Nebius Group NV - $NBIS - Earnings Analysis: Significant increase in revenue driven by core AI infrastructure business.

Business Model

Nebius Group generates revenue through its core AI infrastructure business (Nebius), AI development platform (Toloka), edtech service (TripleTen), and autonomous vehicle platform (Avride). The core AI infrastructure business contributed over half of the Group's total revenue in Q4 2024.

Revenue Sources

• Nebius (Core AI Infrastructure): Revenue from providing GPU clusters, cloud platforms, and tools/services for AI developers.
• Toloka (AI Development Platform): Revenue from providing high-quality training data for Generative AI.
• TripleTen (EdTech Service): Revenue from online reskilling bootcamps focused on tech careers.
• Avride (Autonomous Vehicle Platform): Revenue from partnerships and deployments of autonomous delivery robots.

Income Statement Analysis

• Revenue increased significantly by 466% year-over-year, primarily driven by the core AI infrastructure business.
• Operating costs and expenses increased substantially from $100.2 million to $189.1 million, reflecting investments in business expansion.
• Loss from operations increased from $93.5 million to $151.2 million due to increased operating expenses.
• Net loss from continuing operations increased from $88.3 million to $136.6 million, primarily due to increased operating expenses and share-based compensation, partially offset by higher interest income.

Balance Sheet Analysis

• Cash and cash equivalents increased dramatically from $116.1 million to $2,449.6 million due to a successful funding round.
• Total current assets decreased from $3,455.9 million to $2,533.6 million, primarily due to the deconsolidation of discontinued operations.
• Property and equipment increased from $132.4 million to $849.3 million, indicating significant investments in infrastructure.
• Total liabilities decreased significantly from $5,460.8 million to $294.9 million, primarily due to the deconsolidation of discontinued operations.
• Total shareholders' equity remained relatively stable, decreasing slightly from $3,300.6 million to $3,256.9 million.

Capital Allocation

Nebius Group is focused on capital investment into the core AI infrastructure business rather than share repurchases, as determined by the Board of Directors in December 2024. They raised $700 million in an oversubscribed funding round to support AI infrastructure capacity deployments. Capital expenditures totaled $417.6 million for Q4 2024. Nebius intends to deploy over 22,000 NVIDIA Blackwell GPUs in data centers in the U.S. and Finland in 2025.

Management Commentary

The fourth quarter was extremely eventful for Nebius. Our shares resumed trading on Nasdaq in October, and we went on to raise $700 million in December in an over-subscribed capital raise from top-tier partners including Nvidia, Accel and Orbis.

Based on contracts already in place, March ARR will be at least $220 million, and we have additional potential deals in the pipeline.

December 2024 ARR for Nebius was $90 million, below previous guidance. This was primarily due to longer lead times for customer acquisition, while the Company was in the process of building out its sales and marketing teams and also migrating customers over to its new AI-cloud platform.

Overall Sentiment: Positive and optimistic, emphasizing rapid growth, strategic investments, and strong positioning in the AI infrastructure market.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.