Nebius Group: Is the Recent Share Price Drop a Mispriced Opportunity or a Warning Signal?

The recent volatility in Nebius Group's share price has sparked intense debate among investors and analysts. A 20% plunge following its Q3 2025 earnings report and broader market skepticism about AI stock valuations as reported have raised critical questions: Is this a correction reflecting realistic concerns about profitability, or an overreaction that overlooks the company's long-term growth potential? To answer this, we must dissect Nebius's financial performance, valuation metrics, and its positioning within the AI cloud infrastructure industry.

The Drivers of the Share Price Drop

Nebius's Q3 2025 results revealed a widening net loss of $119.6 million, up from $43.6 million in the same period in 2024. This deterioration, coupled with weaker-than-expected earnings, triggered a sharp sell-off. While the company has secured high-profile contracts-such as a $3 billion deal with Meta and a $19.4 billion agreement with Microsoft-investors remain wary of its ability to translate these into sustainable profits. Rising capital expenditures and operational costs, driven by its aggressive expansion plans (including a target of 2.5 gigawatts of contracted power by 2026), have further fueled concerns about cash burn and long-term viability.

The broader market context also plays a role. As of late 2025, AI stocks face heightened scrutiny amid fears of a valuation bubble. Public infrastructure SaaS companies, for instance, trade at 6.2x next-twelve-months revenue, while Nebius's price-to-sales ratio stands at 106.1x according to market analysis. This stark disparity suggests that the market is recalibrating expectations for high-risk, high-growth tech firms.

Valuation Realism vs. Growth Optimism

Nebius's valuation appears anchored to its projected revenue trajectory. Analysts estimate 2025 revenues at $578.2 million and 2026 revenues at $1.68 billion, with annual recurring revenue (ARR) expected to surge from $430 million in Q2 2025 to $900 million–$1.1 billion by year-end according to forecasts. If these projections materialize, the company's current valuation-though lofty-could be justified by its market leadership in AI infrastructure. Microsoft and Meta's contracts alone provide $22.4 billion in revenue visibility according to industry reports, a figure that underscores its strategic importance in the AI ecosystem.

However, the 106.1x sales multiple is far from typical for most cloud infrastructure firms. For context, the industry's NTM revenue multiples range from 3.3x for general cloud infrastructure to 12.0x for high-growth software companies according to market data. Nebius's premium reflects investor bets on its ability to dominate the AI data stack, but it also exposes the stock to sharp corrections if growth slows or margins fail to improve.

Industry Benchmarks and Strategic Risks

The AI cloud infrastructure sector is polarized. Data infrastructure firms, which align closely with Nebius's offerings, command a 6.2x NTM revenue multiple, suggesting that the market values AI readiness highly. Yet Nebius's losses and capital intensity place it in a riskier category than more commoditized cloud players. Its 106.1x sales multiple is sustainable only if it achieves profitability and maintains its growth trajectory-a tall order given its current financials.

A critical risk lies in its capital expenditures. The company's plan to expand power capacity to 2.5 gigawatts by 2026 is ambitious but could strain liquidity if revenue growth outpaces cost control. Moreover, the AI infrastructure market is becoming increasingly competitive, with rivals like C3.ai and Snowflake Inc. vying for market share. Nebius's ability to retain its first-mover advantage will determine whether its valuation is a mispriced opportunity or a warning signal.

Conclusion: A High-Stakes Bet

Nebius Group's share price drop reflects a tug-of-war between growth optimism and valuation realism. On one hand, its strategic partnerships and revenue visibility position it as a key player in the AI revolution. On the other, its widening losses and capital intensity raise legitimate concerns about scalability and profitability. For investors, the key question is whether Nebius can bridge the gap between its current financial performance and its projected 2030 valuation of $151.9 billion–$217 billion.

If the company executes its expansion plans while improving margins, the recent selloff could represent a buying opportunity. However, given the sector's volatility and Nebius's high leverage to macroeconomic and technological shifts, this remains a high-risk proposition. In the end, the answer hinges on whether the market's skepticism is a rational recalibration or a premature dismissal of a transformative business.