Nebius stock jumps 40% in two weeks on AI compute demand

Nebius Group's AI cloud business is growing faster than nearly any company in the market, with second-quarter revenue up 454 percent year over year as hyperscalers scramble for scarce compute capacity.

Wall Street expects revenue to climb 446 percent in the third quarter and 526 percent in the fourth, according to consensus estimates, with analysts projecting 250 percent growth in 2027.

Nebius has brought several new data centers online through 2026, expanding its footprint as it races to meet demand from clients building their own AI infrastructure. The company's market value has climbed to about $61 billion, with shares up more than 220 percent year to date and trading near $220.

The growth comes at a cost. Nebius is unprofitable, pouring cash into capital spending to capture market share while the AI build-out lasts. The company this week upsized a convertible notes offering to $5 billion to fund data center expansion, a move that briefly knocked shares down 10 percent.

Compute Shortage Fuels Nebius's Growth

The hyperscalers that lead the cloud infrastructure sector — Microsoft, Amazon, and Google — have booked significant backlogs of business and are trying to secure as much computing power as possible to turn those obligations into revenue. Some of Nebius's biggest clients are companies spending heavily to build computing infrastructure themselves, creating a self-reinforcing cycle of demand.

Nebius operates a neocloud, an AI-first cloud computing service that differs from the general-purpose offerings of the big three. Its focus on AI workloads has made it a direct beneficiary of the GPU shortage that has gripped the industry since Nvidia's latest accelerators became the default choice for training large models.

The company's expansion has been rapid. Several new facilities came online through 2026, and Nebius has said it expects the growth rate to continue into the near future. By the end of next year, the business will have transformed massively from where it stood at the end of 2025.

The Cost of Chasing Market Share

Nebius is spending every penny it can get its hands on. The company this week priced an upsized $5 billion convertible senior notes offering — raised from an initially announced $4.5 billion — to fund data center construction, invest in its full-stack AI cloud platform, and buy key components including graphics processing units.

The offering includes $3 billion of 0.50 percent convertible notes due 2030 and $2 billion of 4.50 percent notes due 2034. Nebius expects net proceeds of about $4.94 billion, which could rise to roughly $5.68 billion if buyers fully exercise options to purchase additional notes. The 2030 notes initially convert at about $313.46 per share, a 40 percent premium to the Aug. 19 closing price of $223.90, while the 2034 notes convert at about $324.65, a 45 percent premium.

Separately, Nebius agreed to exchange $400 million of its 2 percent convertible notes due 2029 and $400 million of its 3 percent notes due 2031 for about 15.8 million Class A shares, a move that could put pressure on the stock as holders sell.

The spending has kept Nebius unprofitable, with a gross margin of 18.81 percent. That should not surprise investors — the company wants to capture market share while it can. But it will eventually have to flip its focus from top-line growth to turning a profit, a transition that could prove difficult given the capital intensity of running data centers.

Given that the AI build-out shows no sign of slowing, it may be years before investors start demanding Nebius prove it can operate its data centers profitably. Shares, which fell about 10 percent on the convertible note news before recovering, still trade well below their 52-week high of $299.86. The question for investors is whether the growth justifies the valuation — and whether Nebius can convert its compute advantage into durable profits before the build-out matures.

This article is for informational purposes only and does not constitute investment advice.