CoreWeave's quarterly revenue surged 134%. Why did Nvidia's protégé stock plummet?

Nvidia's cloud partner CoreWeave posted a third-quarter decline in operating margin due to investments in cloud infrastructure, and lowered its full-year revenue guidance - despite sales more than doubling last quarter. CoreWeave shares were down about 7% in extended trading at the moment.

In the third quarter, the operating profit margin of the provider of cloud services for the development and training of artificial intelligence models amounted to 4%, failing to meet analysts' consensus forecast of 6.5%, Bloomberg notes. By comparison, the figure was 20% in 2024 for the same period.

The decline in margins was a weakness in the generally positive reporting, Bloomberg writes. Revenue rose 134% to $1.36 billion, with Wall Street, according to LSEG, expecting $1.29 billion, CNBC reported. The loss was $0.22 per share, while analysts had forecast $0.57. The report also showed that the backlog - a measure of future sales - totaled $55.6 billion at the end of the quarter. This is almost twice as much as in the previous period, emphasizes Bloomberg.

CoreWeave shares were down about 2% in extended trading after the report, but then sharply accelerated the pace of decline and at one point were losing about 7% of their value. Investor sentiment may have worsened due to CoreWeave's downgraded year-over-year revenue guidance. During a call after the report was released, CoreWeave management said sales in 2025 would be in the range of $5.05 billion to $5.15 billion, Bloomberg reports. Previously, the forecast called for revenue of up to $5.35 billion, the agency added.

"We are impacted by time delays associated with a third-party data center developer that is behind schedule," CoreWeave CEO Michael Intrator said in a Bloomberg statement. This situation underscores the challenges the industry faces in trying to meet the "insatiable demand" for artificial intelligence, the agency said.

CoreWeave is among the so-called neocloud companies that rent out access to powerful AI chips. The high demand for these services has forced the company to actively build data centers and equip them with the latest equipment. At the same time, CoreWeave is looking to diversify its customer base after years of dependence on Microsoft, which remains the cloud provider's largest customer.

In September, CoreWeave signed a $6.3 billion contract with Nvidia, its shareholder and the global leader in the AI processor market. Nvidia, which supplies CoreWeave with its AI chips, has pledged to buy out any unsold cloud capacity in the company's data centers by 2032. The agreement solidifies CoreWeave's status as a key cloud partner for Nvidia and protects it from a possible drop in demand for AI computing capacity, analysts said.

In the third quarter, CoreWeave also announced a $6.5 billion expansion of its partnership with OpenAI (creator of ChatGPT), as well as a six-year contract with Meta worth up to $14.2 billion.

CoreWeave priced its IPO on the Nasdaq exchange in March, offering shares at $40 apiece. On Monday, trading closed at $105.61, a 164% increase. By comparison, the Nasdaq index added 32% over the same period.

This article was AI-translated and verified by a human editor