Date: May 13, 2026 | Source: Motley Fool (fool.com) / company press release
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Arkady Volozh (Founder & CEO): Thanks, Gili, and welcome, everyone, to our call. We have had a great start to the year. We're building an AI-native hyperscaler, and I would say we are developing it across 4 dimensions. The first is capacity and scale; second, product and functionality; third dimension is customers and demand; and finally, capital. All our focus is on execution across all 4 of these dimensions.
On capacity, we are building big. Last quarter, we told you that we already contracted more than 2 gigawatts of power while targeting more than 3 gigawatts by the end of the year. 3 months later, we have already contracted more than 3.5 gigawatts, and we are now targeting at least 4 gigawatts of contracted power this year. Today, we announced a new site in Pennsylvania to support 1.2 gigawatt of power once fully live. This is our second owned gigawatt-scale site in the United States. Our owned contracted capacity now accounts for more than 75% of our total power.
We don't just offer compute. We offer cloud services spanning the AI life cycle from bare-metal to multi-tenancy to inference to agentic and more. We launched Aether version 3.5 this quarter. Our 3 acquisitions this year—Tavily, Eigen and Clarifai—demonstrate the uniqueness of what we're building. Eigen was recognized as the #1 speed inference provider by NVIDIA. While Eigen optimizes at the model level, Clarifai optimizes at the system level, and they both strengthen our in-house Token Factory offering. We also acquired Tavily, extending our platform reach to agentic search. We also expanded our technology partnership with NVIDIA, achieving NVIDIA Exemplar Cloud status this time on our GB300 for training workloads. We are among a small group of providers to achieve this status across multiple GPU generations.
Demand continues to be increasingly strong, but more importantly, our full stack platform allows us to capture and service a large and diverse range of hundreds of customers, not just several big bare-metal offtakers. Our pipeline generation in the first quarter grew 3.5x over the fourth quarter, and this is a record for us. Today, we typically see several customers competing for every GPU we bring online. For example, European fintech leader Revolut recently began using our Token Factory. In physical AI, 1X Technologies is using our cloud platform to build general purpose robots. In life sciences, our cloud platform is enabling start-ups to build more powerful models.
Everything we build is sold. That is what is driving us to build more and to raise our 2026 CapEx guidance to between $20 billion and $25 billion, up from our prior range of $16 billion to $20 billion. This increase reflects investments in our 2027 capacity that will come online early next year. We expect these investments to contribute positively to revenue in the first half of 2027, where we already have customer commitments in place. Meta is one such customer.
We raised significant capital this year, more than $6 billion. More than $4 billion of that came from converts and $2 billion from NVIDIA equity investment. This leaves us with a strong cash position of more than $9 billion. We are very proud of our relationship with Meta. Formally, this is a $27 billion contract with Meta. But in fact, it's worth a lot more for us. This contract alone can unlock billions of dollars of capital for our own multi-tenant cloud at attractive rates. We also have our first contract with Meta and our Microsoft agreement that will provide additional financing opportunities. Everything we build, we sell, and we are still in the very early days. With that, let me hand it over to Dado.
Dado Alonso (CFO): Thank you, Arkady. In Q1, we grew the group revenue by 684% year-on-year to $399 million, up 75% from Q4. Once again, we sold out our capacity as demand continued to exceed available supply. Our Nebius AI business delivered even stronger results. Revenue grew 841% from last year to $390 million, representing an 82% quarter-over-quarter increase and 98% of group revenue. Annualized run rate revenue for our Nebius AI business reached $1.9 billion at the end of March, up over 50% from $1.25 billion in the previous quarter.
Group adjusted EBITDA was $130 million compared to $15 million last quarter and compared to a loss of $54 million a year ago. Group adjusted EBITDA margin was 32%, continuing the inflection in Q4 and reflecting operating leverage in our model. Nebius AI business adjusted EBITDA margin expanded to 45%, up from 24% in Q4. The gap between group and Nebius margin reflects our investments in Avride and TripleTen. We expect Nebius to represent the significant majority of group adjusted EBITDA for the foreseeable future.
Net income of $621 million benefited from a valuation adjustment on the back of ClickHouse's recent funding round—a noncash item that captures the growth in the underlying value of the asset.
Now turning to our balance sheet. In March, we closed a private offering of convertible senior notes, raising $4.3 billion in gross proceeds at attractive premiums and coupons of 1.25% and 2.60%. In the same month, we announced a $2 billion equity investment from NVIDIA. Prepayments from our customers also reached a new quarterly record. Operating cash flow of $2.3 billion was up from an operating cash outflow of $198 million in Q1 last year, primarily driven by upfront payments from our customers. Together, these sources of capital increased cash and cash equivalents to $9.3 billion at quarter end.
As Arkady mentioned, we are raising our CapEx expectations to $20 billion to $25 billion for the year. We have near-term visibility into future revenue associated with this investment. On funding, we will continue to leverage a diversified range of funding sources. With our Microsoft contract and our 2 Meta contracts, we expect to unlock the ability to raise significant capital through asset-backed financing at attractive terms based on Microsoft and Meta credit ratings. We also expect to raise corporate level debt. And our financing options include our at-the-market program, which we have not utilized to date.
And now turning to our outlook for the year. Our strong Q1 performance reinforces our confidence in our annual targets. We are reiterating our full year 2026 guidance for annualized run rate revenue of $7 billion to $9 billion, group revenue of between $3 billion and $3.4 billion, and group adjusted EBITDA margin of around 40%. 3 key parameters will determine our growth profile: utilization, pricing and capacity. At present, neither of the first 2 is limiting our growth. The third, capacity, will play an important role in unlocking our growth potential. We anticipate a nonlinear quarterly adjusted EBITDA margin progression during 2026—margins in Q2 will go a little bit lower given the back-end weighted nature of capacity, returning to Q1 levels in Q3 before moving even higher in Q4. With that, I'll turn the call back over to Gili for Q&A.
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Alex Duval (Goldman Sachs): To what extent have you started to see the impact of stronger GPU pricing, and how to think about the share of older shorter-term contracts?
Marc Boroditsky: We continue to see strong pricing across both old and new GPU generations as demand continues to exceed available capacity. We just raised prices again in the latest quarter, and we are still selling out across all chip types at the higher prices. Contract durations are extending, average contract values continue to increase, and prepayments are becoming more significant—customers of all types are prepaying to lock in future capacity, including hyperscalers.
Andrey Korolenko (on CapEx raise vs cost inflation): The increase in spending is driven by visibility into 2027 and our need to invest ahead of capacity that we expect to bring online. We have been able to secure sites, power and customer commitments for 2027. It's not the cost pressure—the impact of component inflation on our 2026 program was material at around low single digits as a percentage of total spend, because we secured a lot of 2026 back in 2025 at previous price levels.
James Kisner (Water Tower Research): Nebius AI adjusted EBITDA margin nearly doubled to 45% in Q1, while targeting around 40% for the full year. What's driving the implied step down?
Dado Alonso: Our Q1 margins were really strong, reflecting the underlying strength of the business. We have made a number of important investments in the first half—hiring across go-to-market and engineering, our recent acquisitions. Our capacity delivery this year is back-end weighted with a meaningful step-up in Q3. It's a timing dynamic, not a structural one—investments land first, capacity and revenue come online shortly after. Q2 margins go a little lower, returning to Q1 levels in Q3 and stepping higher in Q4.
Andrew Beale (Arete): Timing of capacity additions and when will key sites like Pennsylvania reach full capacity?
Andrey Korolenko: Pennsylvania will have lights up by the end of 2027 with the first around 250 to 300 megawatts, then adding 300 megawatts each year up to 1.2 gigawatts by mid-2030. Our capacity schedule is ramping up—Q3 is a very significant improvement, Q4 also very significant, and Q1 next year is where our bigger projects like Alabama and probably the first Missouri will kick in.
Josh Baer (Morgan Stanley): Can you address the media reports indicating delays at the Vineland, New Jersey site?
Andrey Korolenko: We delivered all our capacity commitments across our Microsoft and Meta customers. The first Meta contract was fully delivered in Q1 this year. The Microsoft contract is way more stretched, with delivery up to the end of this year. We delivered the first tranche in November last year. Most of the volumes will come in Q3 and Q4.
Alex Platt (on the Meta contract): How does the $15 billion capacity option work?
Marc Boroditsky: This expanded new agreement is a 5-year contract for a total of $27 billion, structured in 2 parts. First, a $12 billion commitment to dedicated compute capacity with delivery starting in early '27. And second, $15 billion of additional capacity that we, at our discretion, can allocate to Meta or sell to our AI cloud customers. Meta is committed to buy up to $15 billion of any capacity at our option during the entire 5-year contract. This will likely allow us to finance the clusters with asset-backed financing at attractive terms while selling to our AI cloud customers at potentially higher market prices. If the market remains strong, we should generate more than $27 billion in revenue from this great agreement.
Tal Liani (Bank of America): How do you plan to finance this additional CapEx? Are you considering disposing some noncore holdings?
Dado Alonso: Our balance sheet is strong—$9.3 billion of cash supported by $2.3 billion of operating cash flow, mainly from upfront payments. Currently more than 90% of the CapEx range we projected in February is already secured by cash and contractual commitments. The incremental capacity in our raised $20-25 billion guidance will be funded through additional financing: asset-backed financing against our Microsoft and Meta contracts, possibly corporate level debt, and our at-the-market program (up to 25 million shares), which we have not utilized to date. We will apply consistent guardrails on cost of capital and shareholder dilution.
Nehal Chokshi (Northland): Your pipeline is up 3.5x quarter-over-quarter. Does this include hyperscalers like the Meta deal?
Marc Boroditsky: The pipeline growth of 3.5x is for our AI cloud business and does not include strategic hyperscaler deals like Meta. It includes qualified opportunities across our core AI cloud and Token Factory products across all key customer segments. We have maintained our solid win rates while accelerating our sales cycles and increasing ASPs.
James Kisner (Water Tower): On the $2 billion NVIDIA investment—what concrete deliverables should we expect?
Andrey Korolenko: The NVIDIA strategic investment is meaningful beyond the $2 billion of equity and the line of sight to 5 gigawatts of capacity commitment by the end of 2030. It gives us a multiyear partnership with our most important hardware supplier at a moment when access to GPU supply is a competitive advantage. We gain differentiated supply chain certainty on future Rubin, Vera CPUs and networking, and close collaboration for the design and early support of future SKUs.
Marc Boroditsky (on forward selling): We are sold out again in Q1 as we have been for several quarters. The vast majority of capacity coming online over the next several quarters to 12 months is already under contract or earmarked for our AI cloud customers. We retain a portion of capacity for self-service. We typically see 4 or more customers competing for every GPU we bring online.
Tom Blackwell (on US data center opposition): Not all companies that build data centers build in the same way. We build very efficiently with interesting technological ways of heat reuse. We take a very transparent approach, engaging very actively in communities, and these are long-term investments and long-term partnerships. So far we found that this approach resonates well, but there's no room for complacency.