-off that began in the after-hours session. The plunge came after the AI chipmaker reported second-quarter financial results that fell short of Wall Street expectations on both the top and bottom lines.

The company posted GAAP revenue of $180.11 million, a 74% increase year-over-year but below the analyst consensus estimate of approximately $194.2 million. More significantly, Cerebras reported a GAAP loss of $2.98 per share, far wider than the expected loss of $1.62 per share. The massive loss was driven by a steep drop in GAAP gross margin to 14% and a surge in stock-based compensation expenses exceeding $377 million for the quarter. Hardware revenue also declined 23% year-over-year to $54.1 million, serving as a primary drag on the top-line miss.

While management emphasized that core non-GAAP metrics painted a more favorable picture — with core revenue more than doubling to $210 million and core gross margin improving to 41% — the headline GAAP miss proved too much for investors. The company raised its full-year core revenue guidance to $880–$890 million and expects to more than triple revenue in 2027, but the wide gap between GAAP losses and core profitability triggered a wave of profit-taking. The CFO noted that adjusted gross margin would have been roughly 500 basis points higher if not for higher costs incurred from renting back systems to expand cloud capacity, adding further pressure to the stock.