So, you know how everyone's scrambling for AI compute power? Well, Nebius Group (NBIS) is basically building the factories. And they're selling out of everything they make.
After reporting strong third-quarter results, the company announced plans to more than double its global data center capacity by 2026. The reason? Surging demand for AI compute is forcing what D.A. Davidson analyst Alexander Platt calls a "step-function increase" in growth. Management now projects contracted power of 2.5 gigawatts by the end of 2026, which translates to an annualized revenue run-rate of $7 to $9 billion.
Platt, who reiterated his Buy rating and $150 price forecast on the stock, noted that demand for compute capacity is elevated across GPU generations and regions. This isn't a flash in the pan; it's positioning Nebius for continued expansion straight through fiscal 2026.
The numbers back up the hype. Revenue soared 237% year-over-year to $146.1 million last quarter. But the real story is in the mega-deals. Alongside a previously disclosed contract with Microsoft Corporation (MSFT), Nebius just locked in a $3 billion, five-year agreement with Meta Platforms, Inc. (META).
Here's the kicker: that Meta deal was reportedly constrained by Nebius's current compute availability. They literally couldn't sell more because they're already at capacity. Additional capacity for Meta is expected to ramp up this quarter and hit full utilization by Q1 2026. Microsoft's allocation, meanwhile, is on track to reach full capacity by Q4 2026, with most of that growth loaded into next year.
This updated guidance—2.5GW of contracted power and up to 1GW of connected power by end of 2026—makes the company's prior expectation of 1GW look conservative. D.A. Davidson thinks that, assuming favorable market conditions, Nebius has a potential path to medium-term revenue exceeding $20 billion.
The analyst also believes the company could secure an incremental 400 megawatts of capacity via expansion at its New Jersey site, which can support up to 1GW. Furthermore, they expect Nebius to land two more mega-deals, potentially an expansion of the Meta contract and a new hyperscaler agreement, each roughly the size of the Microsoft deal.
But what makes Nebius a standout, according to the analyst, is its economics. The company uses an ODM (original design manufacturer) model for its NVIDIA Corporation (NVDA) racks. This shaves 15-20% off compute costs compared to using OEM alternatives. Since compute hardware makes up about 80% of total capital expenditures, that's a massive efficiency gain.
Combine that with operational efficiencies in data center management, and D.A. Davidson believes Nebius is positioned to generate double-digit returns on capital. That's a stark contrast to peers like CoreWeave, Inc. (CRWV), which currently posts a return on capital of about 4%.
Platt reaffirmed the Buy rating and $150 price target, valuing the stock at 7 times its projected 2026 revenue. The firm called Nebius one of its top AI picks and, notably, its "favorite neocloud player."
The financial outlook is, in a word, explosive. Revenue is projected to surge from $571.8 million in 2025 to $5.38 billion in 2026. The company is also expected to swing decisively into profitability, with GAAP earnings per share rising from $1.00 in 2025 to $6.11 in 2026.
Despite all this bullish news, the stock was trading lower by 8.23% to $93.81 at last check Wednesday. Sometimes the market takes a minute to catch up to the story.
