Surging Demand for Computing Power: Nebius Q2 Revenue Soars 454% YoY, AI Cloud Sales Jump 514% | Earnings Watch

AI cloud computing infrastructure company Nebius delivered a strong second-quarter performance: revenue grew 454% year-over-year to $582.3 million, beating market expectations, sending its stock soaring more than 23% during intraday trading. Following competitor CoreWeave's upward revision of its full-year performance outlook the previous day, signals of sustained robust demand for AI computing infrastructure were further reinforced.

Notably, AI cloud business sales skyrocketed 514% year-over-year to $575 million, accounting for approximately 98% of the company's total revenue this quarter and serving as the core driver of performance growth. Looking ahead to the full year, Nebius reaffirmed its 2026 revenue guidance, projecting annual revenue between $3 billion and $3.4 billion, while maintaining its annualized operating revenue target of $7 billion to $9 billion.

Nebius CEO Arkady Volozh stated that the company is converting strong demand into "contract-backed, profitable growth," noting that all targets set for the quarter were met, and in most cases, exceeded expectations.

Surge in Mega-Contracts Enhances Computing Power Pricing Power

Nebius achieved breakthroughs in contracting this quarter. The company signed four core AI cloud contracts with clients including Reflection, Cohere, a U.S.-based Neolab, and a U.S. quantitative trading firm, with an average value of over $1 billion per contract. The total value of these four contracts nearly quadrupled compared to the previous quarter, while the value of new customer contracts increased more than ninefold year-over-year.

Computing power prices also strengthened. Volozh revealed that the clearing price in the company's first capacity auction was 15% higher than the previous historical high quote for Blackwell GPUs; Chief Revenue Officer Marc Boroditsky stated that this price was 20% higher than the company's Blackwell pipeline pricing.

Currently, the annual contract value per megawatt for Nebius's long-term contracts is approximately $20 million to $25 million, while quotes for short-term contracts, typically no longer than six months, have risen to $40 million to $50 million per megawatt, with some transactions commanding even higher prices.

Volozh indicated that under current contract terms, the company could easily sell out its entire planned capacity for 2027, but management has chosen to retain some supply to capture the higher actual value offered by short-term contracts.

Profitability Leaps Forward as Capital Expenditure Expands

Profitability also showed significant improvement. Nebius's adjusted EBITDA for the quarter reached $236.2 million, compared to a loss of $21 million in the same period last year; the adjusted EBITDA margin rose from 32% in the first quarter to 41%. Of this, the AI cloud business reported an adjusted EBITDA of $286 million, with a profit margin of 50%.

Company CFO Dado Alonso explained that the group's overall margin was lower than that of the AI cloud business primarily because the company continues to invest in early-stage businesses such as the autonomous driving platform Avride and the edtech platform TripleTen.

Meanwhile, capital expenditure climbed rapidly. Capital expenditure for the quarter amounted to approximately $5.7 billion, exceeding analysts' expectations of $4.7 billion, mainly used for GPU procurement and data center expansion. As of the end of June, the company's cash and cash equivalents totaled $8.042 billion, with operating cash inflow of $2.246 billion for the quarter, marking a significant reversal from the cash outflow of $167.8 million in the same period last year.

Year-End Contracted Capacity Target Raised to 5 Gigawatts

Strong demand has also prompted Nebius to accelerate its infrastructure expansion. The company raised its contracted electricity capacity target for the end of 2026 from over 4 gigawatts to 5 gigawatts and plans to add more than 1 gigawatt of capacity annually starting in 2027.

The company expects that most of the contracted capacity will come online sequentially over the next two to three and a half years. However, Nebius also emphasized that there is still a time lag between contracted capacity and actual revenue, as data center commissioning, network construction, and customer onboarding require time.

To support large-scale construction, the company is raising funds through various methods, including customer prepayments, debt financing, and cooperative construction. Nebius expects to receive over $9 billion in customer prepayments throughout 2026, with the cumulative total of customer commitments already exceeding $40 billion.

In July, the company completed $775 million in asset-backed debt financing at an interest rate of SOFR plus 250 basis points, secured by deployed GPU infrastructure and an investment-grade customer contract.

Additionally, the company is advancing an "asset-light" cooperation model, where partners fund and operate data centers, while Nebius provides the full-stack platform and customer resources. Volozh stated that the company has received dozens of letters of intent for cooperation and expects this model to contribute additional capacity as early as 2027.

Intensifying Competition, Supply and Demand for Computing Power Remain Core Support

Facing the entry of new players like xAI into the AI cloud market, Nebius management remains optimistic about demand prospects. Volozh stated that current demand for AI computing power still far exceeds supply, and the company is confident in absorbing its entire planned capacity for 2027 at current prices and contract conditions.

According to Jacob Bourne, an analyst at Emarketer cited by Reuters, although market competition is intensifying, demand for AI cloud capacity continues to grow, but the more critical issue is whether this demand can gradually expand beyond the AI industry to form a more diverse and sustainable customer base.

Nebius spun off from Russian internet giant Yandex in 2024 and has since established partnerships with tech giants such as NVIDIA, Microsoft, and Meta.

Looking ahead to 2026, the company expects full-year capital expenditure to reach $20 billion to $25 billion, with an adjusted EBITDA margin of approximately 40%, and plans to announce formal 2027 performance guidance later this year.