CoreWeave's Q3 EBITDA Margins Exceed 60%, But CapEx and Leverage Loom Large

What happened

CoreWeave reported Q3 2025 adjusted EBITDA of $838 million with margins above 60%, citing AI-optimized infrastructure and contracted demand. However, this performance coincides with significant capital expenditure needs, raising questions about margin sustainability as disclosed in recent filings. The company faces extreme customer concentration, with one client accounting for ~70% of revenue, which heightens revenue risk and contract dependency. Despite strong EBITDA, CoreWeave remains highly leveraged with net debt/EBITDA at ~19x and interest coverage of only 0.15x, indicating severe financial strain. Thus, investors must balance impressive near-term profitability against long-term vulnerabilities from rising CapEx, leverage, and customer concentration.

Implication

The strong EBITDA margins highlight operational efficiency but do not address CoreWeave's core financial risks, including high leverage and customer concentration. Rising CapEx is necessary for growth but could pressure cash flows, making debt service and diversification more challenging. Customer concentration remains a pivotal threat, where any loss of a major client could rapidly erode profitability and contract backlog value. Valuation at ~79x EV/EBITDA appears stretched given these risks and competitive pressures in the AI infrastructure space. Therefore, while Q3 results are positive, they reinforce the need for improved cash flow and reduced leverage before considering equity investment, aligning with a cautious stance.

Thesis delta

The new article confirms CoreWeave's ability to generate high EBITDA margins, but it does not mitigate the underlying risks identified in the DeepValue report, such as extreme leverage and customer concentration. Thus, the thesis remains unchanged: CoreWeave is a potential sell due to unsustainable margins amid rising CapEx, with no material improvement in key risk factors.