Popular US stock Coreweave plummets nearly 21%! Losses exceed expectations, lock-up period about to expire, and market expectations are too high
CoreWeave, a popular stock in cloud AI infrastructure, plummeted nearly 21% after releasing its second earnings report following its IPO. Although revenue exceeded expectations and the full-year guidance was raised, the loss was greater than anticipated, coupled with the expiration of the IPO lock-up period this Thursday, raising market concerns. Analysts pointed out that the market had previously had overly high expectations for the company, while the company's projected capital expenditures were relatively low and some expenditures were delayed, which could be a risk signal
The stock price of CoreWeave, a cloud AI infrastructure service provider supported by NVIDIA, plummeted nearly 21% on Wednesday, as the company's losses reported after the market close on Tuesday exceeded expectations, and the IPO lock-up period is about to end.
This is the second quarterly report released by CoreWeave since its IPO. According to the financial report, the company's adjusted loss per share was $0.27, higher than the analysts' original expectation of a loss of $0.21 per share.
As CoreWeave released its financial report, the lock-up period following its IPO will end on Thursday evening. Media analysis suggests that this may lead to volatility in the stock price. The so-called lock-up period refers to a period after a company goes public during which insiders are restricted from selling their shares.
Analysts stated:
"We remain positive about the long-term performance of the company and are encouraged by today's related data, but we believe the upside potential in the short term is limited due to potential equity dilution issues related to Core Scientific, market uncertainty, and the upcoming end of the lock-up period on Thursday."
Core Scientific is a company recently acquired by CoreWeave. On Wednesday, Core Scientific's stock price fell by 8.34%.
Market Expectations Too High
CoreWeave's performance guidance exceeded market expectations. The company expects revenue for the current quarter to be between $1.26 billion and $1.3 billion, while analysts expected $1.25 billion. The company also raised its revenue forecast for 2025 to between $5.15 billion and $5.35 billion, an increase from the $4.9 billion to $5.1 billion forecast given in May, and higher than the market's general estimate of $5.05 billion.
However, some analysts had hoped that CoreWeave would provide stronger performance expectations, as the company's stock price has surged significantly since its listing in March. Prior to the release of the financial report on Tuesday, some comments pointed out that after the stock price skyrocketed, the market set a higher expectation threshold for CoreWeave's second quarterly report since its IPO. In other words, if the financial report is not impressive enough, it may fail to impress investors, and if there are shortcomings, the stock price is more likely to decline.
As a "new star" in the AI concept stocks in the U.S. this year, CoreWeave's stock price has risen over 240% in just over four months since its IPO, reflecting investors' optimism about the company's spending in the AI field. Since CoreWeave's business model involves purchasing NVIDIA AI chips and other data center equipment only after customers sign usage contracts, the company is also seen as a barometer of the AI-related spending boom
Analysts Worry About Low Capital Expenditure Expectations and Some Delays
Some analysts have pointed out that the company's capital expenditure expectations are low, and some expenditures have been postponed to the fourth quarter, which may be a risk signal. The financial report shows that CoreWeave's third-quarter capital expenditure guidance is roughly flat compared to the second quarter, with the full-year capital expenditure guidance remaining unchanged, and the midpoint of the guidance range of $20 billion to $23 billion is $21.5 billion, slightly higher than the analyst expectation of $21.03 billion.
Morgan Stanley analysts stated:
"The delay in capital expenditures highlights the uncertainty of deployment timelines; as the actual usage time is pushed back, the revenue that can be recognized within the quarter will also decrease accordingly."
CoreWeave stated that due to the continued surge in AI demand, the company's revenue has more than tripled compared to the same period last year, reaching $1.21 billion, far exceeding Wall Street's forecast of $1.08 billion. Chief Financial Officer Nitin Agrawal mentioned in the analyst call that customer demand still exceeds supply capacity.
CoreWeave's clients include OpenAI, Microsoft, and NVIDIA, and it also stated that it recently signed expansion agreements with hyperscale customers.
Wall Street Insights previously mentioned that the core logic behind CoreWeave's soaring stock price is that the company is seen as one of the few public market tools that allow investors to indirectly bet on OpenAI's success. Although OpenAI is not publicly listed, it holds shares in CoreWeave and has signed cloud infrastructure supply contracts worth billions of dollars with the latter, lasting until April 2029.
Additionally, CoreWeave is currently a preferred partner of NVIDIA, the highest-valued company in the world, and is referred to as NVIDIA's "favorite child," with NVIDIA holding a 7% stake in it.
CoreWeave also acquired AI model monitoring startup Weights and Biases for $1.4 billion in this quarter and stated that the revenue order backlog at the end of the quarter had reached $30.1 billion
