Nebius’s 841% Cloud Surge Meets a Wall of Caution as Rivalry and Capex Risks Mount

Nebius delivers 841% AI cloud revenue surge and $50B backlog, but D.A. Davidson downgrade and Google-Blackstone $5B JV spark profit-taking, with analysts split on valuation.

The picture at Nebius is one of stark contrasts. On one side, the Amsterdam-based cloud specialist just delivered a staggering 841% jump in its artificial-intelligence cloud revenue, swinging to an adjusted operating profit of $129.5 million and booking a $50 billion order backlog that includes Meta and Microsoft. On the other, a downgrade from D.A. Davidson and the emergence of a deep-pocketed competitor—Google teaming up with Blackstone in a $5 billion joint venture—have punctured the euphoria, sending the stock into a selloff before it clawed back to close at $197.78.

The tension between explosive operational momentum and mounting valuation anxieties played out sharply this week. Nebius shares had touched an all-time high of $233.73 as recently as May 14, but the combination of an analyst slap and fresh competitive news triggered a wave of profit-taking. D.A. Davidson’s Gil Luria cut his rating to Neutral with a $250 price target, arguing the stock already trades at a 30% premium to its backlog—leaving little room for near-term upside. The Google-Blackstone venture, which plans to build another AI cloud business on Google’s chips, only added to the headwinds, hitting a technically overbought stock.

Yet the underlying business numbers are anything but weak. Nebius reported first-quarter revenue of $399 million, up 684% from the roughly $51 million a year earlier, with the AI cloud segment alone growing 841% and now accounting for virtually all of the group’s top line. The annualized revenue run rate reached $1.92 billion by the end of March, substantially ahead of analyst expectations. But the cost of that growth is staggering: management has lifted the 2026 capital expenditure ceiling to $25 billion, a colossal sum for a company that still booked a net loss of $100 million on an adjusted basis in the first quarter.

The balance sheet offers some cushion. Nebius ended the quarter with more than $9 billion in cash, and it raised fresh capital during the period, including a multi-billion-dollar equity investment from Nvidia. Contracted power capacity already exceeds 3.5 gigawatts, with a target of 4 gigawatts by year-end, and a new AI factory is slated to come online in Pennsylvania in 2027. Still, the market is demanding proof that these upfront infrastructure bets will translate into the ambitious revenue targets management has set for 2026.

Wall Street remains deeply divided on the outlook. Citigroup’s Tyler Radke raised his target 70% to $287 with a Buy rating, citing strong demand and higher GPU pricing. Citizens analyst Greg P. Miller kept an Outperform and a $270 target, praising Nebius’s control over its data centers and dedicated power supply. Northland also rates it Outperform at $248. Morgan Stanley, however, lifted its target to just $144—well below the current market price—and stuck with an Equal-weight call, acknowledging faster capacity expansion but balking at the valuation. The stock now trades at roughly 17 times expected annual sales, with a market capitalization near $55 billion.

Tuesday’s session reflected the jittery mood. After an initial plunge, Nebius recovered nearly 8% from its intraday low to close at $197.78. The selloff did not signal any sudden collapse in AI demand, but rather a recalibration after a meteoric rally. The coming quarters will test whether Nebius can convert its enormous order book and capital spending into sustained profitability before the competitive landscape tightens further.