Nebius Group N.V. NBIS stock has become an impressive performer in the AI space after having gained 25.4% in the past month, outperforming the Zacks Computer & Technology sector and the Zacks Internet Software Services industry’s growth of 6.1% and 12.6%, respectively. The S&P 500 Composite is up 3.6% over the same time frame.
Price Performance
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Much of the momentum stems from its recent AI infrastructure deal with Microsoft Corporation MSFT, with the stock surging 42% since the announcement on Sept 8.
But with such steep near-term gains, the natural question arises: Should investors stay invested or take profits off the table and exit?
Let’s unpack the company’s fundamentals and challenges to ascertain the best course of action.
MSFT Deal & Other Tailwinds
Based in Amsterdam, Nebius is a specialized AI infrastructure neo cloud company. The demand for AI infrastructure has exploded in 2025, fueled by the increasing usage of generative AI, machine learning, and high-performance computing applications. In the last reported quarter, NBIS revenues surged 625% year over year to $105.1 million. AI cloud infrastructure revenues grew more than nine times year over year, driven by demand for copper GPUs and near-peak GPU utilization.
As companies build GPU-intensive data centers, Nebius emerges as one of the key beneficiaries. The recent deal with MSFT involves NBIS providing dedicated GPU capacity to Microsoft from its new data center in Vineland, NJ, beginning later this year. The GPU services will roll out in several tranches during 2025 and 2026, with the agreement valued at approximately $17.4 billion through 2031. Microsoft could also purchase extra services or capacity as per the terms of the deal, which would raise the total value to around $19.4 billion.
While this represents NBIS’ first major long-term contract with a big tech firm, the company has indicated that more multi-faceted deals will likely follow, further solidifying its capacity and reach in the booming AI cloud space.
NBIS’ partnership with NVDA (also an investor in the company) is another plus. With the new Blackwell GPUs entering the market at scale and its data center capacity expanding significantly in parallel, the company expects a substantial increase in sales by year-end.
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Nebius plans to secure 220 megawatts (“MW”) of connected power (active or ready for GPU deployment), including 100 MW of active power by 2025. This also includes new data centers in the U.K., Israel and capacity expansion in Finland. The 1 GW capacity target by 2026 positions Nebius to capture incremental upside from accelerating demand for AI compute. On the last earnings call, NBIS highlighted that it is scaling up capacity and is also “able to sell it quickly”.
Annualized run rate (“ARR”) surged to $430 million in June from $249 million in March. The company expects the additional capacity, which comes online later in the year, to help it achieve updated ARR guidance. NBIS has raised its year-end ARR guidance to $900 million to $1.1 billion (previous estimate: $750 million to $1 billion), underscoring the strength of its contracted pipeline and near-term visibility.
Apart from the booming core AI business, investors also need to look at the company’s various stakes in some high-growth tech ventures that could emerge as powerful value drivers. Nebius holds equity stakes in ClickHouse and Toloka. It has two additional businesses, one is TripleTen, an edtech platform, and another is Avride, an autonomous vehicle platform. These various stakes give Nebius a unique edge among AI-infrastructure players. Nebius seems confident to effectively monetize these businesses and fuel its core business while minimizing dilution to existing shareholders and keeping debt in check.
Analysts have increased their estimates for NBIS over the past 60 days.
Bearish Undercurrents for NBIS
Despite the bullish narrative, challenges remain for NBIS, given a volatile global macroeconomic environment. Tremendous competition in the AI cloud infrastructure space, heavy capital spending and execution risks point to a challenging road ahead.
While Nebius is rapidly acquiring clients, the AI infrastructure market remains intensely competitive. It faces tremendous competition in the AI cloud infrastructure space, which boasts behemoths like Amazon AMZN, Microsoft, as well as small players like CoreWeave CRWV. CRWV is another GPU-focused, hyper-growth pure play company in this space. CoreWeave reported 207% year-over-year revenue growth for the second quarter of 2025. CRWV’s partnership with OpenAI is a big plus. On the last earnings call, CRWV announced a $4 billion expansion with OpenAI, adding to the previously announced $11.9 billion deal.
On the other hand, Amazon Web Services and Microsoft’s Azure cloud platform together dominate more than half of the cloud infrastructure services market and are now aggressively moving into AI infrastructure. As a result of intense competition, Nebius may face pricing pressure and higher customer acquisition costs.
Nebius also reaffirmed its $2 billion 2025 capex guidance. Now, $2 billion capex is a huge cash outlay, even with a $4 billion capital raised as highlighted on the last earnings call. To fund capex associated with delivering AI infrastructure to Microsoft, NBIS recently announced the closing of its public offering of Class A ordinary shares and private offering of convertible senior notes, which have gross proceeds of nearly $4.2 billion as of Sept 15, 2025. Other than the MSFT deal, it plans to use some of the proceeds from financing for accelerating business growth, including the purchase of additional compute power and hardware and well-located land plots for expansion of its data center footprint, and for general corporate purposes.
Higher capex can be a concern if revenues do not keep up the required pace to sustain such high capital intensity, especially in a macro environment where AI demand cycles could fluctuate due to competitive pricing and regulatory changes. Moreover, scaling aggressively (multiple data centers in various regions) involves execution risk.
NBIS' Stretched Valuation is Concerning
Valuation-wise, Nebius seems overvalued, as suggested by the Value Score of F.
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In terms of Price/Book, NBIS shares are trading at 5.68X, higher than the Internet Software Services industry’s ratio of 4.45X.
How to Approach NBIS Stock Now?
Nebius’ growth trajectory is promising, and management is rapidly scaling capacity to meet demand.
Given the stiff competition from hyperscalers like Amazon, NBIS faces significant pricing pressure and execution risks as it scales. Higher capital expenditures carry risk, especially amid a volatile macro environment. For investors already holding shares, the story remains compelling, but for new entrants, it may be wise to wait for a better entry point.
At present, NBIS carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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