Nebius Group: A Strategic Entry Point for Investors?

Key Points

• Nebius Group's investments in data center capacity and cutting-edge NVIDIA GPUs demonstrate a commitment to meeting future AI infrastructure needs.
• The company's focus on providing a comprehensive suite of services, from cloud platforms to specialized AI tools, caters to a wide range of AI developers.
• Strategic partnerships with industry leaders, combined with strong revenue growth, highlight Nebius Group's potential to capture increasing market share.

The artificial intelligence (AI) revolution is upon us, and its progress hinges on a critical, often overlooked foundation: robust and scalable infrastructure. The demand for this specialized infrastructure is exploding, creating a massive investment opportunity. Nebius Group N.V. NASDAQ: NBIS is a relatively new player in the public market, and the company has been positioning itself as a key provider of this essential AI infrastructure. After the earnings report release for the most recent quarter, Nebius Group’s stock price dropped by over 10%, leaving investors wondering whether they should buy the dip or adopt a wait-and-see approach.

Long-Term Opportunity, Discounted Price? 

Nebius Group's earnings report for the fourth quarter of 2024 (Q4 2024) was released triggering a roughly 10% drop in share price by mid-day February 21, 2025. This reaction stemmed primarily from reported losses and cash outflows despite significant revenue growth. Q4 2024 saw an adjusted EBITDA loss of $75.5 million and a net loss from continuing operations of $136.6 million. The full-year 2024 picture painted a similar story, with an adjusted EBITDA loss of $266.4 million and a net loss from continuing operations of $396.9 million. The company's cash outflow from operations for 2024 totaled $319.6 million.

However, focusing solely on the losses overlooks a crucial aspect of Nebius Group's story. Nebius’s financial results showed explosive revenue growth. The company's Q4 revenue jumped 466% year-over-year to $37.9 million, fueled by a 602% growth in its core AI infrastructure business. Full-year 2024 revenue reached $117.5 million, a 462% increase from the previous year.

Nebius is aggressively expanding its infrastructure to meet accelerated anticipated demand. Key initiatives include its first U.S. data center in Kansas City, Missouri, slated to launch by the end of Q1 2025. This facility will initially house thousands of NVIDIA Hopper GPUs and has the potential to expand to 40MW, accommodating about 35,000 GPUs.

Furthermore, Nebius plans to deploy over 22,000 NVIDIA Blackwell GPUs in data centers in the U.S. and Finland in 2025, significantly boosting its computational power. The European expansion includes an existing data center in Paris that already hosts H200 GPUs.

While some may find the recent stock price decline concerning, it could be interpreted as a market overreaction. This presents an opportunity to acquire shares at a price significantly lower than recent highs and at a discount relative to the company's long-term growth potential. Nebius Group's reaffirmed projection of $750 million to $1 billion in ARR by December 2025 suggests substantial future revenue growth.

Market Correction Creates Opportunity

High-growth technology stocks, particularly those in emerging sectors like AI, are inherently volatile. Market corrections are common and often triggered by short-term concerns, even when a company's long-term prospects remain strong. Nebius Group's revenue growth demonstrates the increasing demand for its AI-as-a-service offerings. The company's core business model revolves around providing a comprehensive, AI-centric cloud platform designed for intensive AI workloads.

Nebius AI Studio, the company's Inference-as-a-Service platform, provides cost-efficient access to a wide range of open-source AI models, including Llama, Mistral, and OpenbioLLM. Recent expansions include vision model support and new LLMs like DeepSeek R1. The company also offers Tracto.ai, a serverless platform for compute-intensive workloads, further broadening its service portfolio.

Nebius Group has forged strategic partnerships with industry leaders, strengthening its market position and demonstrating the value of its offerings. These include a preferred cloud service provider status within the NVIDIA Partner Network, which ensures access to cutting-edge GPU technology. Avride, the Nebius autonomous driving division, holds partnerships with Uber NYSE: UBER and Grubhub for robot delivery services. TripleLen has established a key partnership with Ascent for education funding.

For investors who believe in the long-term growth of the AI infrastructure market and Nebius Group's ability to capture a significant share, the recent price dip could be viewed as a strategic entry point. It's an opportunity to acquire shares at a price that may not be available once the company's growth trajectory becomes more widely recognized.

Nebius Forward: Catalysts for Future Growth

Despite the market's reaction to the Q4 earnings, Nebius Group's management remains confident in the company's future. CEO Arkady Volozh specifically reaffirmed the projected December 2025 ARR of $750 million to $1 billion, stating it is "well within reach." 

Several key developments could drive future growth and potentially boost investor sentiment: the official launch of the Kansas City data center in Q1 2025, the deployment of over 22,000 NVIDIA Blackwell GPUs, significantly enhancing computational capacity, continued expansion of the Nebius AI Studio platform and its user base, potential new partnerships and collaborations in the rapidly evolving AI sector, and further customer acquisition, building on the momentum indicated by the projected March ARR of at least $220 million.

Weighing the Risks and Rewards of Nebius Group

Nebius Group presents a compelling yet complex investment case. The company operates in a high-growth market, has demonstrated impressive revenue growth, and is making significant investments in its infrastructure. However, it is also currently unprofitable and faces intense competition from established players like Amazon Web Services, Microsoft Azure, and Google Cloud, as well as other emerging AI infrastructure providers.

While driven by legitimate concerns about near-term profitability, the recent stock price decline may offer a strategic entry point for long-term investors who believe in the company's vision and are comfortable with the inherent risks of investing in a growth-stage company in a rapidly evolving sector.

Nebius Group's journey is just beginning. Its success will depend on its ability to execute its ambitious plans, navigate the competitive landscape, and ultimately translate its technological prowess and market position into sustained profitability. For those who believe in the long-term potential of AI infrastructure, Nebius Group may warrant a closer look.