Nebius' 45% Margin Marks a Turning Point as Capacity Constraints Become Pricing Leverage

The narrative around Nebius has shifted decisively. For a company whose stock was once defined by losses and speculative promise, the latest quarterly numbers tell a different story—one where pricing power and operational heft are starting to deliver real financial returns. The AI cloud provider posted a first-quarter revenue of $399 million, a 684% surge from a year earlier, while adjusted EBITDA swung from a $53.7 million loss to a $129.5 million profit. That translated into an EBITDA margin of 45%, up from roughly 23% in the prior period.

The improvement is not a one-off. Management has set long-term EBIT margin targets of 20% to 30%, but the immediate trajectory suggests the company is already operating well within that band on an adjusted basis. The core AI cloud business alone accounted for $389.7 million in revenue—about 98% of the total—and annualized recurring revenue (ARR) hit $1.92 billion at the end of March, up from $1.25 billion in December 2025.

Wall Street took note. Goldman Sachs reiterated its buy rating and $205 price target, pointing to three drivers: expanding capacity, strong pricing, and high utilization. Morgan Stanley raised its target to $144 from $126, but kept an equal-weight rating, citing a wide valuation range. The bank's optimistic scenario sees Nebius at $400 if it brings more than 5 gigawatts of power online by 2030. Other analysts were more aggressive: DA Davidson lifted its target to $250 from $200, and Citizens jumped to $270 from $175. Freedom Capital stands as the lone holdout, having downgraded in April from "Strong Buy" to "Hold" on valuation grounds—the stock trades at roughly 16 times forward sales.

Should investors sell immediately? Or is it worth buying Nebius?

Capacity, not demand, is the binding constraint. Nebius has already secured over 3.5 gigawatts of contracted power, surpassing its earlier 3-gigawatt annual target, and now aims to exceed 4 gigawatts by year-end. More than three-quarters of that will be owned infrastructure, giving Nebius greater control over costs and utilization. A new site in Pennsylvania adds up to 1.2 gigawatts of potential power. The capital required is enormous: the company's 2026 investment program calls for $16 billion to $20 billion in spending, a staggering sum against a market capitalization of roughly $52 billion.

To complement the raw compute play, Nebius has been building a software layer. Recent acquisitions of Tavily, Eigen AI, and Clarifai strengthen search, inference platforms, and orchestration—moving the company beyond pure GPU rental. The message is that Nebius wants to be a full-stack AI infrastructure provider, not just a capacity broker.

The stock surged more than 18% on the results, a move amplified by short covering. Over 20% of the free float was sold short, according to the primary report, and any positive catalyst can trigger rapid buying pressure. The key test comes in the third quarter, when Nebius expects a meaningful capacity ramp. If execution stays on track, even Morgan Stanley's cautious stance could look conservative. Any delays, however, would vindicate the skeptics who argue the valuation already prices in perfection.

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Nebius Stock: New Analysis - 15 May

Fresh Nebius information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.

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