Nebius Group's Q3 2025 Earnings Call: Contradictions Emerge on Capacity Constraints, Large Deals, and 2025 ARR Guidance

Date of Call: November 11, 2025

Financials Results

• Revenue: $146 million in Q3, up nearly 355% YOY and up 39% sequentially; core infrastructure ≈90% of revenue (core grew ~400% YOY and 40% QoQ); annualized run rate (core) at end-September $551 million
• Operating Margin: Adjusted EBITDA margin for the core infrastructure business nearly 19%, expanded quarter over quarter

Guidance:

• Full-year 2025 group revenue tightened to $500–$550M, pacing to the midpoint
• End-2025 ARR guidance reiterated at $900M–$1.1B; 2026 ARR target (annualized run rate) $7B–$9B
• Microsoft and Meta revenue to ramp predominantly in 2026 (Microsoft tranches mostly in 2026; Meta deployments concluding within ~3 months)
• Plan to secure 2.5 GW contracted power and 800 MW–1 GW connected power by end-2026
• Expect adjusted EBITDA slightly positive at group level by year-end, but negative for full-year 2025
• 2025 CapEx raised to ~ $5B; financing via corporate debt, asset-backed financing, and equity (ATM up to 25M Class A)

Business Commentary:

* Strong Demand and Capacity Constraints: - Nebius Group reported Q3 revenue of $146 million, up nearly 355% year over year and 39% quarter over quarter. - The growth was driven by strong demand, with all available capacity sold during the quarter, and new deals signed, including a $3 billion contract with Meta and a previously announced $17.4-$19.4 billion deal with Microsoft.

• Infrastructure and Capacity Expansion:
• Nebius plans to increase its contracted power to 2.5 gigawatts by 2026 and have 800 MW-1 GW of connected capacity by the end of the year.

• This expansion is due to the need to meet growing demand, as current capacity constraints limit revenue growth.

• Product Innovation and Market Expansion:

• The company launched the enterprise-ready cloud platform version 3.0, called Aether, and Nebius Token Factory for open-source model inference.

• These new products are aimed at expanding Nebius's addressable market, particularly among enterprise customers and AI startups.

• Financial Performance and Future Outlook:

• Nebius achieved an adjusted EBITDA margin for the core infrastructure business of nearly 19% quarter over quarter.
• The company targets an annualized run rate revenue ARR of $7 billion-$9 billion by the end of 2026, driven by capacity expansion and large, long-term deals.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly emphasized strong demand and contract wins: "Q3 demand was very strong. We sold out all of our available capacity." They announced a new Meta contract of "approximately $3 billion" and cited Q3 group revenue of "$146 million, up nearly 355% year over year," while forecasting ARR of $7B–$9B for 2026 and accelerating capacity to remove current bottlenecks.

Q&A:

• Question from Alex Platt (DA Davidson): Can you tell us more about the new Meta deal? Why did you choose? Why would they choose you, and how should we model the deal?
  Response: Meta deal ≈$3B over five years; size limited by available capacity—would have been larger with more capacity; mega deals provide financing and accelerate building the core AI cloud.

• Question from Alex Duvall (Goldman Sachs): We provided the updated 2026 ARR outlook of $7–9 billion. What exactly is in the $7–9 billion ARR target? Is this based on pre-existing core business plus Microsoft and Meta? Is there anything else in terms of signing up for large deals?
  Response: The $7–9B ARR is built from current sold capacity, planned new capacity, and the long-term Microsoft and Meta contracts; management says more than half of that ARR is already booked.

• Question from Alex Duvall (Goldman Sachs): Can you walk us through the timeline of your infrastructure build-out for Q4 2025 and 2026? What gives you confidence that you can reach your 2.5 gigawatts goal of contracted capacity?
  Response: Rolling launches (Israel, UK live; Finland phase in Q4; New Jersey and additional US/EU sites in H1 2026); target is 800MW–1GW connected and 2.5GW contracted by end-2026, supported by LOIs and site pipeline.

• Question from Online Participant (Unspecified): How should we be thinking about revenue contribution from Microsoft and Meta deals for this year and going forward?
  Response: Microsoft will have minimal impact in 2025 (first tranche delivered); most Microsoft and Meta revenue ramps in 2026, with Meta deployments concluding in ~3 months and largely at full run rate in 2026.

• Question from Online Participant (Unspecified): What does the overall demand environment look like in Q4 and into the next year?
  Response: Demand is accelerating materially: PipeGen expanded ~70% QoQ with $4B pipeline in Q3; capacity constraints forced turning away customers.

• Question from Neil Chulgki (Northland): Incremental ARR in September quarter was around $12 million, down from $180 million in the prior quarter and $159 million in the March quarter. Why is incremental ARR down?
  Response: Incremental ARR fell because capacity was the binding constraint; management expects significantly higher incremental ARR in Q4 as more capacity is brought online.

• Question from Online Participant (Unspecified): How are you thinking about CapEx and what is your philosophy on CapEx spending?
  Response: CapEx is staged—secure land/power (small %), build connected data centers (~18–20%), then GPUs (~~80%); GPU purchases are paced to contracted/visible demand; 2025 CapEx raised to ~ $5B.

• Question from Alex Duvall (Goldman Sachs): You have announced your target is 2.5 gigawatts of contracted power... Is it fair to assume that if you get 2.5 gigawatts, this will equate to over $20 billion of revenue? By when do you envisage you could do this and how?
  Response: 2.5GW could imply very large revenue, but realization depends on GPU deployment timing, capital availability and visible demand; management is securing power now to enable rapid scale when funded and demanded.

• Question from Online Participant (Unspecified): When you are sold out, is that the same issue, or is that really an issue with your future growth and differentiation of servicing a broader range of customers?
  Response: Being sold out is a capacity-management issue; future deployments will be allocated by deal economics to balance mega contracts and enterprise/startup customers to preserve strategic relationships.

• Question from Online Participant (Unspecified): Why are you planning to pursue an ATM after completing a secondary—won't this add dilution to shareholders?
  Response: ATM (up to 25M Class A) provides an efficient, ongoing equity access tool to fund growth alongside debt and asset-backed financing; management remains dilution-sensitive.

• Question from Online Participant (Unspecified): How long between power being connected and when it is hooked up to GPUs and generating revenue?
  Response: Typical lead time is 6–12 weeks from connected power to revenue-generating GPU deployment; shorter if expanding an existing site.

• Question from Online Participant (Unspecified): You recently launched Token Factory. What is the opportunity around this? Will this expand your market or open up new segments?
  Response: Token Factory is an inference-as-a-service platform enabling enterprises/ISVs to run open-source models with guaranteed performance and transparent token costs, broadening Nebius' addressable market for inference workloads.

• Question from Online Participant (Unspecified): What demand are you seeing for the new Blackwell generation versus the previous Hopper generation?
  Response: Strong demand across both Hopper and Blackwell; many customers renew or upgrade immediately, Blackwell capacity (B200/B300/GB300) largely pre-sold and Nebius is early to market in Europe.

• Question from Andrew Beal (Aratay): Can you provide more details regarding some of the Greenfield sites? Do you have LOIs for further new US and EU DC locations, or are you further down the road with these?
  Response: There is a robust US/EU pipeline with LOIs and further advanced discussions; management declined to disclose specifics but said progress is underway toward the 2.5GW roadmap.

• Question from Online Participant (Unspecified): Any chance GPUs will be oversupplied next year as new suppliers come to market?
  Response: Management expects the market to remain supply-constrained at least through 2026; their staged CapEx approach mitigates overspend risk and preserves financial flexibility.

Contradiction Point 1

Capacity Constraints and Revenue Impact

It involves differing explanations of how capacity constraints affect incremental ARR, which directly impacts revenue expectations.

Why is incremental ARR down to $12 million in the September quarter compared to $180 million in the prior quarter and $159 million in the March quarter? - Neil Doshi (Northland)

2025Q3: Revenue and ARR are limited by our capacity. Because capacity has been the bottleneck, we've seen a decline in incremental ARR. However, as we're bringing on a lot of capacity in Q4, you should see that incremental ARR in Q4 will be significantly higher. - Arkady Volozh(CEO)

What are the ARR trends for the year? Can you provide an ARR update for this quarter? - Nehal Chokshi (Northland)

2025Q2: Annualized run rate revenue grew from $249 million in March to $430 million in June. The positive trajectory continues into July, with significant portions already under contract. - Dado Alonso(CFO)

Contradiction Point 2

Large Deals and Revenue Expectations

It involves differing expectations regarding the impact of large deals on revenue growth, which is crucial for investor expectations.

What is included in the $79 billion ARR target? Is it based on existing core business plus Microsoft and Meta? Are there other factors in securing large deals? - Alex Duvall (Goldman Sachs)

2025Q3: $7 billion-$9 billion in ARR is based on several factors: unblocking capacity constraints, increased demand from AI startups to enterprises, and planned capacity growth with Microsoft and Meta contracts. The capacity we are putting in place, along with existing capacity and long-term deals, gives us confidence in achieving the target. - Mark, Go-to-Market Executive

Reaching 1 gigawatt of contracted power by 2026—how should we model next year's revenue? - Alex Platt (D.A. Davidson)

2025Q2: Too early for 2026 guidance, but our midterm outlook stands with revenues in the mid-billions, assuming capacity growth from 2025 levels. This outlook excludes large deals from frontier AI labs or hyperscalers. - Marc D. Boroditsky(CRO)

Contradiction Point 3

Capacity Expansion and Growth Strategy

It involves the company's strategy for capacity expansion and growth, which directly impacts revenue projections and market positioning.

Do we have medium-term capacity for these deals and customers? - Alex Platt(DA Davidson)

2025Q3: We are very opportunistic. We will enter into deals which provide us with the best margins. We are very much focused on margins and profitability, not only on growth itself. - Arkady Volozh(CEO)

What is the midterm revenue and EBITDA guidance, and what are the key factors to achieve it? - Neil Doshi(Nebius Group)

2025Q1: Key factors for revenue growth include scaling capacity and securing longer-term contracts, especially from enterprise-level customers. - Roman Chernin(CBO)

Contradiction Point 4

2025 ARR and Revenue Guidance

It involves changes in financial forecasts, specifically regarding annual recurring revenue (ARR) and revenue guidance, which are crucial for investor expectations.

What exactly is included in the $79 billion ARR target? - Alex Duvall(Goldman Sachs)

2025Q3: $7 billion-$9 billion in ARR is based on several factors: unblocking capacity constraints, increased demand from AI startups to enterprises, and planned capacity growth with Microsoft and Meta contracts. - Mark, Go-to-Market Executive

What is the latest update on Nebius's revenue and EBITDA guidance? - Neil Doshi(Nebius Group)

2024Q4: We reiterate our guidance for exiting 2025 at $750 million to $1 billion ARR. - Neil Doshi(Head of IR)