Nebius Flips the Script: Software Acquisitions and $25 Billion Build-Out Follow Record Quarter

AI cloud provider leverages 841% AI segment revenue growth to acquire Clarifai talent, expand data centers, and target higher-margin software layers; analysts raise price targets.

A 684% revenue surge in a single quarter would satisfy most companies. For Nebius Group, it is merely the launchpad for a two-pronged strategy: pivoting to higher-margin software while pouring up to $25 billion into infrastructure. The Amsterdam-based AI cloud provider is betting that control over both the chip layer and the platform layer will lock in customers and lift margins well beyond the 45% it now earns in its core GPU rental business.

The software push accelerated on May 12 when Nebius acquired the core development team of Clarifai, a specialist in AI inference and compute orchestration, along with a license to its patent portfolio. Clarifai founder Matthew Zeiler, a recognized pioneer in machine learning, joins as senior vice president of research. His team’s technology will be woven into Nebius’s in-house Token Factory platform, which was already strengthened by the earlier acquisition of Eigen AI. Where Eigen AI optimises at the model level, Clarifai works at the system level — handling multimodal processing, agent-based logic and long-term memory. The ambition is a full-stack infrastructure that reliably runs complex AI models in production, mirroring the margin-rich software layers of Amazon, Microsoft and Google.

Those margins matter because Nebius is also in the midst of an enormous capital expenditure cycle. During its quarterly presentation on May 13, the company lifted its 2026 capex target range to $20–$25 billion, up from a previous ceiling of $20 billion — and up sharply from a prior range of $16–$20 billion. Much of the additional capacity is already backed by firm customer commitments. To support that build-out, Nebius is securing power: it now aims to have more than four gigawatts of contracted power capacity by the end of 2026, with around 3.5 GW already under contract. Over three-quarters of that power will serve its own data centres, with new sites under construction in Pennsylvania, Missouri and Alabama expected to come online next year.

The first quarter provided the financial foundation for these ambitions. Revenue hit $399 million, powered by an 841% surge in the AI segment alone. The company swung from an adjusted EBITDA loss of $54 million a year earlier to a profit of $130 million. Annualised recurring revenue from the AI cloud business reached $1.92 billion by the end of March. Pricing power was evident: Nebius raised prices during the quarter and still ran at full capacity, pushing the adjusted EBITDA margin in its AI business to 45% from 24% in the prior quarter.

Wall Street responded with a flurry of target price increases. Citizens lifted its target to $270 from $175, citing capacity expansion and pricing leverage. DA Davidson raised its target to $250 (rating Buy), Goldman Sachs to $205 (Buy) and Morgan Stanley to $144 (Equal Weight). Bank of America and Northland subsequently chimed in with targets of $240 and $248 respectively. The stock jumped as much as 21% after the earnings release, boosted by a short squeeze — more than a fifth of the free float had been sold short. The shares later hit a fresh all-time high above $220 on the Nasdaq, bringing year-to-date gains to roughly 134% and the market capitalisation past $52 billion, or about 16 times expected revenue.

Supporting the massive infrastructure build, Nebius has ample liquidity — $9.3 billion in cash — and plans to raise additional debt in the single-digit billions. That follows a $4.3 billion convertible bond private placement completed in March. Customer prepayments and an untapped share issuance programme provide further flexibility. On the commercial front, a new distribution partnership with TD SYNNEX will extend Nebius’s reach to enterprise clients for AI clusters based on Nvidia chips.

Management did offer one caution: a temporary dip in margins during the second quarter as new server capacity is brought online. The longer-term question, however, is whether the Token Factory platform can translate the billions spent on hardware into durable margin expansion. The next quarterly report will offer an early read on that transition.