Nebius: Did Meta And Microsoft Buy Compute At Near-Zero Margin? (Rating Downgrade)

Bashar Issa7.25K FollowersFollow5ShareSavePlay(9min)Comments(2)SummaryNebius’s explosive growth may be masking weak contract economics.Nebius may be accepting very low or even negative margins on raw compute contracts to finance its infrastructure buildout.Until management provides clearer evidence that these hyperscaler contracts can generate acceptable returns, the stock deserves a Hold rating. alacatr/E+ via Getty Images Investment Thesis Last year, I upgraded Nebius (NBIS) to a "Buy" after its first (and transformative) deals with Meta (META) and Microsoft (MSFT). However, looking at NBIS's profit margins after the initial racks came online, I am starting to question how theseThis article was written byBashar Issa7.25K FollowersFollowBashar is a contributing writer at Seeking Alpha, focusing on Long/Short investment ideas, with a geographic focus in North America. Before that, Bashar worked at an Investment Fund in the United Kingdom. He has a Master's degree in Finance from the Queen Mary University of London and a Bachelor's degree in Economics from Middlesex University.Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.