Nebius Q2 Earnings: Growth Rates Matter—Does the AI Infrastructure Giant Justify Its Stretched Valuation?

The AI revolution is no longer a distant promise—it's a $60 billion+ market in 2025, and companies like Nebius Group (NASDAQ: NBIS) are at the forefront. But with a Price-to-Sales (P/S) ratio of 40.81, nearly 14 times the sector median, and a Price-to-Book (P/B) ratio of 4.10, investors are left asking: Does Nebius's explosive revenue growth and strategic AI infrastructure positioning justify its stretched valuation?

The Q2 Earnings: A Tale of Two Metrics

Nebius's Q2 2025 results were a masterclass in balancing growth and risk. Revenue surged to $105.1 million, a 625% year-over-year increase and 106% sequential growth, driven by surging demand for AI compute and infrastructure. The company raised its Annualized Run-Rate Revenue (ARR) guidance to $900 million–$1.1 billion for 2025, a 30% upward revision.

Yet, the financials tell a darker story. Despite the revenue pop, Nebius reported a net loss of $91.5 million, up from $61.6 million in Q2 2024. Adjusted EBITDA also remained in the red at $21 million, though this marked a 64% improvement from the previous year. The disconnect? Capital expenditures (CapEx) spiked 221% YoY to $510.6 million, as the company races to secure 1 gigawatt of power by 2026 to fuel its AI data centers.

Valuation: A High-Stakes Gamble

Nebius's valuation metrics scream “overpriced” by traditional standards. Its P/S ratio of 40.81 dwarfs the sector median of 2.90, while its P/B ratio of 4.10 is above the industry average. Yet, when compared to peers like CoreWeave (EV/Sales of 19.40), Nebius appears undervalued. The AI infrastructure sector's average EV/Sales ratio is 25.8x, but Nebius's core business trades at just 7.14x, assuming it hits its $700 million–$1 billion revenue target.

This discrepancy highlights a critical question: Is the market underestimating Nebius's potential? The company's 625% YoY revenue growth and positive Adjusted EBITDA ahead of schedule suggest it's on a path to profitability. Its strategic partnerships with NVIDIA, including early access to Blackwell GPUs, also position it to dominate the next wave of AI workloads.

Strategic AI Infrastructure: A Double-Edged Sword

Nebius's bet on AI infrastructure is both its greatest strength and its most significant risk. The company is building out a global network of data centers optimized for AI, with a focus on high-performance computing (HPC) and custom-designed hardware. This vertical integration could give it a cost edge as AI workloads scale.

However, the capital intensity of the business is staggering. Nebius's operating expenses in Q2 totaled $216.3 million, or 206% of revenue, with depreciation and amortization alone accounting for 72% of sales. This suggests the company is burning cash to build a future where AI infrastructure is commoditized.

The Investment Case: Growth vs. Value

For growth investors, Nebius's 385% YoY revenue growth in Q1 and $502.5 million net income from continuing operations in Q2 2025 (vs. a $116.9 million loss in 2024) are compelling. Analysts like Goldman Sachs have set a $68 price target, implying a 30% upside from current levels.

But value investors should be wary. Nebius's ultra-expensive valuation (Value Grade F) and high leverage (despite a net cash position of -$1 billion) make it a speculative bet. The company's ARR guidance of $900 million–$1.1 billion is ambitious, and missing these targets could trigger a valuation collapse.

Final Verdict: A High-Risk, High-Reward Play

Nebius's Q2 results underscore its role as a key player in the AI infrastructure race. Its strategic positioning, NVIDIA partnerships, and aggressive expansion plans justify optimism. However, the stretched valuation and capital-intensive business model mean investors must tolerate significant risk.

Investment Advice:
- Buy for growth investors who can stomach volatility and are betting on AI's long-term dominance.
- Avoid for value investors seeking immediate profitability or conservative returns.
- Monitor closely for signs of margin expansion or delays in infrastructure scaling.

Historical data from 2022 to the present reveals a critical nuance: Nebius has consistently underperformed in the short term following earnings releases. A backtest shows a 3-day, 10-day, and 30-day win rate of 0.00% after earnings, with a maximum return of -2.01% recorded on August 7, 2025. This pattern suggests that market participants have historically reacted negatively to earnings reports, regardless of the company's underlying growth. For investors, this underscores the importance of managing expectations around short-term volatility and aligning strategies with long-term fundamentals.

In the end, Nebius is a company that's betting its future on the AI boom. If it wins, the rewards could be massive. But in a sector where valuations are as speculative as the technology itself, the line between genius and folly is razor-thin.