Nebius Q4 Surge Masks Critical Power Bottleneck; Execution Risk Mounts

What happened

Nebius Group reported exceptional Q4 2025 results with revenue growth of 547% year-over-year and AI cloud revenue up 800%, driven by strong demand for its AI infrastructure. However, the company now faces mounting energy infrastructure constraints, explicitly stating that growth is gated by the pace of converting contracted megawatts into connected and monetizable power, not by lack of demand. This aligns precisely with the DeepValue master report's warning that Nebius's valuation hinges on observable de-risking signals like contracted-to-active power conversion and contract-backed debt funding. Management targets 800 MW to 1 GW connected power by end-2026, but grid bottlenecks raise schedule and valuation risks, as the stock remains priced for flawless execution amid high capital intensity and financing dependencies. Thus, despite impressive top-line performance, the core narrative shifts from growth euphoria to execution scrutiny, with infrastructure delays threatening to undermine financial projections.

Implication

The stellar Q4 growth masks underlying bottlenecks in energy infrastructure, making near-term stock performance highly sensitive to Nebius's ability to hit connected power targets without relying on dilutive equity issuance. Financing remains a critical overhang, with the Microsoft agreement contingent on securing additional debt, and any shift toward ATM usage could compress per-share upside despite operational progress. Grid delays or slower power conversion could push the company toward its bear case scenario, where active power stalls near 170 MW and cash burn forces elevated equity issuance, potentially halving the stock's value. This reinforces the DeepValue report's 'WAIT' call, suggesting that entry points below $75 offer better risk-reward after visible de-risking on both infrastructure and capital structure. Therefore, a patient, evidence-based approach is warranted, with investors prioritizing quarterly updates on active MW growth and debt versus equity financing trends.

Thesis delta

The news does not materially shift the investment thesis but intensifies the focus on energy constraints as an immediate and critical gating factor, validating the report's emphasis on execution risks over demand. It underscores that growth alone is insufficient without parallel progress in infrastructure conversion, keeping the 'WAIT' rating intact until clearer de-risking signals emerge in the next 3-6 months.