Nebius Stock: Scaling Ambition Meets Execution Challenge

Nebius reports 547% revenue growth and a $20B+ contract backlog but faces operational scaling challenges to meet demand from Meta and Microsoft.

The cloud and AI infrastructure provider Nebius is charting an aggressive growth path, underscored by strategic acquisitions, a massive contract backlog, and bold financial targets for 2026. However, its latest quarterly results highlight the central challenge: translating explosive demand into timely delivery. The key question for investors is whether the company can ramp up its operational capacity quickly enough to fulfill its substantial commitments.

Financial Performance: Stellar Growth Amid a Quarterly Miss

Nebius reported fourth-quarter 2025 revenue of $227.7 million, a figure that fell short of consensus estimates of $246 million. The year-over-year comparison tells a more dramatic story, with the company announcing a staggering 547% increase in sales.

Profitability metrics showed significant improvement. The core business EBITDA margin expanded to 24%, and Nebius achieved a positive adjusted EBITDA for the first time in a quarter. A standout performer was the cloud computing segment, which surged by 830%. For the full year 2025, total revenue reached $529.8 million. The company also exceeded its own annual recurring revenue (ARR) target range of $900 million to $1.1 billion, closing the year at $1.2 billion.

Strategic Moves: Acquiring Tavily and Expanding Footprint

In a move to enhance its "agentic AI" capabilities, Nebius announced the acquisition of Tavily, a specialist in agent-based search technology. The deal was valued at approximately $275 million, with communications around the transaction suggesting a valuation range of $275 to $400 million. This acquisition is designed to augment the Nebius AI Cloud with specialized search functionalities, signaling a shift toward a broader software and service portfolio.

Concurrently, the company confirmed the construction of a new data center in Birmingham, Alabama. These parallel initiatives align with a clear strategic direction: expanding both physical capacity and service offerings.

A Backlog Exceeding $20 Billion Drives Investor Confidence

A primary catalyst for market optimism is Nebius's secured contract pipeline. The company holds a five-year, $3 billion agreement with Meta, signed in November 2025, and a separate five-year pact with Microsoft valued at over $19 billion. This combines to create a committed backlog surpassing $20 billion.

The first delivery tranche for Microsoft was completed on schedule in November 2025, with further installments slated throughout 2026. Management noted during the Q4 earnings call that the number of contracts with terms exceeding twelve months nearly doubled from the third quarter, and the average selling price increased by more than 50%.

To support this growth, Nebius secured $700 million in funding from Nvidia, gaining access to top-tier GPUs at discounts reported to be around $20,000 per unit. Its commercial model includes hourly rentals for Nvidia systems—including H200, H100, and Blackwell architectures—as well as token-based access to AI software models.

The 2026 Outlook: Lofty Targets and Substantial Capital Requirements

Nebius has set ambitious guidance for 2026, projecting revenue between $3.0 and $3.4 billion. It aims for an ARR of $7 to $9 billion by the end of the year, alongside an adjusted EBITDA margin target of 40%.

Operational goals are equally specific. The company plans to increase its data center sites to 16 this year, up from seven in 2025. Furthermore, it intends to grow its active data center capacity to a range of 800 megawatts to 1 gigawatt by the end of 2026, a significant jump from 170 megawatts at the close of the prior year.

The scale of this ambition comes with a high price tag. Planned capital expenditures (CapEx) for 2026 are estimated at $16 to $20 billion. Nebius states that approximately 60% of the required funding is already secured. The company also received around $830 million in customer prepayments during Q4, which it says will support the expansion and reduce reliance on external capital markets.

The next significant milestone arrives with the quarterly report on April 29th. This update will provide crucial evidence on whether Nebius remains on track with its capacity build-out and its schedule for delivering the 2026 contract tranches.