(Bloomberg) — After last week’s selloff, this is a tough time to be raising the issue of spending on artificial intelligence. But that’s precisely what CoreWeave Inc.’s quarterly results after the closing bell Monday are about to do.
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Shares of the cloud-computing company plunged 22% last week amid a broader unwinding of the AI trade that sent the S&P 500 Index tumbling to its first weekly loss in a month. Now, investors will be closely watching CoreWeave’s results as concerns mount about heavy spending by companies like Meta Platforms Inc. and Microsoft Corp., as well the circularity of many AI deals announced in recent weeks, with OpenAI at the center. Most of CoreWeave’s sales come from Meta, Microsoft and Alphabet Inc.
“Investors have gotten a lot more sensitive to the balance between growth and spend,” said Dave Mazza, chief executive officer at Roundhill Financial. “Doubling revenue is great, but if capex is climbing even faster, that math doesn’t work forever.”
CoreWeave shares rose as much as 6.1% in early trading Monday ahead of reporting its results.
The company already faces questions about the circular nature of its arrangements, its debt load and its dependence on a few large customers. It’s expected to post almost $1.3 billion in revenue in the quarter, more than double the year-ago number, and an adjusted loss per share of 36 cents, compared with a loss of 53 cents in the second quarter, due to its rising capital expenditures. Its operating margin is projected to be about 14.3%, down from more than 21% a year ago.
Though investors are concerned about the level of AI spending, hyperscalers have maintained that they need to keep funding infrastructure, and demand continues to outstrip supply. Earnings reports from CoreWeave’s top clients showed an ongoing commitment to AI buildouts, which should flow to the company’s revenue in the coming quarters.
“We expect this revenue to remain largely supply-constrained, which could force the company into greater capital spending next year,” Bloomberg Intelligence technology analyst Anurag Rana wrote in a report last week. “Roughly two-thirds of this year’s capex, or about $14 billion that we calculate, could be realized in 4Q, which may lead to an acceleration in sales growth in 2026 as more supply comes online.”
This vast demand has eased concerns that CoreWeave is too dependent on just a few clients, Rana said in an interview. Even if a top customer were to leave, another client would likely rush in to work with the company, he added.
“They are the number one neocloud,” Rana said. Still, in light of the stock’s struggles over the past few months and its overall volatility, how investors will respond to the results is anyone’s guess, he said.
It’s also why the company has committed to its own capital spending — it needs to be able to meet demand from its clientele. Wall Street will be watching for how much the company’s backlog and recurring purchasing orders have grown and how that flows through to revenue in the coming quarters. Jefferies analysts led by Brent Thill see deals from the quarter doubling recurring purchasing orders from a year ago to $60 billion.
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“Although it remains unclear whether we will get guidance for FY26 this quarter or next, we still expect upside to consensus ests driven by RPO growth,” Thill wrote in a Nov. 6 note.
CoreWeave shares sank 21% on the day after the company reported second-quarter earnings in mid-August, posting a wider than anticipated quarterly loss and giving a disappointing outlook, which stoked fears that margins were being hit from its rapid expansion in AI data centers. The stock is down 30% since then. However, the shares are still up more than 160% since the company’s challenging initial public offering in March, which required support from Nvidia Corp. to get done.
In some ways, CoreWeave’s recent weakness offers a more favorable setup heading into this report. Part of that is Core Scientific Inc. shareholders rejecting CoreWeave’s contentious takeover bid on Oct. 30. CoreWeave Chief Executive Officer Michael Intrator said the partnership between the two companies, which work together to supply AI providers with data center capacity, will continue.
Looking ahead from here, the issue for Coreweave will be continuing to grow and gradually generating positive cash flow.
“I think the market starts focusing on whether CoreWeave can scale profitably, not just build capacity,” Roundhill’s Mazza said. “With that being said, if they show a path to positive cash flow in the next year or two, the market will give them credit for that.”
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–With assistance from Subrat Patnaik, David Watkins and Debby Wu.
(Adds stock move after market open in fourth paragraph)
