At the start of October 2026, Nebius Group (NASDAQ: NBIS) reset compute prices on its NVIDIA B300, B200, H200, and H100 virtual machines, the precise hardware AI developers are most desperate to rent.
Cloud companies rarely raise prices, as competition in computing rentals typically pushes rates lower with each successive chip generation, making this move a notable departure from industry norms.
Nebius runs a cloud platform built specifically for artificial intelligence, purchasing NVIDIA GPUs, installing them in data centers across Europe and the United States, and renting capacity to AI labs, startups, and major tech companies.
Its current roster of anchor customers includes household names such as Microsoft and Meta, with Nebius confirming it delivered every contracted capacity tranche to Microsoft and is already working on a second agreement with Meta.
The company’s moat is not patent-protected technology but rather physical scarcity, specifically GPUs that are powered, networked, and ready for immediate deployment at a moment when power and data center space have become the tightest inputs in AI.
Nebius expects to close 2026 with 5 gigawatts of contracted power and plans to deploy more than 1 gigawatt per year beginning in 2027, locking up scarce infrastructure before rivals can match it.
Pricing data from the company’s second-quarter 2026 shareholder letter reinforces the thesis, showing that pricing for older-generation GPUs rose more than 30% from the first quarter, with deals averaging above $20 million in revenue per megawatt.
Second-quarter 2026 revenue reached $582.3 million, up 454% from a year earlier, while annualized recurring revenue hit $3.0 billion at the end of June, rising sharply from $1.9 billion at the end of March.
Adjusted EBITDA swung to a positive $236.2 million from a loss of $21.0 million in the same period a year earlier, as cost of revenue fell to 23% of revenue from 29% and SG&A expenses dropped to 30% from 65%.
Customer commitments now exceed $40 billion, and approximately 70% of second-quarter deals included prepayments covering 50% to 60% of related capital expenditure, with the company expecting more than $9 billion in customer prepayments across all of 2026.
However, the buildout is generating significant financial strain, with Nebius spending $8,130.3 million on property, equipment, and intangibles in the first half of 2026 alone, while total debt stood at $8,545.7 million at the end of June.
Interest expense jumped to $119.1 million in the second quarter from just $4.8 million a year earlier, and depreciation climbed to $259.7 million from $75.2 million, pushing GAAP net loss from continuing operations to $190.4 million.
To fund the expansion, Nebius raised roughly $2.8 billion by selling stock through an at-the-market program, a dilutive mechanism that weighs on existing shareholders even as the stock rallied on pricing news.
At 46.08 times forward earnings as of October 9, Nebius trades at nearly double the sector’s 23.23 multiple, a premium that demands strong and consistent earnings growth to justify.
Analysts, however, expect earnings per share to fall 62.73% in 2027, a decline the company attributes to timing, as depreciation and interest costs from late-2026 capacity arrivals will land before the corresponding revenue fully materializes.
Short interest stands at 19.81% of the float, reflecting a sizable cohort of investors betting against the stock, while hedge fund holdings moved in the opposite direction, rising to 87 funds in the most recent quarter from 70 in the prior one.
Concentration risk adds another layer of uncertainty, as an outsized share of the demand story rests on Microsoft and Meta, meaning any pullback by either customer would leave a gap that would be difficult to quickly replace.
The investment case for Nebius ultimately rests on the belief that AI compute demand stays structurally tight through 2027 and beyond, giving the company the runway to convert a costly buildout into durable, high-margin profits.
Softening GPU pricing across the broader market or difficulty funding the next gigawatt of capacity without heavy additional dilution would each erode the core premise that makes the current premium defensible.
For investors comfortable with sharp volatility and a multiyear payoff horizon, Nebius presents a structurally interesting position, but the combination of shrinking near-term earnings and a premium multiple leaves very little room for execution errors.
