Nebius rally reflects real demand but valuation still prices perfection

What happened

Nebius’ stock has surged roughly 300% in the past year after management reported strong Q3 results, raised power‑capacity guidance, and said all new AI capacity is sold out alongside large contracts with Microsoft, Meta and other hyperscalers. The Seeking Alpha piece frames this as hypergrowth and cites analyst forecasts for rapid revenue expansion, but the DeepValue master report shows the company’s revenue ramp (from ~$21m in 2023 to $302m in 9M25) is paired with heavy, front‑loaded capex (~$2.0bn 9M25) and deeply negative group free cash flow until very recently. Nebius segment EBITDA turned positive in mid‑2025, and a $4.8bn cash balance provides runway, yet group EBITDA remains negative, interest coverage is hugely negative and net debt/EBITDA sits at a risky ~6.6x once the investment cycle is considered. The recent claim that capacity is “sold out” and the existence of hyperscaler deals are meaningful validation, but the filings show limited public disclosure on contract tenure, pricing or committed minimums — critical details that determine recurring economics versus one‑off bursts. In short: demand is real and upside is plausible if ramps, utilization and contract economics prove durable, but the equity currently trades as a long‑duration option on flawless execution with almost no margin of safety if any of those levers disappoint.

Implication

The market is pricing Nebius as if hyperscaler contracts, high utilization and durable margins are guaranteed; that reduces margin of safety and makes new purchases speculative. Investors should trim positions or maintain only a small, option‑sized stake unless the company provides transparent contract terms (multi‑year commitments, minimums, pricing) and sustained Nebius segment EBITDA with improving group FCF. Key near‑term monitors are: disclosed contract backlog and ramp schedule, utilization rates at Vineland/Kansas City sites, capex cadence and any equity/convertible issuance that would dilute current holders. If Nebius proves recurring revenue from hyperscaler deals and shows capex moderation leading to materially positive FCF, the thesis improves; absent that, a sell‑off or multiple compression is the more likely outcome. Risk‑tolerant investors may keep a small exposure to the upside, but risk‑averse or value‑focused portfolios should reduce weight now.

Thesis delta

The new article underscores market enthusiasm by highlighting sold‑out capacity and hyperscaler contracts that could materially validate Nebius’ go‑to‑market; DeepValue already noted these deals but insisted they must be backed by disclosed committed economics. The overall stance shifts only marginally: demand signals increase the probability of upside, but valuation and cash‑flow/leverage risks still make the stock unattractive for new capital absent clearer contract disclosures and sustained positive group FCF.