Technology firm Nebius Group disclosed Wednesday that its first-quarter capital expenditures surged beyond expectations, fueled by major investments in graphics processing units and data center equipment to support its artificial intelligence cloud operations.
The tech company has carved out a profitable niche in the booming AI and cloud infrastructure sector by supplying Nvidia graphics cards and computing systems to software developers.
Financial analysts, however, have raised red flags about Nebius’s massive capital outlays as the firm rapidly builds out data centers worldwide, creating margin pressure despite robust revenue increases.
The company even halted its stock repurchase program in late 2024 to funnel more money into growing its primary AI infrastructure operations.
These worries echo similar concerns about larger competitor CoreWeave, which has forecast capital expenditures between $30 billion and $35 billion this year, cautioning that the investment surge could hurt short-term profitability.
Nebius Group has been growing its AI infrastructure division through strategic purchases and major computing agreements.
This month, the company announced plans to acquire AI firm Eigen AI for approximately $643 million to enhance its inference capabilities and expand its United States operations.
Nebius also secured a multi-year agreement with Meta to deliver up to $27 billion in computing services over a five-year period.
Capital spending soared to roughly $2.5 billion during the first quarter, a dramatic increase from $544 million in the same period last year. Wall Street analysts at Visible Alpha had projected $2.4 billion.
First-quarter revenue climbed to $399 million for the three-month period ending in March, surpassing analyst expectations of $371.4 million, according to LSEG data.
