CoreWeave is on fire, at least on paper. The AI infrastructure provider posted some seriously impressive revenue numbers: $1.2 billion, up roughly three times year over year. But hold on, before you start cheering, let’s dive into why investors aren’t exactly popping champagne.
Despite the strong revenue figures, CoreWeave booked a $290 million net loss. Ouch. The company’s scaling up quickly to meet what CEO Michael Intrator called the "unprecedented demand for AI," but it’s costing them big time. Infrastructure spending is soaring, and interest costs are also taking a big bite out of the company’s bottom line. Even with a $200 million adjusted operating income, the adjusted net loss still widened to about $131 million.
Thin Margins and Tough Competition Raise Concerns
Now, before you think this is all doom and gloom, the company’s revenue backlog stands at a solid $30 billion. That means long-term contracts are signed, and the cash flow will be coming in, but it’s going to take some time as compute capacity comes online. So, what’s the catch? Well, investors didn’t quite share the optimism, and CoreWeave’s shares fell sharply by more than 10% to $133.3 in after-hours trading.
In my opinion, it’s the math that’s causing all the headaches. CoreWeave’s operating margins have compressed from 20% last year to just 2%. And some analysts, like Jeffrey Emanuel of Pastel Network, aren’t exactly thrilled with the adjusted operating margin of 16%. That’s kind of weak for a capital-heavy business like CoreWeave, don’t you think?
But wait, it gets better (or worse, depending on how you look at it). Some experts argue that CoreWeave’s growth hides some fragility, particularly around GPU depreciation assumptions. Emanuel explained that the company’s assuming a straight-line, six-year lifespan for their H-100 GPUs, but those machines are already falling behind in price and performance compared to newer models.
And the competition’s catching up. Ram Kumar from OpenLedger pointed out that CoreWeave’s edge came from getting their hands on NVIDIA’s newest GPUs first, but that advantage is fading as hyperscalers and specialist clouds catch up.
Is CoreWeave’s Future at Risk?
In my view, CoreWeave is starting to look a little too much like a price-war victim, especially with those slim margins and heavy fixed costs. If AI budgets slow down or customer consolidation hits, they could be in serious cash flow trouble. A slowdown could squeeze them more than their diversified hyperscaler rivals.
If CoreWeave’s accounting is anything to go by, they might be masking deeper losses. Emanuel suggests adjusting their depreciation model to something more realistic, like 2.5 or 3 years, and the losses could be pretty staggering. That’s a red flag, especially considering the juicy contracts they’ve landed during the AI boom.
CoreWeave’s got a tough road ahead. They need to expand margins quickly and lock in more usage to avoid slipping from a high-growth disruptor to just another infrastructure landlord.
Anastasiia G
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