Nebius stock is stuck in a bear market after falling 54% from its all-time high of $300, a decline that coincided with the sell-off in Neocloud companies.
NBIS has dropped to $141, and investors are now focusing on the upcoming earnings report. The results should offer more insight into the company’s business and its relationship with Microsoft.
Nebius Group to publish earnings as AI jitters remain
Nebius, one of the biggest neocloud companies, is set to publish its financial results on Thursday. Analysts expect the results to show that its growth accelerated in the third quarter.
Yahoo Finance data shows that analysts expect the results will show that its revenue jumped by 520% in the third quarter to $907 million. The most optimistic analyst expects the results to show that its revenue will jump to $942 million.
Nebius Group is expected to provide strong annual revenue guidance, with its revenue rising to $3.35 billion, up by 531% from a year earlier. This figure is expected to surge to over $12.2 billion next year.
Nebius is making most of its revenue from its top clients, who include some of the biggest companies in the world, including popular names like Meta Platforms and Microsoft.
Nebius faces some major challenges
While the top-line numbers are encouraging, the reality is that Nebius is facing some major challenges, which explains why its stock has plunged.
One of the risks is that the AI industry is facing headwinds. For example, Anthropic plans to launch an IPO at a $1.3 trillion valuation, much lower than the $2 trillion that analysts were expecting. OpenAI, another large company, recently raised $11 billion at a $1.25 trillion valuation, lower than the $1.4 trillion that analysts were expecting.
Meanwhile, there are concerns that Microsoft, its top client, is reconsidering the use of neocloud companies, citing the elevated costs and project delays. It is now considering whether it will announce more deals.
The company also faces other challenges, including the rising cost of doing business that has seen prices of servers, GPUs, and memory higher.
Gartner, a top analytics company, warned that neocloud companies will announce large impairments in the next few years. In its report, it cited the gap between the expected revenue and the costs.
READ MORE: Nebius stock falls as $3.5B loan raises AI infrastructure debt concerns
Nebius is also continuing to dilute existing investors. It raised over $2 billion in the second quarter, with management expecting to raise a similar amount in the third quarter. Its outstanding shares have jumped to over 238 million from last year’s 218 million.
The company has also not announced a major contract with large companies. While this could be because of its capacity, it could also be because of the rising competition in the industry. Virtually all Bitcoin mining companies have pivoted to the AI industry. Also, other companies like Lambda, Nscale, and Firmus have also announced large deals.
These challenges explain why the company has a short interest of 20%, a sign that investors expect it to drop.
Nebius Group stock technical analysis
NBIS stock chart | Source: TradingView
The daily chart shows that the NBIS stock has remained in a bear market as it has slumped by over 50% from its all-time high. It has now remained below the 50% Fibonacci Retracement level.
The stock has also remained below the 50-day Exponential Moving Average (EMA) and the Ichimoku cloud indicator.
Nebius has also retested the important resistance level of $145.40, its lowest swing on July 29. Therefore, there is a risk that the stock will continue falling, potentially to the psychological level of $100. On the flip side, a move above the resistance level of $150 will invalidate the bearish outlook.
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