CRWV 25Q2 - Highly-leveraged bet

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CoreWeave just reported Q2 earning yesterday.

  • Revenue came in as $1212.8 million, growing 207% YoY, beating high-end guidance by 10.25%.
  • Raised full year guidance by $250 million to $5350 million.
  • Q3 revenue is guided to be $1.26B ~ $1.3B
  • Revenue backlog grew to $30.1 billion.
  • Maintained full year CapEx guidance of $20 billion to $23 billion
    • To break down, CapEx was $1.9B in Q1, $2.9B in Q2, Q3 guidance is $$2.9B ~ 3.4B, so CapEx for Q4 is going to be huge… Likely a either a significant dilution or a huge new debt is coming.
  • Debt is still increasing rapidly. Interest expense in Q2 was $267 million, 22% of total revenue. Q3 guidance of interest expense is $350 million to $390 million, about 28% to 30% of total revenue based on guidance. And it will likely blow up in Q4 and beyond.

Although CoreWeave’s revenue growth remains strong, the high debt level has made this business more and more risky.

I had a 7% position in CRWV before Q2 earning. I trimmed it significantly in the pre-market today, leaving only 1.5%. And I loaded more $NBIS shares using part of the money. After reading earning reports of both the companies, it feels to me that $NBIS’s business model can be a clear winner, despite CRWV’s first-to-market benefits.

Cheers,
Luffy

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Luffy,

I feel similar things. When I looked at CoreWeave financials and saw that their average loan had an interest around 11%. 11% on that large of loans really is a drag on the company’s ability to generate profit.

Drew

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I haven’t gone through the report or call, but isn’t high Capex the name of the game for AI Cloud providers? Can’t rent out GPU time if you don’t have the GPUs up and running, right? The question would be whether Coreweave is being smart about adding capacity given the demand for their services.

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That’s a good point. It makes sense to invest rapidly to buy more GPUs, but because of the large high-interest debts, the ROI from these investments would be questionable in my opinion. Currently, there’s about $11 billion debt on CoreWeave’s balance sheet and it paid $267 million in Q2 just for interest. The debt level could easily be doubled in Q4 as CoreWeave plans to spend $20B~$23B CapEx for the year in total. The interest level is going to be huge at end of 2025.

I really like the GPU neo clouds and believe it is the biggest market opportunity right now. However, after comparing Q2 earnings, I feel Nebius is the safer bet now. Nebius has more cash, minimal debt and a disciplined CapEx plan, so it can potentially has a more sustainable path of long-term growth and has a better path to profitability. I still have a small watch position for CoreWeave now and may add in the future if the business stabilizes.

Luffy

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Share lockup expiry tonight too. So that may provide a nice entry point over the next week with lots of shares selling. Very concerned about the level of debt and negative profits though.

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