This is one of those seemingly boring accounting distinctions that makes a huge difference. EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization – and in the case of these neoclouds, depreciation is everything, as some in this thread have already pointed out.
Ergo, EBIDTA is not even close to FCF. Not even back of the napkin. Not even in the ballpark.
On 146m revenue this quarter if EBITDA had been 40% that would be 58.4m, but deprec and amort was 99m, so they’d still have a 40m loss.
I have a ~1% position in NBIS, IREN, and CRWV, but I am skeptical of this business model too. There are so many unknowns, including, as Smorg points out, if MSFT and other customers will be the real winners, despite dumping piles of cash onto these neoclouds – since the neoclouds will in turn bear the very expensive burden of turning that cash into compute.
Bear
24 Likes
Hi,
I’m holding my Nbis tightly. With the current sales run rate plus the msft and meta deals, they’re on track to reach a 4.7B annual run rate with ease once everything is fully delivered. At a 22B mkt cap, that’s a P/s ratio of only 4.68x
Best,
Pablo Ahlers
18 Likes
I did decide to sell all my Nebius shares on Thursday, only to buy them all back again 2 hours later. That’s rare for me, thankfully, to make such a knee jerk reaction as that. I am glad I bought them all back again (actually slightly cheaper than they had been just 2 hours earlier).
What I’ve noticed again from the numbers in their Q3 is that their revenue growth of 355.1% (incidentally identical to Iren’s 355.1% this week though of no consequenceof course) is vastly outperforming their operating costs and expenses. Nebius opex grew 145% whilst their revenue grew 355%. Surely this means that they will eventually reach profitability if things continue as they are?
Jonathan
10 Likes
Maybe. This might be an instance where raw dollars are worth a look in addition to percentages. Yes, revenue grew 355% vs just 145% for expenses. However, that revenue increase was $114M versus an expense increase of $164M YoY. The QoQ adds were $41M in revenue versus $60M in expenses. Expenses as a percentage of revenue still sits at 189% for Q3, which is down slightly from Q2’s 206%. So, yes NBIS is making progress. But it also has a long way to go.
Virtually every hypergrowth firm we’ve discussed here over the years starts with a similar trend. The best are the ones that most quickly close that gap. As long at NBIS delivers in that area, it’s worth keeping around. The moment it falters, it’s probably more of a sell than a trim. One lesson I’ve learned repeatedly in these names is it’s hard to reverse daunting math once it starts moving in the wrong direction.
(Disclosure: 8.5% position)
45 Likes