Nebius Q3 results exceed expectations, capital expenditure rises to $27 billion, ARR target postponed, stock falls over 14% pre-market | Earnings Report Insights

AI cloud computing company Nebius Group announced its third-quarter results, with both revenue and profit exceeding market expectations. However, the combination of a lowered ARR growth guidance and a significant increase in capital expenditures has raised doubts among investors about its profitability path, causing its share price to drop more than 14% in pre-market trading.

In Q3, Nebius reported revenue of $981 million, about 6.7% higher than the market consensus of $919 million. Adjusted EBITDA stood at $466 million, also significantly above expectations of $357 million. However, the company lowered its annual recurring revenue (ARR) target from the previously promised "reaching $7 to $9 billion by December 2026" to "more than $7 billion by February 2027." At the same time, the company stated that "ARR is no longer the right metric to measure the business," which has cast doubt on the clarity of its strategic direction.

It is worth noting that on the same day, broad selling sentiment was seen in the semiconductor sector as well, with CoreWeave also dropping about 10% in pre-market trading. Some market participants believe the magnitude of Nebius’ decline resonated with broader sector sentiment and cannot be entirely separated out.

In the third quarter, Nebius achieved revenue of $981 million, up 571% year-on-year. Adjusted EBITDA reached $466 million, compared to a loss of $5.2 million in the same period last year, marking a significant turnaround. Cumulative revenue for the first three quarters reached $1.962 billion, a year-on-year increase of 549%. Cumulative adjusted EBITDA reached $832 million.

On the cost side, total operating costs and expenses for Q3 were $930 million, lower than analysts’ expectations of $1.16 billion, demonstrating some cost control capability. Depreciation and amortization expenses stood at $355 million, accounting for approximately 36% of revenue, reflecting the company's rapidly growing asset base.

Q3 capital expenditures were approximately $7.3 billion, with ending cash and cash equivalents at $7.426 billion. According to GAAP, the net loss from continuing operations in the third quarter was $37.5 million, but adjusted net profit was $90.9 million.

Nebius maintains its expectation that full-year 2026 revenue will be at the lower end of the $3 billion to $3.4 billion range, and for the first time provides guidance for 2027, forecasting revenue to reach between $12 billion and $13 billion.

However, what the market is focusing on is the substantial increase in capital expenditure. The company has raised its 2026 capital expenditure guidance from the previous $20 to $25 billion to approximately $27 billion. For 2027, capex is planned at between $40 billion and $45 billion, to support the addition of over 1 GW of computing capacity. This level of sustained investment means that the company’s free cash flow will be under considerable pressure in the medium term.

The company simultaneously postponed its ARR target from "December 2026" to "February 2027," with the lower end of the target also narrowed to "above $7 billion." Moreover, the company hinted that it may adopt other metrics instead of ARR to measure business progress in the future, increasing uncertainty for external comparability of performance tracking.

As of September 30, 2026, Nebius had total assets of $38.744 billion, more than doubling from $12.43 billion at the end of 2025, mainly driven by rapid expansion in net property and equipment—which reached $12.431 billion at period end.

In the first three quarters, the company raised approximately $16.618 billion in net cash from financing activities, including proceeds from $5.75 billion in convertible notes issuance, $3.809 billion from treasury stock sales, and $773 million in long-term loans. Meanwhile, cash outflows from investing activities amounted to $15.924 billion, mainly spent on acquiring property and equipment.

At the end of the reporting period, total share capital stood at 292,902,405 shares, including 259,597,352 class A shares, 33,305,053 class B shares, and 29,138,539 class A treasury shares excluded from circulation.

Nebius positions itself as a full-stack AI cloud platform for developers and enterprises, covering the entire chain from data processing and model training to production deployment, serving startups and large enterprises worldwide building AI products, agents, and services.

In addition to its core AI cloud business, the group also includes Avride (an autonomous driving and delivery robot developer), tech career retraining platform TripleTen, and equity investments in ClickHouse and Toloka. Notably, since a third-party investment transaction completed in Q2 2025, Nebius no longer holds a majority voting stake in Toloka, which has since been deconsolidated and is now accounted for under the equity method.

Founder and CEO Arkady Volozh has issued a public quarterly letter to shareholders regarding the Q3 results and will host an earnings call at 8:00 a.m. ET on November 12.