Nebius's revenue increased by 454%, with a significant portion of the funds coming from customers making advance payments.

      Nebius rents out computing power by purchasing Nvidia chips, installing them in data centers, and charging companies to train and run AI models on this infrastructure. This business model is referred to as a neocloud. The company, which is based in Amsterdam and listed on Nasdaq, originated as a spin-off from the Russian internet firm Yandex in 2024. On Wednesday, it announced its second-quarter results, and the stock surged by 34%.

      Revenue for the quarter reached $582.3 million, marking a 454% increase from the previous year. The AI cloud segment, which constitutes most of the business, experienced a growth of 514% to $575 million, as reported by Bloomberg. Analysts had projected a total revenue of $572.75 million, according to LSEG data.

      While those figures were prominently covered, the more intriguing details lie further down the report.

      Cash does not equal profit

      Nebius generated $2.2 billion in cash from operations during the quarter, but it also incurred a loss of $190.4 million. Both amounts are accurate, and the discrepancy between them tells an important story. About $1.2 billion of this cash is classified as deferred revenue, indicating payments made by customers for capacity that has yet to be utilized. An additional $1.2 billion came from settling already issued invoices.

      The company's deferred revenue on its balance sheet has increased from roughly $1.6 billion at the end of December to nearly $6 billion. Nebius anticipates receiving over $9 billion in customer prepayments this year and claims to have more than $40 billion in customer commitments. This situation represents a genuine advantage: deposits are less costly than debt and indicate a willingness from buyers to pay in advance for services. However, it does not equate to actual earnings.

      Rapid growth is costly

      In a three-month period, Nebius spent approximately $5.7 billion on chips, equipment, and data centers, exceeding analysts' expectations of $4.7 billion, according to Visible Alpha. The company's cash burn increased significantly to $3.4 billion from $678 million in the previous year, reported The Information.

      The operating loss expanded to $175.9 million compared to $111.2 million earlier, indicating that the company is incurring greater operational losses now than when it was much smaller. For the first time, adjusted EBITDA became positive, reaching $236.2 million.

      Long-term debt has doubled to $8.5 billion since December. In July, Nebius secured its first facility against its own GPUs worth $775 million, and it plans to continue utilizing this funding method. Lambda similarly financed its chips through a $917 million leveraged loan.

      For the full year, Nebius projects revenue between $3 billion to $3.4 billion and capital expenditures of $20 billion to $25 billion, which equates to around seven dollars spent for every dollar earned.

      It just declared a price for compute

      Hidden within the earnings call is a significant figure beyond Nebius itself. CEO Arkady Volozh informed analysts how much a megawatt of deployed capacity earns. Medium-term leases yield between $20 million to $25 million per megawatt annually, while short-term leases—lasting up to six months—bring in $40 million to $50 million. Monthly rentals cost approximately double that of annual contracts.

      Volozh also mentioned that Nebius could sell its entire planned capacity for 2027 at current prices but has opted not to, indicating that the forward price is sufficiently high to justify retaining inventory.

      This timing is noteworthy. The CME Group will begin trading futures on Nvidia GPU rental prices on October 5, and the rationale for this market was the absence of a public reference price for computing. A publicly listed operator has now established one.

      Demand is concentrated, which carries risk

      The total contract value obtained in the quarter roughly quadrupled, with four agreements averaging over $1 billion each. The contract values from new customers increased more than ninefold. However, four contracts over $1 billion represent a limited number of buyers. Nebius already counts Microsoft and Meta as clients, and Nvidia serves as both a supplier and a shareholder.

      Emarketer analyst Jacob Bourne clearly articulated a caveat to Reuters, noting that while demand continues to rise despite increasing competition, the essential question remains regarding how diversified and sustainable this demand will be beyond the AI industry itself.

      This was underscored by events within the same week: rival CoreWeave doubled its revenue to $2.6 billion and saw a 19% increase, while Cerebras reported earnings and saw a drop of over 16%.

      Capacity is being established in Wales

      The day after the results were announced, Nebius disclosed where some of its capacity will be allocated. It has agreed to lease high-density capacity from Vantage Data Centers at the CWL1 campus in Newport, South Wales. This agreement represents the first announced commercial capacity commitment in the South Wales