Nebius Group: Powering the Future of AI with Unprecedented Growth
Strategic Capacity Expansion Fuels Growth
Nebius Group N.V. is actively boosting its global data center infrastructure, with plans to more than double its operational capacity by 2026. This aggressive expansion directly addresses the escalating global need for artificial intelligence processing power, marking a pivotal moment in the company's growth trajectory.
D.A. Davidson's Continued Confidence
Alexander Platt, an analyst at D.A. Davidson, has reiterated a 'Buy' recommendation for Nebius Group, maintaining a price target of $150. This endorsement follows the company's impressive financial outcomes and its forward-looking initiatives in the AI domain.
Projected Revenue and Operational Capacity
The firm points to a significant surge in Nebius's data center capabilities, anticipating a contracted power capacity of 2.5 gigawatts by the close of 2026. This expansion is expected to generate an annual revenue run-rate between $7 billion and $9 billion, underscoring the company's potential for substantial financial returns.
Sustained Demand for Computing Resources
The analyst notes that the appetite for computing resources remains robust across various graphics processing unit (GPU) generations and geographical regions. This persistent demand creates an optimal environment for Nebius to continue its growth through the 2026 fiscal year.
Impressive Financial Performance and Key Alliances
Nebius reported a 237% year-over-year increase in revenue, reaching $146.1 million, largely due to the strength of its core AI compute offerings. The company has also secured a five-year, $3 billion contract with Meta Platforms, Inc., complementing an existing agreement with Microsoft Corporation.
Optimistic Outlook for Resource Allocation
The recent agreement with Meta is projected to achieve full utilization by the first quarter of 2026, with additional capacity for Microsoft expected to be fully deployed by the fourth quarter of the same year. Nebius's updated projections, including 2.5 gigawatts of contracted power and up to 1 gigawatt of connected power by the end of 2026, surpass prior estimates, suggesting a conservative initial outlook.
Future Expansion and Strategic Partnerships
D.A. Davidson suggests that an additional 400 megawatts of capacity could be added through the expansion of Nebius's New Jersey facility, which has the potential to support up to 1 gigawatt. The firm also anticipates Nebius will secure two more significant deals, possibly an extension of the Meta contract or a new agreement with another major hyperscale client, each comparable in size to the Microsoft deal.
Operational Efficiency and Competitive Advantage
Nebius is expected to achieve double-digit returns on capital, thanks to its adoption of an Original Design Manufacturer (ODM) model for NVIDIA Corporation server racks. This strategy significantly reduces computing costs by 15-20% compared to Original Equipment Manufacturer (OEM) alternatives, where hardware typically accounts for 80% of total capital expenditures. Combined with efficient data center management, these factors could lead to higher returns than competitors like CoreWeave, Inc.
Reaffirmed Stock Valuation and Market Position
D.A. Davidson reiterates its 'Buy' rating and $150 price forecast for Nebius Group, valuing the stock at seven times its projected 2026 revenue. The firm identifies Nebius as a top AI investment choice and its preferred 'neocloud' provider.
Projected Financial Trajectory
Nebius Group's financial projections indicate substantial growth, with revenue expected to soar from $571.8 million in 2025 to $5.38 billion in 2026. The company is also anticipated to achieve profitability, with GAAP earnings per share projected to rise from $1.00 in 2025 to $6.11 in 2026.
Market Performance
As of the most recent market update, NBIS shares experienced a decline of 8.23%, trading at $93.81 on Wednesday.