Nebius Group's Q2 2025 Earnings: A High-Growth AI Infrastructure Play with Strong EBITDA Momentum and Aggressive Scaling Plans

Nebius Group (NASDAQ: NBIS) has emerged as a standout player in the AI infrastructure sector, delivering explosive revenue growth, improving EBITDA margins, and aggressive infrastructure expansion in Q2 2025. For investors assessing the company's long-term scalability and operational leverage, the latest earnings report paints a compelling picture of a business poised to capitalize on the surging demand for AI compute and cloud services.

Operational Leverage: Revenue Growth Outpaces Costs

Nebius reported Q2 2025 revenue of $105.1 million, a 625% year-over-year (YoY) increase and 106% quarter-over-quarter (QoQ) growth. This acceleration reflects the company's ability to scale its AI cloud platform, which is tailored for intensive workloads like large language models (LLMs) and generative AI. The core business achieved positive Adjusted EBITDA, exceeding expectations, while the overall EBITDA loss narrowed to $21.0 million for the quarter—a 64% improvement compared to Q2 2024.

The gross margin for Q2 2025 hit 71.4%, up sharply from 46.65% in Q1 2025, signaling stronger cost discipline and pricing power. This improvement is critical for operational leverage, as it demonstrates Nebius's ability to generate higher profitability per dollar of revenue. However, operating expenses (OPEX) remain a drag, rising 71% YoY to $216.3 million, driven by product development, depreciation, and data center expansion. While OPEX as a percentage of revenue spiked to 206%, the absolute rate of growth in expenses (71%) lags behind revenue growth (625%), suggesting improving efficiency as scale increases.

Scalability: Powering the AI Infrastructure Boom

Nebius's long-term scalability hinges on its infrastructure expansion. The company is securing 1 gigawatt (GW) of power by 2026, with 220 megawatts (MW) of connected power expected by year-end 2025. Key projects include:
- New Jersey: 200 MW of contracted power, with 100 MW available in 2025.
- Finland: 75 MW expansion, on track for completion by 2025.
- New Data Centers: Launches in the UK, Israel, and Kansas City, with two U.S. greenfield sites in advanced discussions.

These efforts align with the global AI infrastructure market's projected growth, which is expected to exceed $100 billion by 2027. Nebius's focus on proprietary software and hardware (e.g., NVIDIA's Blackwell GPUs) positions it to capture a significant share of this market. The company's $2 billion capital expenditure (capex) forecast for 2025—up from $1.5 billion—underscores its commitment to scaling compute capacity and meeting surging demand.

Risks and Considerations

While Nebius's growth trajectory is impressive, investors must weigh several risks:
1. Capital Intensity: The company's EBITDA loss for the first half of 2025 was $74.7 million, down 36% from the same period in 2024. Sustaining profitability will require disciplined cost management as capex and OPEX rise.
2. Competition: Major cloud providers (e.g., AWS, Microsoft Azure) are also expanding AI infrastructure, potentially pressuring margins.
3. Supply Chain Constraints: Delays in GPU procurement or power availability could slow expansion.

Investment Thesis: A High-Risk, High-Reward Play

Nebius Group's Q2 2025 results validate its position as a high-growth AI infrastructure leader. The company's ability to achieve positive Adjusted EBITDA in its core business, coupled with aggressive infrastructure scaling, suggests strong operational leverage as revenue accelerates. However, the path to profitability remains challenging, with OPEX and capex outpacing near-term earnings.

For investors with a long-term horizon and a tolerance for volatility, Nebius offers an attractive opportunity to participate in the AI infrastructure boom. The key metrics to monitor include:
- ARR Guidance: The raised $900–$1.1 billion range for 2025 reflects confidence in customer retention and new demand.
- Gross Margin Trends: Sustaining a 70%+ gross margin will be critical for long-term profitability.
- Infrastructure Utilization: Efficient deployment of new data centers and GPU capacity will determine scalability.

Conclusion

Nebius Group's Q2 2025 earnings highlight a company in hypergrowth mode, leveraging AI's explosive demand to scale revenue and improve margins. While the path to profitability is not without risks, the company's strategic focus on infrastructure expansion, proprietary technology, and global market capture positions it as a compelling long-term investment. For those willing to ride the volatility, Nebius represents a high-conviction bet on the future of AI.

Investment Advice: Consider a small to medium position in Nebius Group for a high-growth portfolio, with a focus on long-term horizons (3–5 years). Monitor quarterly EBITDA trends and infrastructure utilization rates to assess progress toward profitability.