Nebius Shares Swing as 841% Cloud Revenue Surge Meets Valuation Downgrade

Nebius Group Q1 revenue surged 684% to $399M, but DA Davidson downgrade on valuation sparked 9% reversal. Analysts divided on growth vs. price, with $46B backlog and $25B capex.

The market’s reaction to Nebius Group’s latest quarterly numbers told two stories in a matter of hours. First came a surge of more than 14% on Thursday, pushing the stock above $226 before a sharp reversal wiped nearly 9% from its value. The whipsaw captured a fundamental tension: a company delivering extraordinary growth now faces the consequences of its own success.

The catalyst was a quarterly report that shattered expectations. Revenue hit $399 million in the March quarter, an almost eightfold jump from $51 million a year earlier. The core AI cloud business alone generated $389.7 million, representing 841% year-over-year growth and accounting for roughly 98% of total sales. Adjusted EBITDA swung from a loss of $53.7 million to positive $129.5 million, with a margin of 32%.

Yet the same day, DA Davidson downgraded the stock from Buy to Neutral, keeping a $250 price target while pointing squarely at valuation. Nebius shares had already risen nearly 140% since the start of the year. The downgrade triggered a selloff, underscoring how quickly high expectations can become a liability.

Other banks took the opposite view. Citigroup lifted its target from $169 to $287. Citizens JMP raised its target to $270, while Northland’s Nehal Chokshi increased his to $248 and maintained a Buy rating. The divergence highlights a widening debate over how much future growth is already priced in.

Morgan Stanley struck a more cautious note, sticking with an Equal-weight rating and raising its target only modestly to $144. In a bull case scenario, the bank sees shares reaching $400, but ties that to aggressive capacity expansion through the end of the decade.

The numbers underpinning the bullish case are indeed eye-popping. Nebius now holds a contracted capacity of more than 3.5 gigawatts, with a year-end target exceeding 4 gigawatts. A new site in Pennsylvania will add up to 1.2 gigawatts, with phased delivery starting in 2027, complementing the existing AI factory in Independence, Missouri. Over 75% of contracted capacity will be owned and operated by Nebius itself.

Management’s medium-term targets remain intact: at least $3 billion in revenue by 2026, with an adjusted EBITDA margin around 40%. The backlog stands at $46 billion, providing a multi-year growth runway. For 2027, DA Davidson already models revenue above $10.6 billion.

The capital required to achieve those ambitions has expanded. Nebius now plans investments of $20 billion to $25 billion, up from a previous range of $16 billion to $20 billion. Morgan Stanley attributed the increase primarily to higher anticipated capacity for 2027, not more expensive components.

A direct comparison with CoreWeave intensifies the valuation debate. Nebius reported quarterly revenue of $399 million, up 684% year on year. CoreWeave, by contrast, generated $2.1 billion in sales, up 112%, but its net loss widened from $315 million to $740 million. More tellingly, CoreWeave carries a debt-to-equity ratio of 10.7 versus Nebius’s 2.1. Nebius remains the smaller but more nimble player, and analysts project a compound annual growth rate of 233% from 2025 to 2028, with adjusted EBITDA growth of 187% after turning profitable in 2026.

The stock’s recent trajectory reinforces the dual nature of this story. After touching lows in the $135–$145 range in late April, Nebius rebounded sharply, closing at $219.93 on May 21 after an intraday high of $226.81. The next reporting date is July 29, 2026, when management must demonstrate that the annualized run-rate is on track to hit its targets.

For now, the shares are caught between two forces: operational acceleration and elevated expectations. As long as Nebius backs its capacity goals with revenue growth and margin improvement, the fundamental story remains intact. Any slippage in power, data centers, or customer commitments, however, will hit a stock that leaves little room for error.