[LIVE] Nebius Group (NBIS) Q2 Earnings Report & Conference Call

Brief Summary

Alright, so, this video is all about Nebus and its crazy good quarter. The experts are super impressed with the company's performance, especially the raised guidance and capacity expansion. They also talk about the management's conservative approach, which makes them even more bullish. Key takeaways include:

• Nebus crushed estimates, even without including Tooka's numbers.
• They raised their ARR guidance for the end of the year.
• They're expecting a massive increase in megawatt capacity by the end of this year and in 2026.
• New enterprise customers like Cloudflare are joining the party.
• The management is conservative and under-promises, which is a good sign.

Intro and Nebus Overview

The video starts with a welcome and introduces Manuel, Nate, and Daniel, who are here to discuss Nebus. Nebus is doing really well, and the panel is here to talk about this special company that might be flying under the radar. The host mentions he'll link their profiles in the description and pinned comments. They plan to cover the recent report and the upcoming call, which is starting in about half an hour.

Financial Performance and Guidance

Manuel says Nebus's quarter was way better than expected. Even without Tooka's numbers, they crushed estimates. The core business reached positive adjusted EBITDA ahead of schedule, which is insane. The group's adjusted EBITDA loss was only $21 million, while analysts expected almost $60 million. They also raised the ARR guidance for the end of the year, which Manuel didn't expect because management is usually prudent. The New Jersey data center was delayed by a month, but they're still on track. Capex is lower than expected, showing they're efficient.

Megawatt Capacity and Future Growth

Manuel is really excited about the megawatt capacity guidance: 220 megawatts by the end of this year and over one gigawatt in 2026. 220 megawatts is more than enough to cover the high end of guidance, like $1.1 billion in ARR. He wouldn't be surprised if they raise guidance again next quarter. One gigawatt could bring billions in revenue as early as next year, and their midterm target is mid-single-digit billions.

New Customers and Business Validation

It's great to see new enterprise customers like Shopify and Cloudflare. This validates the quality of Nebus. They're also planning to retrade to have autonomous vehicles this year. Click House and Tooka aren't part of these numbers. Triple 10 had another great quarter. Overall, Manuel is very happy and says it was way better than his expectations.

Conservative Management and Execution

Nate says the guide is what everyone cared about, and they splurged out of the water. They raised their topline guidance to a midpoint of a billion, which was expected to be the top of the error guidance. They still have two more quarters, so they can crush this. 220 megawatts by the end of the year is also insane. The CEO is trying to secure more than a gigawatt next year. Execution risk is the big risk, but they're executing like crazy. Danielle adds that she's impressed by management's conservative approach, which makes her more bullish. She likes a management team she can trust that underrates rather than overrates the business.

Revenue Potential and Valuation

One gigawatt data center could generate $40-50 billion in revenue for Nvidia chips. Analysts think it's closer to $25 billion. You can imagine the revenue Nebus can generate with one gigawatt. Today, group revenue is $105 million, but ARR will be closer to a billion. This guidance was first issued in October, then raised in December, and now they've raised it again. Nebus is conservative on guidance, especially on the overall business. Their GPU depreciation is a four-year scale versus CoreWeave's six-year scale, which is quite aggressive.

Long-Term Holding and Market Potential

Manuel has no bad things to say about the management so far and expects to continue holding the stock for the short to medium term because the price is still way below where it should be. His average cost is $25, but he's not selling a single share. This is just the beginning. Nebus is a $12-13 billion company, while CoreWeave is a $50-55 billion company, showing the potential here. When you buy Nebus today, you buy it for the core cloud business, but you get everything else as an extra.

Click House and Market Rerating

They own 28% of Click House, which could be worth a couple of billion dollars. When they start raising money, the market will start rerating Nebus based on their ownership. Although the stock has more than doubled since April, it can go up even higher. The market pays more attention to a quality company. Outside of a handful of big tech companies, only a few newcomers have the technological expertise and multi-billion dollar scale to play in this field, and Nebus is one of them.

Averaging Up and Crazy Quarter

This is one of those positions that Nate will continue to average up in. He made a mistake not averaging up into strong execution winners early on. If they continue to execute and outpace their guidance, he'll continue to average up. It's a crazy quarter.

Revenue Inference and Valuation

If they infer the same revenue per megawatt from the 2025 guidance, they can be making around $4 billion in ARR in late 2026. If you slap the same multiple that CoreWeave has, that's a $40 billion valuation. Even today, the valuation is way below where it should be, especially when you add a ride and the rest of the business.

ARR and Earnings Call

They'll probably tell us the current ARR during the call and provide more guidance. Usually, they tell us where they ended in April or March. They need to know at least June because it's the end of Q2.

Blackwell GPUs and New Jersey Expansion

The Blackwell ultra GPUs will be deployed in the UK and operational in Q4 2025. The expansions are still on track, even with the delay in New Jersey. It's not really a delay because their expectations were as early as summer, and that's still happening. The first phase will be ready by August 28th, which is still summer.

Future Data Centers and Raising Money

Manuel was afraid they'd maintain the previous guidance because of the New Jersey delay, but it looks like they have other levers to pull. They should expect another data center in the US. To reach over one gigawatt by next year, they should be announcing a bunch of new locations in the next few months. It's impossible to get there without more locations. They'll probably raise some money. Manuel wants to ask about it during the earnings call. He's not sure if they'll reply because their earnings calls are through Zoom. It wouldn't surprise him to see another raise because the demand is there.

Raising Capital and Potential Partnerships

Manuel's question would be about the preferable method of raising more cash, like another convertible placement or normal debt instead of convertible ones. They could even consider an offering if they reach a huge share price. They're so efficient with deploying cash that it would be long-term accretive. He's wondering how they're managing their expectations. They're probably already in conversations with someone. Nate's biggest question is how they're going to raise money and the type of duty practices they're going to take. They're guiding for maybe over one billion or one gigawatt, so they're going to need to build a lot more. They'll probably raise through a partnership with Uber to invest in a ride because Uber has invested in many autonomous vehicles companies.

Yandex Team and Early Stage

It's insane that they could get a Yandex team for what was then a $5-6 billion valuation. Yandex was worth over $30 billion and had decades of experience building gigantic companies. It's not just the Yandex team, but the founder of Yandex, which is way more impressive. You're getting the founder of Yandex at a $12 billion valuation. They wish they found this company earlier, but they're still early to the party.

Finding the Earnings Call Link

Roman just sent the link to the earnings call. This is the power of being public on social media. They don't want too many people on the call, otherwise Zoom will crash.

Equity and ARR Discussion

Someone on the chat said that Tooka and Click House are reported in the equity statement. Someone else said $430 million in ARR by the end of the period. They ended the quarter with $430 million in ARR, which means in June, the revenue was $35.8 million.

Earnings Call Issues and Streaming

They were able to get into the call, but there's music blasting in their ears. You can't even control the volume. They're going to stream the call, so people should stay right here. It's easier to watch it here. They're saving hundreds of people on the Zoom call. They should be the exclusive provider of Nebus's earning school.

Financial Results and Russian Company Perception

The stock is still down 71% over the past five years and has done nothing for three years. It's like a dead. One of the comments they get is about the revenue aspect: how can a $10 billion company only generate $50 million? The second part is that it's still a Russian company. But the whole point of them not being listed was that they had to relocate and divest all of their business. Now it's a Dutch company.

Equity and Click House Valuation

They're referring to the $5.1 billion in equity. In the financial results page, they have total shareholders' equity of $3.775 billion and then equity below $5.1 billion. The difference is derived from the subsidiaries. In the shareholders' letter, they said they were accounting for Click and Tooka under the equity method. So, those $1.4 billion are probably from Click House. If Click House had a valuation around $6.35 billion, 28% is $1.8 billion. The equity method is usually just an accounting measure and doesn't really reflect the true value of the businesses.

Tooka Raise and Click House Ownership

They have no information about the Tooka raise. They're trying to look at these numbers and get a sense of it. Click House alone is more than that difference, so it's probably just a conservative method. They'd like to ask how much they still own of Click House because they participated in the last funding round and assumed it was to retain the entire 28% stake or at least avoid too much dilution.

Earnings Call Begins

The 2025 earnings conference call begins. Arati Balo, founder and CEO, and the broader management team are joining. Their remarks will include forward-looking statements based on assumptions. Actual results may differ materially. They undertake no obligation to update any forward-looking statements. They will present both GAAP and non-GAAP financial measures. A reconciliation is included in today's earnings press release. Arati says they had an excellent quarter. They more than doubled their revenue for the whole group from Q1. This quarter, they also became EBITDA positive in their core AI infrastructure business ahead of projections.

Capacity and Customer Expansion

They could grow faster, but they were oversold on their supply of previous generation hoppers and decided to wait for the new generation of GPUs. The new black belts are coming to the market in masses, and they're dramatically increasing their data center capacity. That's why they expect to significantly increase sales by the end of this year and are increasing their ARR guidance from $700 million to $1 billion to $900 million to $1.1 billion. By the end of this year, they expect to have secured 220 megawatts of connected power that is either active or ready for GPU deployment. This includes data centers in New Jersey and Finland. They've nearly closed on two substantial new Greenfield sites in the United States. Overall, they're in the process of securing more than 1 gigawatt of power by the end of 2026. They've made big enhancements to their software cloud platform to support expanding capacity and meet the demand of large scaling clusters. They've continued to significantly expand their customer base, adding large global technology customers such as Cloudflare, Pros, and Shopify. They still remain a leading new cloud provider for so-called native AI tech startups.

Financing and Exciting Times

They've raised over $4 billion in capital so far. They have a strong balance sheet and access to potentially billions of dollars more thanks to their non-core businesses and other equity stakes such as a ride, Click House, and Tooka. This is an exciting time for Nebus. They're in the midst of a once-in-a-generation opportunity. The demand for AI compute is strong and will only get stronger. They're rapidly increasing their capacity to pave the way for accelerated growth in 2026 and beyond.

New CFO Introduction and Financial Highlights

Arati introduces their new chief financial officer, Dada Alonsa. Dada is excited to be joining Nebus and believes AI will fundamentally transform the world. Nebus is well-positioned to make that happen. They reported $105.1 million in revenue, up 625% year-over-year and up 106% quarter-over-quarter, driven by strength in their core business and solid execution from their Triple 10 team. Their AI cloud infrastructure revenue increased more than nine times year-over-year, driven by strong customer demand for their corporate GPUs and near-peak utilization of their platform. Even as they achieve hypergrowth, they continue to operate with discipline. This focus allowed them to achieve positive adjusted EBITDA in their core business ahead of expectations. They recorded a gain from revaluation of investment in equity securities related to their equity investment and a gain from discontinued operations. These two non-business-related items made them gap net income profitable for the quarter. These gains are one-time in nature.

Guidance and Future Outlook

They see very strong momentum in their business, and demand for AI compute remains exceptionally high. Given their plans to further scale their platform this year, they're updating their full-year outlook for annualized run revenue, raising guidance from $750 million to $1 billion to $900 million to $1.1 billion. This is based on closed contracts for existing and future capacity, as well as sales they anticipate for the rest of the year. For their core business revenue, they're maintaining their guidance of $400 to $600 million. They continue to experience strong demand and are building capacity to take advantage of the large opportunity in front of them. Of the 220 megawatts of connected power they expect to have at the end of the year, they will have 100 megawatts of active power. Most of their GPU installations will take place in Q4, so they expect their annualized run rate revenue and revenue to be back-end weighted. For group revenue, they're keeping the projections they already provided: group revenue of $450 to $630 million. This excludes the 2025 revenue guidance of $50 to $70 million they previously gave for Tooka. Effective from Q2, they have deconsolidated Tooka from the group. They expect to be slightly adjusted EBITDA positive by the end of the year at the group level, but still negative for the full year. They're maintaining their capex guidance of around $2 billion in 2025.

Hypergrowth and Leadership

They're experiencing hypergrowth with demand to support continued strong results. They're investing in capacity to capture the large and growing opportunity in front of them and are positioning the company to become a leader in AI cloud infrastructure. The future of Nebus is incredibly bright. They're not just well-positioned; they have the resources, the expertise, and the team to lead and win.

Demand Environment

The demand environment in Q2 was very strong. As they brought on more capacity, they sold through it and were at peak utilization by the end of the quarter. As they bring on larger CR clusters, they are able to bring on new large customers who want to purchase greater capacity. This allows them to expand and diversify their customer base. There is growing opportunity in the market. If they had more capacity in Q2, they probably would have sold more as well. They were able to improve the maturity of their platform, which has contributed nicely to increasing their competitive win rate.

EBITDA Guidance

They are very pleased to report that their core business rates adjusted every profitability this quarter ahead of their initial guidance. Looking ahead, they expect the core business to remain positive throughout the rest of the year. At the group level, they anticipate turning adjusted EVA positive by the end of the year. However, for the full year, it will remain negative. They expect group adjusted evidence to be positive starting next year.

ARR Dynamics and Update

They saw strong momentum in Q2, with annualized run rate revenue growing from $249 million in March to $430 million in June. While they are not providing monthly ARR updates, this positive trajectory has continued into July. A significant portion of their increased analyze run revenue guidance is already under contract, which gives them strong visibility. They also see continued strong demand in the market, and as they scale up capacity, they are able to sell it quickly. With additional capacity coming online later this year, they are confident they're on track to deliver on the revised ARR guidance.

ARR vs. Revenue Guidance

The increase in their AR guidance reflects the strong demand they are seeing in the expected delivery of additional GPU capacity later this year, particularly the Blackwell Ultras. Because much of this capacity will come online by the end of the year, the impact will show up more in ARR than within the year revenue. That timing dynamic is why they are holding their 2025 revenue guidance steady. This late-year ramp will create a strong foundation heading into 2026 and will support meaningful revenue acceleration next year.

One Gigawatt and Midterm Revenue

It's too early for them to provide 2026 guidance, and they'll be returning to that question later this year. They want to reaffirm their midterm outlook as they are making very good progress towards their goals. Their base case calls for several billion dollars of revenue in the midterm, which means in the next few years. Their base case also assumes that they grow their capacity to support this type of revenue goal from their 25 levels. This guidance does not factor in a large deal from like a frontier AI lab or a hyperscaler. Those transactions would be considered incremental to this guidance. Their ambition is to grow much larger and much faster, and they are laying that foundation with the one gigawatt capacity that they're deploying.

Tariffs Impact

They are following the question of tariffs closely. For now, it's a bit early to say anything definitive. Whatever is determined, this affects all players in their market. While it's possible they could potentially see some short-term fluctuations, they're confident that the market will be able to balance things out going forward.

Return on Capex

When they price their GPUs, they aim for healthy margins on a per-hour compute basis. For the hopper generation, they expect to break even in roughly two to three years on a gross profit level that includes both the cost of hardware but also the associated operational expenses. This estimate doesn't factor in their higher-margin software and services revenue. As those scale, they see potential to shorten the return on invested capital. They expect to price Blackwells at a premium, so it's still early to comment on specifics at this age.

Infrastructure Buildout Timeline

They are ramping up their capacity to accelerate their growth for the next year and after. They are growing with a number of the regions where they are present. In the second half of 2025, they are adding the UK, Israel, a new site in New Jersey, and additional capacity in Finland. Finland and New Jersey are their main drivers of capacity this year. In New Jersey, they have 200 megawatts in the ongoing construction phase. A good part of that will be available this year, and the rest in the first half of 2026. In Finland, they expect to have an additional 50 megawatts in operations this year.

Greenfield Opportunities

They are in advanced discussions for a couple of new Greenfield sites, each one able to deliver hundreds of megawatts of power in 2026, and they will announce that soon. They typically favor green fields because they can control every aspect of the data center from the design to construction to the hardware installations and deployment and phasing. They can tailor the phasing according to their demand. It's cheaper to build than build to suit, and they are not locked into long-term leases. By controlling the design of the building, they can achieve a lower total cost of ownership, probably around 20% less than the market average.

UK and Israeli Facilities

The UK looks great, and they think it's a really exciting opportunity. It's a massive AI market, definitely the third largest outside of the US and China. They've been paying close attention to what the government's been doing, and they've been taking some quite impressive steps to stimulate growth generally in AI, including confirming 14 billion pounds in private sector investment into AI in the region. They announced their intention to launch their first big facility, a GPU cluster, in the UK, just outside of London, and they expect that to be coming on stream in early Q4. They think they're going to be the first to deliver B300s to the UK market. There's a vibrant market of AI-native startup scaleups in London and around. There's a significant enterprise customer presence as well. Some of the big global tech companies have been setting up regional hubs and regional R&D facilities. One of the most promising industry opportunities is the healthcare and life science space. They have a dedicated healthcare and life science team that's led out of the UK. They're working in partnership with Nvidia and will soon be announcing some initiatives that will be helping life science startups in the sector. Israel also presents a big opportunity to service growing demand in the local AI sector. The government's been doing a reasonable amount to develop the ecosystem and stimulate demand. Israel seems to be emerging as a dynamic AI hub globally. They'll be launching their GPU cluster there with Nvidia, also coming up on stream in early Q4.

Financing Capacity Expansion

Their business model is working well, and as they bring new capacity online, they are able to sell it efficiently, which reinforces their confidence to continue investing. Given the strength of the market, they see a clear opportunity to scale and demand their footprint in infrastructure. They have significant cash on hand and will approach any additional capital raising opportunistically, depending on timing and market conditions. At the moment, their focus is on securing land and power and moving quickly to reach their one-gigabyte target.

Software Stack Updates

Customers who train or run the AI models and have the AI-connected tasks are generally looking for speed, reliability, and flexibility/convenience. This quarter, they continued to execute on those things, and the improvements were also geared towards Blackwell deploy readiness. They doubled the speed of their network, which had a direct impact on their ML perf benchmark results. They improved reliability by increasing the mean time between failure. This was due to improvement in their core platform and deployment of their auto-healing and health check software that could address potential points of failure before nodes actually fail. They also improved flexibility, making it easy for anyone using the S3 storage to easily migrate their data to do the AI workloads on their clusters network. This makes it easier for the customers to come to Nebus.

ML Perf Benchmarks

This quarter, they submitted ML Perf training 50 results, revealing some quite impressive performance for large-scale training of Llama 3.1, the big one, 405 billion parameters model. In the cloud, as they doubled the size of their cluster, the speed scales linearly. Their results are comparable to bare metal benchmarks, but they accomplish this in the cloud. This is important for customers because it's easier, faster, and more cost-effective.

Inference as a Service Platform

They see more and more demand shifting to inference. The strength of Nebus is that they build the full stack. They are developing the next layer of their offering to enable the AI-centric ISVS, like product builders and enterprises that apply AI in their critical workflows. They are building an enterprise-grade platform to deploy and scale open-weight AI models like llamaquen flux, just released open AI new models, and others. They focus on high performance and reliability on dedicated infrastructure. Their platform runs on top of Nibio's proven scaled infrastructure, and they target solving the biggest pain points in production AI: unpredictable latency, GPU bottlenecks, and not enough flexible platforms to build on scale.

New Customer Wins

As they're making their way through the market, they're getting interesting adoption from big customers like Shopify and Cloudflare. These customers are leaders in their categories and are pushing the frontier of using AI to build and deliver great solutions. Shopify is utilizing Nebius's AI infrastructure along with Tooka's training data to optimize every step of the merchants' journey. Cloudflare is using Nebus to power inference at the edge, a very important part of their overall offering as a part of their popular workers API. Both relationships are growing, and both are scaling opportunities for them. They're also seeing similar interests from other major technology companies and leaders in their categories, reinforcing the opportunity overall in the market.

Observations and Strategy

This is a very exciting organization with great technology because they have a world-class leading team. The market is massive and growing quickly. The opportunity for Nebus is to get more structured and methodical with their go-to-market and to continue to build out their coverage to be able to proactively pursue the market opportunity. To that end, they are building out their go-to-market leadership team, including adding a world-class VP of sales strategy and operations who's starting this week. They're also adding general managers to lead their businesses in the Americas, the Middle East, Asia-Pacific, and Japan, as well as adding leadership to take on the opportunity around strategic customers and major enterprises. In tandem, they will continue to expand their overall customer-facing capacity and distribution capabilities. In the short term, they are focused on pursuing the regional markets of AI builders and targeted software vendors and select enterprise segments in order to be able to develop a strong understanding of the use cases that are winning and then a deep understanding of the overall customer journey. Midterm and longer term, they intend to cover the entire global IT market with distribution and sales capacity.

Blackwell Demand

They continue to see really strong demand for the hoppers in Q2. Whenever hopper capacity becomes available, they're selling it very quickly. They did bring on the B200s, and they are actively selling through them as well. Pricing trends remain relatively stable for the hoppers, even in the context of Blackwell alternatives, which are actually coming through with a healthy premium relatively speaking. They're also seeing interest in the grace Blackwells that are being implemented later this year.

Partnerships and Success Measurement

This quarter, they made strong progress expanding their reach across the AI ecosystem through several high-impact partnerships. They launched integrations with Mistl B 10 and Sky Pilot, all of which extend their ease of use of their AI cloud and dedication to their developers and model builders by supporting them across their workflows. They also partnered with Lightning AI and any scale, extending their presence across both open-source toolsets and enterprise users. These collaborations simplify how teams scale and deploy AI workloads using Nebus. On the infrastructure side, they expanded their AI cloud portfolio with NVIDIA AI interprise and became a launch NCP partner for NVIDIA DGX cloud leptin, further strengthening their position as a high-performance AI platform. They measure their success through the adoption of their partner platforms, revenue contribution, and strategic access to new user segments, all of which they've seen trending positively.

Utilization Trends

As they bring on more capacity, they're selling through it, and they are able to bring on bigger customers who want to get greater capacity. They're adding more capacity this and next quarter and shifting to selling against future requirements. They're building a model where they can close and drive expansion of future capacity and future versions of GPUs.

Getting Large Contracts

They see a lot of demand coming from the top frontier AI labs, and they believe that this will increase in the future. Millions of new GPUs are coming to the market next year and beyond. To capture this demand, they are increasing their capacity significantly. They are just addressing this issue right now. They hope to see those big customers among their class customers because finally, they have capacity of their scale. All the projections they're making this year in midterm do not include these big accounts and those big deals. So, if and when they will come, it will all be incremental and will be a nice surprise.

AV Ride Update

They are very excited about a ride as a company's future, taking into consideration what's going on in this industry this year. They see a structure for a ride similar to what they've done with Tooka. It's a good example of a type of partnership they are looking for when a strong partner comes to develop this business and who actually gives up control. In the meantime, the business is performing extremely well. They continue to scale. They have two business lines: delivery and autonomous vehicles. On the robot side, a ride is expanding the coverage with existing partners. They add new cities, new service areas, and restaurants. They're launching new university campuses in their project with GrabHub. They're also entering new verticals. Just recently, they signed with a grocery delivery for the retailer HB in Texas and also indoor robot operations in Japan. That came through a partnership with Mitsu for the sun. On the autonomous vehicle side, a ride is growing its fleet. They're partners with Hyundai, and they're expanding their road tests in Dallas. They're looking forward to launching their robot taxi service with Uber later this year because they signed this partnership early. They believe it's a great business and a source of significant value for their company.

Sources of Funding

They talked about potentially tapping into their non-core businesses and equity investments to fund growth of the core business. Tooka was able to