CoreWeave is one of the leaders of the relatively new “neo-cloud” sector, companies providing cloud services with a tight focus on AI solutions.
A key question is how appropriate the word “leader” really is here, because despite impressive revenue growth and valuations, the growth strategy of most companies in this sector raises serious doubts about its sustainability. These doubts were reflected in the company’s latest earnings call, after which the stock fell by more than 6% in pre-market trading.
Financial metrics
- Revenue posted a phenomenal 112% year-over-year increase, rising to USD 2.08 billion.
- The bottom line looks worse: EPS (loss) came in at -USD 1.4 versus market expectations of around -USD 0.9.
- Backlog surged by as much as 284%, reaching USD 99.4 billion.
However, the deeper we dive into the company’s financial statements, the more questions arise.
- Adjusted net profit fell to USD 21 million, implying a margin of around 1%.
- That is a quarter-over-quarter decline of more than 76% and a year-over-year decline of more than 87%.
- Net loss is growing much faster than revenue and backlog, reaching USD 589 million in Q1.
- This represents a year-over-year increase of 392%.
- Depreciation and amortization expenses are also rising rapidly, reaching USD 1.14 billion (more than half of revenue).
- That is an increase of more than 250% year over year.
Guidance
- The outlook for the second quarter is also below consensus. Management guided revenue to USD 2.45–2.6 billion, versus market expectations closer to USD 2.7 billion.
Against the backdrop of poor financial figures, the company highlights its successes, such as collaborations with Anthropic, Meta, Jane Street, and Mistral. A partial attempt to address the profitability issue and the company’s enormous CAPEX (over USD 6 billion) is to secure financing of USD 8.5 billion and sell a stake worth USD 2 billion to Nvidia. However, concerns about monetization not only remain, the problem is becoming increasingly pressing.
CRWV.US (D1)
The company’s technical picture looks much better than its fundamentals. The share price clearly broke out of a narrowing falling wedge consolidation, stopping at the 38.2% Fibonacci level. If the EMA100 crosses above the EMA200, it would be a strong bullish technical signal. Source: xStation5.
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