Nebius Shares Tumble Following Quarterly Results

Nebius shares fell sharply after Q4 revenue missed estimates, despite 500%+ YoY growth. The company reaffirmed aggressive long-term targets and announced a strategic AI acquisition.

Nebius stock experienced a sharp decline on Friday, dropping approximately 9% to close just under $98 per share. This pullback occurred after the equity had gained nearly 10% in the week following its February 12 earnings release. Trading volume was notably high at around 17.2 million shares, significantly exceeding its average. The reversal has led market participants to question whether investors are reassessing their initial positive reaction to the company's financial report.

Earnings Report Falls Short of Projections

For the fourth quarter of 2025, Nebius reported revenue of $227.7 million, representing a year-over-year increase exceeding 500%. However, this figure fell short of the consensus estimate of $246 million by approximately $15 million. The company also missed analyst expectations on earnings per share, reporting a loss of $0.69 compared to the estimated loss of $0.42.

The core AI Cloud business segment contributed $214.2 million, a growth of more than 800% compared to the prior year. Company leadership attributed the revenue shortfall to timing issues rather than weakening demand. Significant investments in capacity expansion, product development, and GPU procurement drove cost of revenue up by 225% to $68.5 million.

Strategic Acquisition and Ambitious Targets

In a strategic move announced February 10, Nebius disclosed plans to acquire Israeli startup Tavily for $275 million. The total consideration could potentially rise to $400 million upon the achievement of certain performance milestones. Tavily specializes in real-time search infrastructure that enables AI agents to navigate the web, verify information, and complete tasks autonomously. This acquisition is intended to add a live-data search layer to Nebius's Token Factory Inference Engine. The roughly 30-person team, including founder Rotem Weiss, will join Nebius, while the product will continue to operate under the Tavily brand.

Despite the quarterly miss, management reaffirmed its aggressive long-term forecasts. Key objectives include:
- Annual Recurring Revenue (ARR): $7 to $9 billion
- Connected Power Capacity: 800 MW to 1 GW
- Contracted Power Capacity: Over 3 GW
- ARR by Year-End 2025: Approximately $1.25 billion
- Active Power at Quarter-End: About 170 MW, surpassing the prior forecast of 100 MW

The company noted that its capacity expansion is proceeding ahead of schedule, even as near-term losses are expected to continue.

Analyst Sentiment Remains Largely Positive

Market analysts have maintained a generally optimistic stance. Compass Point initiated coverage on February 18 with a Buy rating and a $150 price target. Northland Securities reaffirmed its Outperform rating with a $211 target, while D.A. Davidson reiterated a Buy rating with a $150 target. The consensus among eleven covering analysts stands at "Moderate Buy," with an average price target of $143.22.

Institutional investor interest appears sustained. Recent regulatory filings show that BlackRock increased its stake, and Nvidia maintained its position in the company.

Path Forward

Nebius faces the ongoing challenge of balancing explosive revenue growth with substantial capital expenditures and reported losses. The Tavily acquisition signals a strategic pivot from a pure infrastructure provider toward a fully integrated AI cloud platform. The company's next quarterly report, scheduled for April 29, will provide further insight into its progress toward achieving its ambitious ARR goals.