Nebius Q4 Earnings Expose Cash Flow Strength Amid Soaring CAPEX Burn

What happened

Nebius Group's Q4 earnings reveal a stark contrast between its eye-catching 855x GAAP P/E and robust operating cash flow of $834 million, buoyed by unearned revenue inflows despite negative EPS figures. The company's cash generation improved as it monetizes prepaid AI cloud contracts, yet this masks deeper financial pressures. CAPEX surged to $2.1 billion in the quarter—over twice operating cash flow—driven by aggressive AI infrastructure expansion and data center buildout. This aligns with the DeepValue report's warning of extreme capital intensity, where FY2025 capex hit $4.07 billion against $529.8 million revenue, underscoring execution risks. Ultimately, the earnings highlight Nebius' cash flow resilience but reinforce that its growth story remains tethered to risky, capital-heavy execution.

Implication

The strong operating cash flow indicates Nebius is effectively converting prepaid contracts into liquidity, reducing near-term financial strain. However, CAPEX vastly outpacing cash flow signals ongoing heavy investment that demands external capital, raising dilution risks if equity issuance is needed. Key milestones like Meta's Feb-2026 tranche delivery and Microsoft financing closure are now more critical, as failures could trigger contract terminations and slow revenue growth. This intensifies the need for investors to monitor execution closely, as the company's margin of safety remains negligible without proof of on-time deployments. Therefore, maintaining a cautious stance aligns with the DeepValue report's 'WAIT' rating, prioritizing evidence over narrative until these binary outcomes resolve.

Thesis delta

The Q4 earnings data does not shift the core investment thesis but sharpens its focus on cash flow versus capex dynamics. It reinforces that Nebius' valuation relies on perfect execution and financing, with no margin for error in tranche deliveries or capital raising. Investors should view this as a confirmation to stay patient, awaiting clearer signals from upcoming contract milestones before committing capital.