Nebius Hits EBITDA Profitability on AI Demand Surge, But Capex and Cash Flow Risks Undermine Durability

What happened

Nebius Group announced profitability on an EBITDA basis for Q4 2025, driven by exploding AI cloud demand, as highlighted in a recent Seeking Alpha article. However, the DeepValue master report reveals this adjusted metric masks a GAAP net loss of $249.6 million, with $180.7 million in depreciation from aggressive $4.1 billion annual capex. Positive operating cash flow of $834.3 million was primarily fueled by upfront customer payments, not sustainable core operations, underscoring reliance on prepaid contracts. Critical risks persist, including high customer concentration, un-remediated material weaknesses in internal controls, and dependency on external financing with dilution risk. Thus, while EBITDA profitability signals demand strength, the investment thesis remains unchanged, awaiting proof of financeability without dilution and consistent delivery execution.

Implication

The EBITDA profitability indicates operational scaling and cost management amid AI demand, which may temporarily boost investor sentiment and support valuation. However, it does not translate to GAAP profitability due to heavy depreciation from capex, meaning losses persist and cash flow is propped by non-recurring upfront payments. With capex expected to stay near $4.1 billion run-rate, financing needs remain acute, raising the specter of dilution via ATM issuance or unfavorable debt terms. Customer concentration and delivery slippage risks could quickly erode cash inflows, forcing equity raises under weak conditions. Therefore, maintaining a 'WAIT' stance is prudent, focusing on the next two quarters for sustained positive operating cash flow and power-connect milestones without dilution.

Thesis delta

The news of EBITDA profitability does not shift the core investment thesis; it merely confirms demand strength while reinforcing the same critical dependencies. The thesis still hinges on verifying financeability without dilution and proving delivery-to-revenue conversion through operating cash flow and power-connect milestones over the next quarters. No delta is warranted, as the 'WAIT' rating and monitoring points remain valid until these proofs materialize.