Cerebras Systems Inc. (NASDAQ:CBRS) is having a rough morning. The AI chip company's stock is sliding in premarket trading Thursday after it served up a mixed bag of second-quarter results after Wednesday's close. The headline numbers were a bit of a puzzle: the loss was smaller than expected, but revenue came up short. Investors, it seems, are focusing on the miss.
Cerebras Sees Neo-Clouds Breaking Away From NVIDIA Dependence — Calls 2027 Opportunity ‘Large’
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Cerebras stock drops in premarket trading after mixed Q2 earnings, despite record core revenue and raised 2026 guidance.
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Cerebras Earnings Snapshot
Here's the breakdown. Cerebras reported an adjusted loss of 4.5 cents per share, which is better than the 17-cent loss analysts were bracing for. But sales of $180.11 million fell short of the $194.20 million consensus estimate. So, a beat on the bottom line, a miss on the top line. Classic mixed quarter.
Dig a little deeper, though, and there's a lot to like. Core revenue hit a record $209.9 million, up 103% year over year and above the company's own guidance. Core gross and operating margins also came in better than expected. The core gross margin expanded 940 basis points year over year to 40.6%. Cloud and other services gross margin jumped 1,600 basis points to 41.8%, while hardware gross margin improved 510 basis points to 38.8%.
Chief Financial Officer Bob Komin noted that the quarterly adjusted gross margin would have been 500 basis points higher if not for extra costs tied to expanding cloud capacity by renting back more of the company's own systems. It's a short-term squeeze for long-term gain, but it still stings a bit.
The core operating loss narrowed to $33.6 million, and the operating margin improved to negative 16% from negative 42% a year earlier. That's progress, even if it's still in the red.
Cerebras ended the quarter with more than $8.6 billion in cash and marketable securities, plus an unused $850 million revolving credit facility. So, no liquidity worries here.
Cloud Demand Drives Growth
The real star of the show was the cloud business. Core cloud and other services revenue surged 287% year over year to $127.7 million, fueled by demand for fast inference services and the ramp-up of its OpenAI deployment. Core hardware revenue, meanwhile, grew a more modest 17% to $82.1 million.
Cerebras has also been busy securing data center capacity. Over the past seven months, it's locked in more than 600 megawatts of capacity, either operational or contracted for delivery by the end of 2027. Its broader pipeline has reached gigawatt scale. That's a lot of computing power.
The company is also working with AWS on solutions expected to become available through AWS Bedrock in the first quarter of 2027, which could open doors with enterprise customers.
CEO Andrew Feldman teased that Cerebras will unveil its fourth-generation CS-4 system next week. The company also signed six deals worth more than $30 million each during the quarter. And here's a kicker: Feldman said the company's $25.4 billion in remaining performance obligations doesn't even include backlog from AWS or other hyperscalers. That's a lot of future revenue sitting in the pipeline.
Cerebras Raises 2026 Outlook
On the earnings call, Feldman made some interesting comments about the competitive landscape. He said emerging neo-cloud providers are starting to diversify beyond NVIDIA Corporation (NASDAQ:NVDA), which had been their go-to for AI hardware. Some neo-clouds are adopting multiple vendors, while others are building around Advanced Micro Devices, Inc. (NASDAQ:AMD) or even power assets. Feldman called this a "large" opportunity for Cerebras in 2027.
For the third quarter of 2026, Cerebras expects core revenue of $214 million to $216 million, a gross margin of 38% to 40%, and an operating margin of negative 25% to negative 23%. Management expects core gross margin to bottom out in the third quarter before improving in the fourth, as lower-cost, company-owned systems replace rented capacity.
The company also raised its full-year 2026 outlook: revenue of $880 million to $890 million, a gross margin of 41% to 43%, and an operating margin of negative 19% to negative 17%. So, even with the stock getting hit, the underlying business is moving in the right direction.
Targets Faster AI Inference
Feldman also talked up the company's technology roadmap. The disaggregated inference technology, with GPUs currently running in its labs, is expected to be deployed and commercially available in the fourth quarter. Cerebras expects inference throughput to increase more than 20-fold over the next 18 months, and new systems are expected to deliver roughly two times the speed annually for several years. That's a big leap in performance.
Looking ahead, the company expects core revenue to more than triple in 2027. Manufacturing capacity is projected to expand more than 10-fold during 2026, supported by new factories with Flex and Sanmina, with further expansion planned for 2027. Revenue from other hyperscaler partnerships is expected to begin in mid-2027 and ramp through 2028. And again, that $25.4 billion in remaining performance obligations excludes AWS and other hyperscaler backlog, so there's more where that came from.
Cerebras Targets Gross Margins Above 60%
Long-term, Cerebras is aiming for core gross margins above 60%. How? Higher fast-inference pricing, increased use of owned data center capacity, improved throughput, scale benefits, lower wafer costs, and reduced reliance on high-bandwidth memory. It's an ambitious target, but the company seems to have a clear path.
CBRS Price Action: Cerebras Systems shares were down 18.63% at $213.24 during premarket trading on Thursday, according to market data.
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