Nebius' 684% Revenue Surge and $46B Backlog Can't Shield Against Valuation Downgrade

Nebius posts 684% revenue jump to $399M, lands Meta deal and 1.2GW power; DA Davidson downgrades stock as rally prices in gains.

The market is delivering two sharply different verdicts on Nebius. On one hand, the AI infrastructure provider just posted a 684% revenue surge to $399 million, signed a five-year anchor deal with Meta, and locked up 1.2 gigawatts of Pennsylvania power for a new AI factory. On the other, DA Davidson has downgraded the stock from Buy to Neutral, arguing the rally has already priced in the good news.

The tension between operational momentum and stretched valuations now defines the Nebius story. The company's shares closed around $213 on May 25, 2026, up roughly 140% since the start of the year, but still well off the intraday highs that followed the first-quarter earnings release. That report triggered a 23% surge in a single week, pushing the stock so far ahead of analyst targets that even firms that had just raised their price targets felt compelled to step back.

The Meta Effect and the Numbers Behind It

Nebius' transformation from a freshly listed spin-off serving mostly small AI firms to a serious infrastructure contender accelerated when Meta committed to a five-year pact last spring. The contract de-risks the company's ambitious capacity expansion plan by locking in demand. The first-quarter results underscored the shift: adjusted EBITDA swung from a loss to a profit of nearly $130 million, while the core AI cloud business alone contributed $389.7 million in revenue — an 841% jump from a year earlier and roughly 98% of total group revenue.

The annualized run rate hit $1.92 billion at the end of March, up 674% year-over-year and 54% from the prior quarter. That kind of sequential acceleration is rare even in the red-hot AI infrastructure space.

Power as the New Battleground

Scaling AI data centers depends on energy, and Nebius has moved aggressively to secure supply. The company has locked in up to 1.2 gigawatts of power in Pennsylvania for a new facility. More distinctively, it signed a deal with Bloom Energy for 328 megawatts of fuel cells to be deployed on-site, with the first project coming online before year-end. The modular fuel cell approach sidesteps the bottleneck of slow grid upgrades, giving Nebius a speed advantage in bringing capacity to market.

The capital required for this build-out is enormous. Nebius spent roughly $2.47 billion on new facilities last quarter, up from a fraction of that a year earlier. For 2026, capital expenditure guidance has been raised to between $20 billion and $25 billion, up from the prior $16–$20 billion range. The company's cash position remains robust at more than $9 billion, boosted by $6.3 billion in inflows during the first quarter, including a $2 billion equity stake from NVIDIA and proceeds from convertible notes.

Analysts Split: Execution vs. Valuation

DA Davidson's downgrade was notable for its rationale: not a criticism of the business but a recognition that the stock had simply run too far, too fast. The bank kept its price target at $250, having raised it from $200 just days earlier. After the 23% rally, shares were trading close to that new target, leaving little room for error.

Morgan Stanley struck a more cautious tone, lifting its target from $126 to $144 but maintaining an Equal-weight rating. The analysts acknowledged stronger execution, better pricing, and faster capacity progress but concluded that conservative valuation models cannot keep pace with the current share price. Their target remains far below market levels, highlighting the gulf between operational optimism and valuation discipline.

A Temporary Margin Squeeze on the Horizon

Chief Financial Officer Dado Alonso has flagged a likely margin dip in the second quarter. The bulk of capacity additions are back-loaded to the second half of the year, meaning near-term revenue and earnings could look choppy. That creates a setup where some investors may take profits after the steep run. On May 25, the stock traded between $210.73 and $221.92 before settling at $213.29, reflecting the tug-of-war between bulls banking gains and those betting on the long-term story.

The Big Picture: $46 Billion in Backlog and a 5-Gigawatt Target

Despite the near-term caution, Nebius' order book provides a powerful underpinning. The company points to $46 billion in committed contracts and aims to have 5 gigawatts of active data center capacity by 2030. By end-2026, it expects contractually secured power capacity to reach 4 gigawatts, up from the 3-gigawatt projection it gave in May.

Delivery of new cloud capacity for customers is scheduled to begin in the third and fourth quarters of this year. If Nebius can execute on that timetable, convert its energy deals into live data centers, and avoid further margin erosion, the current valuation — a market cap of roughly $55 billion — may eventually look justified. For now, the stock's fate rests on a string of near-term milestones that will either validate the rally or expose it as premature.