Nebius stock NBIS gained 2% in premarket trading on Wednesday after William Blair initiated coverage of the AI-focused cloud provider with an ‘Outperform’ rating.
Analyst Jason Ader said Nebius has several attributes that could help it become a differentiated AI-native cloud platform, including infrastructure scale, software capabilities, major customer relationships and access to low-cost capital, according to TheFly.
William Blair sees Nebius as differentiated
Ader described Nebius as “not just another neocloud”, and said the company’s current valuation does not fully reflect its long-term earnings potential.
William Blair highlighted Nebius’ infrastructure scale and software capabilities, alongside its relationships with major customers and access to capital, as factors that could differentiate the company from other neocloud providers.
The initiation follows a bullish call from BNP Paribas last week.
The firm upgraded Nebius to ‘Outperform’ from ‘Neutral’ and raised its price target to $399 from $260.
BNP Paribas said Nebius’ outlook had “meaningfully improved” since it began covering the company in June.
The analysts also said Nebius could approach $22 billion in annual recurring revenue by the end of 2027. They added that the company’s eventual 2027 guidance could materially reset market estimates higher.
AI cloud business drives revenue growth
Nebius has rapidly expanded its AI cloud infrastructure as demand for computing capacity increases.
The company reported second-quarter revenue of $582.3 million, representing a 454% increase from a year earlier.
Adjusted EBITDA rose from a loss of $21 million to earnings of $236.2 million, while its adjusted net loss narrowed 64% year over year to $33.2 million.
Nebius said the second quarter was its best commercial quarter, with four major AI cloud deals carrying an average total contract value of more than $1 billion each.
The company has also expanded its customer base and infrastructure. Its five-year agreement with Meta Platforms has a potential value of up to approximately $27 billion.
Nebius said in July that it had more than $40 billion in additional contracted revenue from investment-grade customers, including Microsoft and Meta.
The company also announced a $10 billion expansion to build an AI factory in Finland and has begun validating its first full Nvidia Vera Rubin NVL72 rack at its Finland data centre.
Capital supports Nebius infrastructure expansion
Nebius has also raised significant capital to support its infrastructure expansion. The company closed a $5.75 billion convertible-note offering in August.
The company has Nvidia as a passive stakeholder and has raised prices for leasing selected Nvidia chips on a pay-as-you-go basis from October 1.
Earlier this month, Palantir named Nebius its preferred sovereign AI infrastructure partner under a strategic agreement to provide Nebius compute and inference capabilities to eligible Palantir customers.
According to WSJ data, analysts have a consensus overweight rating on Nebius stock, with 14 buy ratings, one overweight rating, seven hold ratings, one underweight rating, and one sell rating.
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