CoreWeave (NASDAQ: CRWV) stock tumbled nearly 8% in after-hours trading Wednesday, despite posting explosive revenue growth in its first quarterly report as a public company. While investors initially cheered a 420% year-over-year jump in revenue, concerns over heavy capital expenditures and soft profit metrics led to a swift reversal.
Q1 earnings beat, but profits disappoint
CoreWeave reported Q1 revenue of $981.6 million, handily beating analyst expectations of $853 million. However, the company logged a net loss of $314.6 million, weighed down by $177 million in IPO-related stock compensation.
Earnings per share came in at -$1.49, falling well below forecasts. Adjusted EBIT margins also missed the mark, and capital expenditures for the quarter totaled just $1.9 billion, underwhelming compared to projections of $2.6 billion.
Despite the profit miss, Citi analyst Tyler Radke maintained a Neutral rating with a $43 price target, citing long-term revenue potential but cautioning that valuation appears stretched.
Massive AI demand fuels backlog and expansion
CEO Mike Intrator highlighted booming demand across AI workloads. CoreWeave’s Q1 performance was buoyed by a deepening partnership with OpenAI, which signed a $4 billion deal after the quarter and committed to up to $11.9 billion over five years. Other major clients include Microsoft and Google, both heavily reliant on CoreWeave’s GPU cloud infrastructure.
The company reported a revenue backlog of $25.9 billion, up 63% quarter-over-quarter. However, remaining performance obligations (RPO) dipped slightly to $14.7 billion from $15.1 billion at the end of 2024.
Capex surge casts doubt on near-term returns
CoreWeave announced full-year capital expenditures of $20 to $23 billion, significantly higher than analysts’ $18.4 billion estimate. Q2 spending alone is expected to hit $3 to $3.5 billion, as the company rapidly expands infrastructure to support rising demand.
Management noted these outlays reflect “accelerated customer uptake” rather than cost inflation, but investors remain cautious about how long the company can sustain such aggressive investment without turning a profit.
Debt moves signal financial strategy shift
To shore up liquidity, CoreWeave recently boosted its revolving credit facility from $650 million to $1.5 billion and may raise an additional $1.5 billion via high-yield bonds, potentially led by JPMorgan.
These steps aim to support expansion and meet long-term client obligations while easing pressure on cash reserves. However, with a current ratio of just 0.39, analysts warn the company faces liquidity risks if growth slows.
Mixed outlook from Wall Street
- Northland Capital rates CoreWeave Outperform with a bullish $80 target, citing its potential to capture 10% of the AI-as-a-Service market by 2025.
- Macquarie offers a more cautious view, maintaining a Neutral stance and a $56 target, pointing to challenges in balancing growth with profitability.
At a market cap of $31.3 billion, CoreWeave is trading near its 52-week high of $68.50, raising questions about upside potential amid market volatility.
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