CoreWeave's Sharp Selloff Amid CapEx Cut and Backlog Resilience

What happened

CoreWeave's stock plummeted 47% after Q3 2025 earnings, primarily due to a reduced capital expenditure guidance from $20-23B to $12-14B caused by delays in third-party powered shell deliveries. Despite this, the company reported a massive $55.6 billion backlog, nearly doubling sequentially, and strong Q3 revenue growth of 134% year-over-year to $1.4 billion. The Seeking Alpha article contends the selloff is irrational, arguing the backlog remains intact and reflects no loss in contract value. However, the DeepValue report highlights persistent risks, including extreme customer concentration with one client accounting for 67% of Q3 revenue and high leverage with a net debt to EBITDA ratio of 19.3x. These underlying vulnerabilities, coupled with supply chain constraints and intense competition, suggest the market's reaction may be grounded in justified concerns over execution and financial stability.

Implication

The selloff underscores the market's heightened sensitivity to operational delays and capital expenditure adjustments, emphasizing the need for close monitoring of CoreWeave's capacity ramp and supply chain management. While the $55.6 billion backlog offers near-term revenue visibility, the heavy reliance on a single customer increases exposure to demand shocks or cancellations. CoreWeave's substantial debt load and weak interest coverage ratio of 0.15x amplify financial risks, particularly if revenue growth falters or interest rates rise. Positive factors like strong AI demand and NVIDIA partnerships are offset by industry-wide GPU supply bottlenecks and power constraints, which could hinder growth. Overall, maintaining a hold stance is prudent until there is clear evidence of improved customer diversification, deleveraging progress, and smoother execution of capacity expansions.

Thesis delta

The recent selloff does not warrant a shift in investment thesis, as CoreWeave's core risks of high customer concentration and leverage remain unaddressed. While the backlog strength and revenue growth are positive, they do not outweigh the execution and financial vulnerabilities highlighted in the DeepValue report. Thus, the hold recommendation persists, pending tangible improvements in risk mitigation.