The Secret of Nebius: How Arkady Volozh launched a second global startup - already in the West

Nebius Group has done the impossible in a year. After the "divorce" of its owner from Yandex, it overtook the latter in terms of capitalization. While remaining unprofitable, it impressed investors with revenue growth and experienced several rallies of its securities. It acquired Nvidia as a minority shareholder and made a major deal with Microsoft. Nebius CEO Arkady Volozh often calls Nebius a startup, although the company is traded on Nasdaq and every step it takes is an event on the AI market. Oninvest looked into how Nebius managed to successfully leave Russia and use its Russian connections to succeed in the West.

Artificial Intelligence (AI) is a technology with a big future. Statista estimates that the AI market will reach $244 billion in 2025 and grow to $800 billion by 2030. UNCTAD [United Nations Conference on Trade and Development, the UN General Assembly body on international trade and development - Oninvest note] predicts a 25-fold growth of the AI market in a decade - from $189 billion in 2023 to $4.8 trillion by 2033.

Infrastructure for AI will be in short supply in the coming years, consultants believe. McKinsey estimates that global demand for computing capacity will grow by 19-22% annually and will reach 171-219 GW by 2030 instead of the current 60 GW. Up to 70% of this demand will come from AI by 2030. Closing the demand will largely be "hyperscalers", or the largest cloud providers: Amazon Web Services, Google Cloud, Microsoft Azure. In parallel, more and more companies will train their own AI models, and many of them will need private hosting and niche solutions. These can be provided by non-cloud providers, McKinsey believes.

This trend is what Nebius has set its sights on. "We are not even B2B, we are T2T, that is, technology for technology," Volozh explained the company's business model.

Its first clients were AI startups. This is a logical step for any neocloud: AI startups aim for rapid growth and are backed by venture capital, said Nebius COO Roman Chernin. In working with this client segment, Nebius has focused on partnerships with AI market leaders, Chernin acknowledged. These include, for example, domain name management and web traffic optimization solutions developer Cloudflare, investment firm Prosus and retail software developer Shopify. Startups have remained an important audience for the company - in September 2025 Nebius established the Nebius Robotics and Physical AI Awards. It can help it find new customers among cutting-edge startups.

In 2024, hyperscalers and technology giants began to look at neoclouds: they themselves faced a shortage of computing power and decided to rent it from smaller market players. In 2025, multi-billion dollar deals took place one after another. Meta and Open AI "rented" capacity from Coreweave. And Microsoft spent $33 billion of its $88.2 billion in capital expenditures to lease capacity from neoclouds. More than half of this amount - $19.4 billion - went to Nebius, the rest was shared by its competitors CoreWeave Inc., Nscale and Lambda. According to Chernin, Nebius sees the large deal as an opportunity to diversify its customer base rather than the risks of the company's dependence on one large client.

Nebius is interesting for the IT giant because Neocloud is one of the first to get access to Nvidia's advanced graphics processors. In an interview with the FT, the company's CEO Arkady Volozh explained how it manages to do this. Nebius has maintained strong ties with the chip maker since the days of Yandex - until 2022, the latter was one of Nvidia's largest customers outside the US and China. For its part, Nvidia participated in Nebius' private placement, becoming a minority shareholder in a startup whose business model depends directly on access to its latest chips.

In his communication with the press, Volozh often refers to Nebius as a mid-stage startup. At this stage, startups usually decide on a business model and start scaling up. But in this case, we're talking about a company whose securities have been traded on the Nasdaq since 2011. "Nebius is an unusual beast: a public company, yet a startup in almost every sense of the word," TechCrunch wrote. And Accel partner Matt Weygand (the venture fund also invested in Nebius at the end of 2024) called the Nebius case "one of the most incredible funders' stories he knows."

Nebius Group emerged as a result of the division of Yandex's business into Russian and foreign parts. After the outbreak of hostilities in Ukraine, Volozh, who fell under EU sanctions, stayed in Israel. Then he seriously considered selling his stake, two of his acquaintances told Oninvest. "The foreign development of Yandex has always been of interest to Volozh, but he had no thoughts of dividing the company until 2022," one of them said.

According to an acquaintance of Volozh, the businessman wanted to sell his stake quickly, but it was necessary to find a configuration that suited Russian and foreign shareholders. "Russian management wanted to acquire shareholders who shared their vision of the company's future, while the Americans often changed their requirements for potential buyers," he specifies. In addition, the deal had to be approved by the Government Commission for Control over Foreign Investments and President Vladimir Putin. Alexei Kudrin, head of the Accounts Chamber and former Minister of Finance, was in charge of finding buyers and coordinating with the authorities. For help in organizing the "divorce" Volozh offered him an option for a 5% stake in the IT-company. Soon Kudrin went to work at Yandex as a corporate development advisor and was himself sanctioned.

The "divorce" was officially finalized in the summer of 2024. The transaction amounted to 475 billion rubles ($5.2 billion as of the transaction date). A 50% discount was applied to it - the government commission set it as a mandatory condition for foreigners to sell stakes in Russian businesses. Billionaires from the pool proposed by Kudrin were not among the official owners. The main shareholder of the IT company was the Consortium.First ZPIF. Among its shareholders are Yandex managers, the structure of Alexander Chachava, founder of the LETA Capital venture fund, Pavel Prass, CEO of the Infinitum special depository, Alexander Ryazanov, ex-president of Sibneft, and Lukoil.

"Yandex does not comment on the results of the transaction. Alexei Kudrin did not respond to Oninvest's questions referred to him. Nebius and the company's CEO Arkady Volozh did not respond to the inquiry at the time of publication.

In addition to the cache, Yandex N.V. got from the "divorce" a large data center in Finland with a supercomputer ISEG, drone solutions developer Avride, education platform TripleTen and stakes in AI startup Toloka and database management systems developer Clickhouse, which also split from Yandex, and part of the team.

In an interview with Bloomberg, Volozh, comparing his "divorce" from Yandex to the exodus of the Jews from Egypt, said that he managed to take "something" away. "In his opinion, Volozh can be considered a "champion of leaving Russia", as the businessman managed to "get away with little blood". At its peak, in 2021, Yandex's capitalization was approaching $30 billion; Volozh eventually managed to take a sixth of that amount plus sought-after businesses and a data center. "Others have not been able to 'divorce' in this way. I think Arkady is very satisfied," concludes the Oninvest interlocutor.

In comparison, Oleg Tinkoff Bank founder Oleg Tinkov told The New York Times that before selling his stake in the bank, he had no negotiations, as the bank was threatened with nationalization. "It's a hostage situation - you take what you're offered," Tinkov shared. According to him, for a 35 percent stake in the bank, he received only 3 percent of its real value. "Let me remind you that both Volozh and Tinkov spoke out against military action in Ukraine, but the legal consequences arose only for the second," says the Oninvest interlocutor.

"Volozh could have sold his company much faster and at a much higher price," another of his acquaintances argues. According to him, Volozh did not care at the time who would become the buyer of his stake in Yandex, and it "did not find understanding" among the part of the team that remained in Russia. In addition, purchase offers were made to too many potential investors. "As a result, pretty soon everyone on the market was aware: Volozh wanted a 'divorce'. There were public discussions, verbal inversions, which only brought down the price of the asset. This is not how things are done," says Oninvest's interlocutor. For example, on the margins of SPIEF-2023, VTB CEO Andrei Kostin spoke about the upcoming deal: "I understand buying it for three kopecks, but for the full price, I think the deal is bad.

Volozh's Russian connections helped him abroad as well, a source close to the businessman is sure: "The road to Nvidia was paved back in Yandex, and Mikhail Parakhin, who was once both Yandex's technical director and responsible for AI development at Microsoft, could help with Microsoft."

"Mikhail Parakhin may indeed have facilitated this deal. His departure from Microsoft was not the easiest, but contacts undoubtedly remained," says a mutual acquaintance of Parakhin and Volozh.

Now Mikhail Parakhin is actively involved in the life of Nebius subsidiaries. In May 2025, he invested in Toloka together with Bezos. The amount of Parakhin's investment, unlike the amount received from Bezos' fund, Nebius did not disclose. After the investment, Parakhin headed the AI startup's board of directors. Oninvest sent an inquiry to Nebius and Mikhail Parakhin, as well as Shopify, where Parakhin serves as chief technology officer. At the time of publication, Nebius, Shopify and Parakhin himself had not responded.

Nebius, in turn, invests in projects close to Parakhin. For example, during a venture round in May 2025, it increased its stake in Clickhouse, which Parakhin developed while at Yandex.

Now Volozh, on the one hand, seems to have returned to his roots: one of his first companies, CompTek, sold networking equipment, and Nebius rents out infrastructure for AI, his acquaintance says. On the other hand, now there is a chance to focus on innovation rather than on advertising, cabs and e-commerce, which used to bring Yandex its main income.

Nebius Group is now building an AI infrastructure that includes computing power, AI-optimized software and hardware, and ecosystems. At the end of Q2 2025, the company had 2 active and 1 under construction data clusters in the US, 2 clusters in continental Europe and 1 each in the UK, Iceland and Israel, and already 2 ISEG supercomputers.

Nebius' revenue growth rate is accelerating year-over-year, its filing shows: in 2023, while the "divestiture" was underway, revenue was $20.9 million, and at year-end 2024 it was up 462% $117.5 million. Published revenue results for Q1 2025 showed $55.3 million (+385% year-over-year) and up to $105.1 million (+625% year-over-year) in Q2. In the Q2 report, Nebius raised its revenue guidance to $900 million to $1.1 billion.

However, Nebius' operating expenses remain higher than revenue: the startup's adjusted net loss in the second quarter of this year amounted to $91.5 mln (+ 49% year-on-year). Adjusted EBITDA for Q2, although down 64%, remained in negative territory - minus $21 million. January-March 2025 was also unprofitable, and 2024 brought Nebius an adjusted EBITDA loss of $266.4 million and a net loss from continuing operations of $396.9 million.

In a letter to shareholders, Volozh cites the reasons for the loss - aggressive expansion to reach 1 GW of total capacity as early as 2026. Nebius needs funds for this, but Volozh is not worried:

In terms of debt burden, the company is doing quite well so far. At the end of the first half of 2025, Nebius had a net to debt ratio of 0.35. But in the III quarter this indicator may be adjusted. In September, it became known that Nebius raised about $2.75 billion through the sale of convertible bonds and $1 billion through shares.

Nebius' subsidiaries create good news for him, on which Nebius' securities rise. For example, in May 2025, Toloka raised investment from Amazon founder Jeff Bezos's personal fund Bezos Expeditions and Shopify CTO and former Yandex colleague Mikhail Parakhin. That same month, Clickhouse, where Nebius has a minority stake, raised a $350 million investment in a C round. These events fueled the May rally in Nebius securities.

After the deal with Microsoft, Volozh's startup has seriously overtaken the parent company in terms of capitalization. Now the capitalization of Nebius is $23.48 billion, while the market value of Yandex shares issue is Br1.54 trillion (or $18.84 billion at the exchange rate of the Bank of Russia as of October 23). At the close of October 22, Yandex shares were worth Br3,898.5 (or $47.7) against Nebius' $104.28 on Nasdaq on the same date.

"This is a moment of recognition for Nebius," said D.A. Davidson analyst Alex Platt. Soon, he said, other hyperscalers also "may soon see the value of Nebius' neo-cloud services." Goldman Sachs analysts are of the same opinion: that Nebius is capable of handling large AI models, which could lead to major new contracts, as the size of the agreement with Microsoft implies confidence in Nebius' scalable capabilities. And Wedbush included Nebius securities in the top 16 stocks that will create the "AI revolution" in 2026, along with Nvidia, Microsoft and Palantir.

"Wall Street expects Nebius' revenue to grow exponentially over the next couple years, an extremely optimistic signal. As a result, the company's P/S ratio [capitalization to revenue ratio] is expected to decline to a perfectly acceptable level of 3x to 4x," KM Capital analysts wrote. Nebius now has a P/S of 45.3, which is on pace for explosive growth with an industry median of 3.57.

Not everyone shares confidence in a cloudless future for Nebius. Among the pessimists are analysts at JR Research, who gave the stock a "Sell" recommendation following the Microsoft deal. "While Wall Street remains optimistic about Nebius' ability to capitalize on the scalability of its AI infrastructure, the company is still expected to generate negative cash flow through fiscal 2027," they remind us. If the company can't quickly monetize other growth opportunities in the technology stack, betting on AI infrastructure scarcity won't work one day. Avride, ClickHouse and Toloka could provide additional monetization opportunities for the parent business, but they won't be enough to cover the costs of Nebius' parent business associated with scaling AI infrastructure, JR Research fears.

By 2030, AI-related companies will need $2 trillion in combined annual revenue to fund the computing capacity needed to meet expected demand, Bain & Co. predicts. Their calculations suggest that their combined revenue will be $800 billion less than the amount needed by the same date. "Demand for computing power for AI is outpacing the efficiency gains in semiconductors, the surge in power needs is stymied by the capacity of networks whose capacity has not been increased in decades," lists Bain Global Technology Practice head David Crawford.

The first doubts about the eternal growth of AI startups are also appearing among venture capitalists, who have poured billions of dollars into them in recent years. For example, according to Nikolay Davydov, founder of the Davidovs VC venture fund, Nebius invests huge sums in the purchase of graphics processors, annually writing off 1/6 of these expenses in its profit and loss statements and hoping to amortize these processors in 6 years. The problem is that Nvidia releases new models every year, and the chances of someone buying obsolete chips from Nebius in 6 years are slim to none. "In a good way, there is a risk in that," he concluded during a Fireside Chat at the Digital Bridge 2025 forum in Astana.

Another challenge is estimating fair demand for AI. In September 2025, researchers from Harvard and Stanford published a joint article on a new paradox in the AI sphere - the generation of "work garbage. This is what they call AI-generated work content that masquerades as well-executed work, but in the end comes out "raw". Its consumer not only does not see any added value in it, but also has to spend time working with it - rewriting code, editing text, etc. Companies have doubts about the effectiveness of the widespread use of AI, the authors of the study conclude.

Finally, analysts see the threat in circular sales and the growing dependence of AI startups and IT giants on each other. Circular deals were one of the precursors to the dot-com crisis, recalls Harvard Kennedy School's Paulo Carvão.

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