Nebius Funds Major Expansion Through Landmark Convertible Bond Offering

Nebius raises $4.3B to fund massive data center growth backed by Meta & Microsoft deals, but shareholder dilution concerns weigh on the stock.

The market continues to process the implications of the largest capital raise in Nebius's history, completed just over a week ago. While the $4.3 billion convertible bond issue attracted strong institutional demand, the reaction from existing shareholders has been notably more cautious, with the stock facing downward pressure.

Capital Deployment for Ambitious Growth

The proceeds are earmarked for a dramatic infrastructure build-out. Nebius aims to increase its active data center capacity from 170 megawatts currently to between 800 megawatts and 1 gigawatt by the end of 2026. The company indicates that its contractually secured pipeline could even exceed 3 gigawatts.

This aggressive expansion is backed by substantial commitments from two anchor clients. Meta has pledged to spend up to $27 billion on Nebius's AI infrastructure over five years. This comprises $12 billion for dedicated capacity and up to $15 billion for additional compute resources. Microsoft has inked a similarly structured five-year agreement worth up to $19.4 billion.

Geographic growth is also accelerating. Early March saw the announcement of an expansion into the Asia-Pacific region, complete with a new General Manager. In the United States, the city council of Independence, Missouri, approved a tax incentive program for a planned AI campus with a potential capacity of up to 1.2 gigawatts.

The Mechanics of the Record Offering

Originally targeted at $3.75 billion, investor orders surged within 48 hours of the March 16 announcement, prompting an increase to $4 billion. By the time the transaction closed on March 20, the initial purchasers had fully exercised their over-allotment options, bringing the final volume to $4.3375 billion.

The offering was split into two tranches: $2.5875 billion in convertible notes carrying a 1.25% coupon and maturing in 2031, and $1.75 billion with a 2.625% coupon, due in 2033. The conversion premiums of approximately 57.5% and 55%, respectively, suggest bond buyers are pricing in significant long-term share price appreciation.

Financial Performance and Underlying Challenges

Nebius's 2025 financial results highlight both rapid growth and persistent challenges. Annual revenue reached $529.8 million, a staggering 479% increase year-over-year. The adjusted EBITDA loss improved substantially, narrowing from $226.3 million to $64.9 million. Looking ahead, the company is targeting 2026 revenue in the range of $7 to $9 billion.

However, a core issue remains for equity holders. Although Nebius generated $385 million in operating cash flow for 2025, it invested $4.1 billion in infrastructure during the same period. This structural cash flow gap makes external financing a necessity as long as the current growth tempo continues. The dilution risk is real, as the bonds are convertible into shares prior to maturity.

The stock has declined approximately 9.4% over recent trading sessions. Most analysts maintain a "Hold" rating on the shares, citing ongoing operational losses, high capital expenditure requirements, and a demanding valuation.

The Path Forward

Achieving these ambitious targets hinges critically on whether AI demand sustains the pace assumed in the company's infrastructure planning. The next quarterly results, expected on May 18, 2026, should provide early indicators of how swiftly the new capacity is being translated into actual revenue.