Hi, I’d like to bring this interesting company to the board.
Nebius used to be a successful Russian company before they sold all the Russian assets due to the sanctions and was re-listed on Nasdaq in October 2024. Now, it’s operating in Netherlands.
The company’s core product is an AI-infrastructure-As-A-Service platform, where companies can train and serve AI models without worrying about managing GPU clusters.
The company’s revenue base is pretty small right now, but is growing very very fast.
These are quoted from the highlights of their 2024 Q3 earning release:
The Group’s Q3 2024 revenue increased 1.7 times compared to the previous quarter and totaled USD 43.3 million
driven primarily by the rapid growth of the Company’s core AI infrastructure business, which grew 2.7 times compared to the previous quarter and 6.5 times on year-on-year basis. (The core product was at 120 million ARR run-rate at end of 2024 Q3)
The customer base (or core product) expanded to over 40 managed clients in Q3 2024, up from 30 in Q2, with additions from the Fortune 500.
Cash and cash equivalents as of September 30, 2024, stood at USD 2,288.2 million on a consolidated basis.
Capital expenditures totaled USD 167.0 million and USD 387.6 million for the three and nine months ended
September 30, 2024, respectively. We anticipate capital expenditures in Q4 2024 to exceed the amount spent in the
first nine months of 2024 as we plan to accelerate investments in GPU procurement and data center capacity
expansion to support the growth of our businesses.
Cash outflow from operations amounted to USD 45.9 million and USD 255.3 million for three and nine months ended
September 30, 2024, respectively.
Revenue of the last 3 quarters have been:
11.3 → 24.9 → 43.3 (million USD)
Recently, Nebius got $700 million funds, from investors including Nvidia. From the press release,
Company now expects to deliver an annualized run-rate revenue (“ARR”) by year-end 2025 of USD 750 million to USD 1.0 billion
Market cap is $8.41 billion now. With $2.28 billion in cash, EV / end of 2025 ARR is (8.41 - 2.28) / 0.875 ~= 7. It’s incredibly cheap considering that the company is at such an early stage and is growing revenue so rapidly, though it’s not a US company and could be given different valuation multiples.
I don’t have a position in this stock yet but plan to sell some of my oversized NVDA position to invest into this one.
I was interested to know if the management team stayed on after the coroporate move to The Netherlands.
From the Yahoo profile section:
The company was formerly known as Yandex N.V. and changed its name to Nebius Group N.V. in August 2024.
The founder & CEO is Arkady Volozh. Checking on Mr. Volozh in Wikipedia:
Arkady Yuryevich Volozh…is a Russian billionaire oligarch…
In June 2022, after the Russian invasion of Ukraine, sanctions were imposed against Volozh and he then resigned from all his positions at Yandex.[5] In March 2024, Volozh was removed from the EU sanctions list.[6][7] In July 2024, the holding company that he leads, Nebius Group, sold its interest in Yandex.
It seems that there are a some layers that might be worth peeling back to understand the corporate structure of this company.
Arkady is the founder and leader of this fresh new company - Nebius Group N.V. He used to be the founder and leader of Yandex N.V but was forced to resign due to the sanctions. Arkady looks to be a strong leader as proved by the growth of Yandex in the past.
Nebius has been mentioned by Bert Hochfeld to his paid subscribers. As a reminder, all of that content should be respected and not shared on public forums.
I do not have a subscription with Bert, so neither do I know this company is recommended by him. What I am sharing here is what I found on the public internet.
I wasn’t specifically suggesting you were, but many of our visitors here are subscribers to Bert, so when a fairly esoteric company is mentioned I think it’s pertinent to remind our posters from time to time.
They were Yandex so a company we have all heard of but until I read into them I didn’t realize it. Thanks Luffy very interesting find. Some information on the company.
Nebius was brought up by Bill Mann a few months back on the other side of the paywall. He alerted us that the newly reconstituted company was active again. I’m not sure what the rules are, but my understanding is as long as it is not an active buy recommendation of a MF service, I can reference it here.
Vince
Anyone can talk about any company that is a growth company as long as you do not quote any service. Plagiarism will not be tolerated but discussion of all growth stocks and anyone’s understanding of those companies has always been encouraged.
The NBIS presentation (link above) has a lot of information to digest. This is my scribbled notes:
The company executives and technical leadership is mostly Russian citizenry owned, now HQ in Netherlands. A new data center is planned for Kansas City in May 2025 along with 3 US hubs. Promises 20-25% reduced cost versus competition like hyper scalars. Target customers are small to medium businesses.
Big capex planned 2025 so they say they have some big money behind them. They say $600M-1.5B capex 2025 wow! Building their own hardware servers and AI software stack based upon NVDIA Hopper and Blackwell. Big revenue forecasts 5-10x and positive adjusted EBIDTA 2025.
The founder / CEO Arkady Volozh does have a good track record as he was cofounder and CEO of Yandex as well. The $750-1000 million ARR and $500-700 million revenue forecast for 2025 is going to be eye blowing if achieved. And this prices the company at a very attractive multiple of ~7 for EV / 2025 ending ARR. I would not worry too much about competition as the AI infrastructure market is a very huge market that can allow multiple players to exist.
Despite lack of track records from the new company and the fact that the Russian founder used to be on the sanctions list, I think this company is attractive enough for me to start at least a small size position.
Backed by Nvidia
2025 outlook projects $500-700 million revenue ( 3-4 times YoY growth)
I took a position as well. Listening to the previous earnings call now, haven’t finished it yet but it’s unlike typical calls. Very brief presentation, then just fielding questions the rest of the time. The questions are submitted; you don’t hear the analysts voices, so I hope it’s not staged.
Interesting tidbit: the CEO, Arkady Volozh, says he has 90% of his net worth in the company.
Lots of talk about how their AI Cloud is “full stack” which gives them a competitive advantage, but I don’t really understand how it’s different from the hyperscalers.
From my perspective Nebius is still very much a story stock with an unproven business model.
On the earnings call the CEO mentioned that revenue is up 2.7x the previous quarter, however there was no mention that on 43.3M of revenue the net loss was 94.2M or double the amount of revenue. Their CFO did not have prepared remarks on the earnings call which is a red flag for me. I assumed the net loss was probably due to the re-listing but it turns out it’s mostly from expenses,
The total operating costs for getting 43.3M of revenue is 130.3M, which shows how much cash they are burning through right now. Granted they do have 2B+ from selling their old Yandex assets, so the runway is long.
While they are expanding to US data centers, I’m skeptical that any company that cares about compliance is going to want to work with a reconstituted Russian company. They did say there is no Russian revenue, assets, or employees in Russia though.
Basically I view this company as a bet on Arkady delivering. However, an 8B valuation for a company which has not proven itself at all seems steep.
I do not think a company gets to 8 billion dollar market cap as a story stock. There has to be some large institutions behind it. The build out of the company also shows a lot of growth ahead.
Well, It used to be that you could not go public when you were losing this amount of money. Investing in this would be like pretending your a venture capitalist, but you don’t get to actually see most of the slide deck.
Well, It used to be that you could not go public when you were losing this amount of money. Investing in this would be like pretending your a venture capitalist
I agree with this comment from MFChips. Nebius was able to trade publicly only because it stole the position of Yandex. Otherwise, it may remain a private start-up.
On one hand, this company is riskier than many other stocks we talked about on this board, but on the other hand, the company also has the top growth momentum and such AI IaaP or GPU-aaP companies have very unique positions ride the AI hype. (I did not find any other public company who has a laser focus on AI infrastructure, except those hyper-scalers who also operate regular data centers.)
As Nebius is still at a “start-up” stage, I would not worry too much about the capital expense being larger than revenue since this is extremely normal, as long as it can deliver the expected strong revenue growth. And I’m OK with additional funding / dilution if the growth holds.
To summarize, it’s all about risk-reward trade-off. This stock’s risk is high, so it won’t be a large or major position in my portfolio. But I see high reward potential despite the risks. So I’m comfortable with a 3~5% starting position before I find more evidence from future earning reports.
Interesting numbers and slides. One thing to note is NBIS has four business lines all operating under different names:
Nebius - AI stack solutions (the main play here)
Toloka - AI data development from language training to evaluation
TripleTen - edtech reskilling platform (yes, tech training classes)
Avride - autonomous driving
It appears NBIS as a whole will make $130-$140M in revenue this year with Q4 still TBA. One of the risks I see here is the wide range of management’s expected outcomes for next year (updated with corrections from Luffy).
Total Revenue: $500-$700M
Expected ARR: $750M-$1B
Nebius Rev: $400-600M
Toloka Rev: $50-70M
TripleTen Rev: $40-60M
Avride: $220K (yes, K) in current revenue with $140M-$150M in funding needs estimated for '24/'25 combined
That’s a lot of moving parts, and the gaps in some of those estimates are almost SPAC-like especially when you consider Toloka and TripleTen are more established revenue streams. Even if management bumps up the lower end of those ranges as it goes, any lowering of the top end will likely be met with sharp disapproval from the market.
There is clearly money to be made in upcoming AI infrastructure expenditures, and Nebius’s NVDA blessing should help its profile. However, NBIS still has plenty of work left to actually win this business.
I’m considering a bet here but will most likely wait until Q4 and updated estimates are on the books first. As it is, there’s simply too much downside for my liking in management’s projected range of 2025 outcomes with the stock currently sitting near all-time highs.
Thanks for sharing your perspective. I’d just like to correct some numbers as they could be very confusing to figure out in the slides and other materials. Agreed that the business could become more clear if we wait for them to disclose more evidence and narrower expectations.
Total Revenue: $400-$600M
To clarify here, from the slide, they gave revenue guidance on every single product. $400-$600M is the guidance for the main Nebius business. The total group revenue is expected to be in the $500-$700M range.
Expected ARR: $500M-$1B …
the gaps in some of those estimates are almost SPAC-like …
Even if management bumps up the lower end of those ranges as it goes …
When Nebius got recent funding from Nvidia, they already updated the ARR guidance to be $750M-$1B (press release). So the gap is indeed narrower as time goes.
Thanks, @monkeydluffy. I updated my original post with your corrections to avoid any confusion.
Along those same lines, I can’t say it helps management’s case any that even the word “Nebius” can mean either the AI infrastructure segment or the company as a whole depending on the context. Hopefully, they clean that up at some point.
Bert Hochfeld has posted a buy recommendation on seekingalpha for NBIS today for anyone who is interested. I know many here follow him. This is provides considerable more color to the risk and opportunity.
