CoreWeave's quarterly revenue exceeds expectations, despite growing skepticism about demand for AI

Reuters, November 10 - CoreWeave (CRWV.O) reported quarterly revenue on Tuesday that exceeded Wall Street expectations, thanks to strong demand for its cloud services. This also eased recent market concerns about the sustainability of demand for its AI infrastructure amid increasing debt burdens.

According to data compiled by London Stock Exchange Group (LSEG), the company reported third-quarter revenue of $3.66 billion as of September, up from $1.37 billion a year earlier, while analysts had expected an average of $3.55 billion.

In the past month, CoreWeave's share price has plunged over 40% because the company has become the focus of growing market fears over a potential AI bubble. Investors are concerned that the company is heavily borrowing to purchase chips, land, and energy for AI data centers, while these assets generate little to no return until leased out.

According to data compiled by LSEG, this AI cloud computing company, backed by Nvidia and valued at $27 billion, has never turned a profit. As of June, its total debt exceeded $5 billion.

CoreWeave's bonds maturing in 2030 currently yield about 15.2%, while its five-year credit default swaps—measuring the market's perceived risk of default—are trading at 1,135 basis points.

This sell-off has triggered a broad crisis of confidence across AI-related stocks. The mood worsened as the Democratic Party achieved an overwhelming victory in the US midterm elections, with investors now assessing the risk of stricter regulations for US data center construction.

Recent earnings reports from hyperscale technology companies also suggested possible delays in data center projects and a slowing pace of spending growth. CoreWeave's client list is impressive, including Microsoft MSFT.O, Meta META.O, OpenAI, and Anthropic.

According to a Bloomberg report last week (link), as this tech giant shifts its focus to expanding its own data centers, Microsoft has increased oversight of certain data center projects belonging to so-called “new cloud” companies—Nebius NBIS.O, IREN IREN.O, and Nscale.

CoreWeave operates about 52 data centers worldwide, all equipped with advanced Nvidia chips. Its global effective capacity exceeds 1.7 gigawatts—which is enough to meet the electricity needs of more than 1.2 million American households.

Some analysts pointed out that concerns over CoreWeave’s financing capability are overstated, given the company’s track record in execution and fundraising.

Brokerage firm Truist noted that market sentiment has diverged from the improving economic fundamentals of AI cloud service providers, adding that higher pricing and increased client prepayments will reduce these firms’ reliance on external capital.

CoreWeave CEO Mike Intrator sought to address these concerns in a memo last month, stating that the company's backlog of orders is sufficient to fully cover its debt obligations.

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