Nebius Group (NASDAQ:NBIS) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below.

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The full earnings call is available at https://nebius-q1-2026-earnings-call.open-exchange.net/registration

Summary

Nebius Group N.V. reported a significant revenue growth of 684% year-over-year to $399 million in Q1 2026, driven by strong demand and capacity scaling.

The company has raised its 2026 CapEx guidance to $20-25 billion, up from $16-20 billion, reflecting investments in infrastructure to meet growing demand.

Nebius achieved a 45% adjusted EBITDA margin for its AI business, with expectations of around 40% for the full year due to strategic investments in capacity and technology.

The company secured a $27 billion contract with Meta, enhancing its capital position and financing capabilities, alongside a $2 billion equity investment from Nvidia.

Expansion plans include a new site in Pennsylvania to support 1.2 gigawatts of power, and strategic acquisitions such as Tavili, Aegon, and Clarify to enhance AI capabilities.

Full Transcript

OPERATOR

Welcome to Nebius Group's Q1 2026 earnings conference call. The presentation will be followed by a Q and A session. If you would like to ask a question, you can click the Ask A Question tab in the top right of the live stream player. Then just type in your question and click Submit. You can submit questions at any time during the presentation and the Nebius management team will try and answer them during the Q and A portion of the call. I will now hand over to Gili Novdolovich, Head of Investor Relations to start the call.

Gili Novdolovich, Head of Investor Relations

Hi everyone and welcome to Nebius' first quarter 2026 earnings conference call. Joining us on the call today are Co-Founder and CEO Arkady and our CFO Dad Al, along with the broader Nebius Executive Management team. Now I'll quickly cover the safe harbor. Some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties.

Actual results could differ materially. Please refer to our form 20F which is a list of our risk factors. We undertake no obligation to update any forward-looking statements. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release which is distributed and available to the public through our investor relations website located at nebius.com.

And now I'd like to turn the call over to Arkady.

Arkady, Co-Founder and CEO

Thanks Gili and welcome everyone to our call. We have had a great start to the year. We're building an AI native hyperscaler and I would say we're developing it across four dimensions. The first is capacity and scale, second product and functionality. Third dimension is customers and demand and finally capital, our fourth dimension. All of our focus is on execution across all four of these dimensions. Let me put our results of the quarter in this context.

First on capacity. As you see, we are building big. Last quarter we told you that we already contracted more than 2 gigawatt of power while targeting more than 3 gigawatt by the end of the year. Three months later today we have already contracted more than 3.5 gigawatt and we are now targeting at least 4 gigawatt of contracted power this year. Today we announced a new site in Pennsylvania to support 1.2 gigawatt of power once fully live. This is our second owned gigawatt scale site in the United States.

Our platform is most efficient when we own the full stack and we are building towards that. Our own contracted capacity now accounts for more than 75% of our total power. But more importantly, we continue to build our full stack platform and this is our second dimension. What does it mean? It means we don't just offer compute, we offer cloud services. Services that span across the AI lifecycle from bare metal to multi-tenancy to inference to agentic and more.

And we have made significant progress on that front. And it's not just developing our platform and launching Astro version 3.5 this quarter. Our three acquisitions this year, Tavili, Aegon and Clarify, demonstrate the uniqueness of what we're building. All three companies bring industry-leading engineers and researchers to Nebius. Aegon AI and Clarify stand on our inference optimization solution. Eagen was recognized as the number one speed inference provider by Nvidia.

While Agon optimizes at the model level, Clarify optimizes at the system level and they both strengthen our in-house token factory offering. We also acquired Tevini earlier this year, extending our platform reach to Agentix Search, an increasingly significant part of the market. This acquisition brought us recapabilities of what this new class of developers need. We also expanded our technology partnership with Nvidia. We again achieved Nvidia Exemplar cloud status, this time on our GB 300 for training workload.

We're among a small group of providers to achieve this status across multiple GPU generations. At our core, we're a technology company. We have top AI engineers and deep proprietary expertise across every layer of the stack, both hardware and software. We're quickly becoming a magnet for top talent. We're happy with our ability to enlarge our offerings through strategic acquisitions. Our clients appreciate the full extent of our offering. This is not common in our market.

This is our strength and this is our uniqueness. We believe this is what will enable us to win. Demand is our third dimension and it continues to be increasingly strong. But more importantly, our full stack platform allows us to capture and service a large and diverse range of hundreds of customers, not just several big bare metal off-takers. Our power line generation in the first quarter grew 3.4 to 3.5 times over the fourth quarter and this is a record for us.

And the demand is broadening across industries. Today we typically see several customers competing for every GPU we bring online. We're building to support this demand with scale and discipline. New customers across a number of use cases are using our full range of offerings to solve their most challenging problems. For example, European Fintech leader Revolut recently began using our token sector in physical AI, 1X Technologies is using our cloud platform to build general-purpose robots in life sciences.

Our cloud platform is enabling startups to build more powerful models and that accelerate drug discovery and advance the fight against diabetes in ways that were previously impossible. And beyond technology sectors, larger companies in industries such as manufacturing, energy, heavy equipment and pharmaceuticals are increasingly engaging with us. Demand is high. Everything we build with is sold. That is what is driving us to build more and to raise our 2026 CapEx guidance to between 20 and 25 billion dollars, which is up from our prior range of 16 to 20 billion dollars.

This increase reflects investments in our 2027 capacity that will come online early next year. We expect these investments to contribute positively to revenue in the first half of 2027 where we already have customer commitments in place. Matter is one such customer. We need to invest to fully realize this. This requires capital, which is our fourth dimension. We're doing a very good job in tapping the market at scale. We raised significant capital this year, more than $6 billion.

More than 4 billion of that came from converts and 2 billion from Nvidia equity investment. This leaves us with a strong cash position of more than $9 billion. More importantly, we have laid the foundation to raise substantially further capital this year. There are a variety of ways for us to do this. There is our recent Meta contract. First, let me just say that we are very proud of our relationship with Meta and there is tremendous respect between our tech teams.

Formally this is a $27 billion contract with Meta, but in fact, it's worth a lot more for us. This contract alone can unlock billions of dollars of capital for our own multi-tenant cloud at attractive rates that may not otherwise be available to us. On top of this, we also have our first contact with Mentor in our Microsoft agreement that will provide additional financing opportunities. Obviously, there are many other untapped options for us to finance our public cloud build-out from the significant prepayments we get from customers to asset-backed financing of our payment of contracts to corporate debt and so on.

So to close, it has been a great quarter. We're even more focused on what is ahead. We will continue to execute expanding capacity, building our cloud platform, expanding our customer reach, and financing growth diligently. Everything we build, we sell. And we are still in the very early days. I want to thank our team for the incredible work day after day and night after night and to thank our shareholders for your continued support. And with that let me hand it over to Doug.

Doug, CFO

Thank you Arkady. Indeed, we are off to a strong start to the year with a number of important achievements. First, we accelerated revenue growth during the quarter. We also significantly expanded our margins and we strengthened our balance sheet. I will touch on each of these, share some color on our results and conclude with guidance. Please note that all comparisons are year over year unless noted otherwise. So let's start with our revenue and arrangement.

In Q1 we grew the group revenue by 684% year on year to $399 million, up 75% from Q4. Once again we sold out our capacity as demand continued to exceed available supply. Our Nebius AI business, which excludes our consolidated investments in 110 and Avrite, delivered even stronger results. Revenue grew 841% from last year to $390 million representing an 82% quarter over quarter increase and 98% of group revenue growth was driven by capacity scaling and was further supported by strong utilization of pricing.

Annualized run rate revenue for our Nebius AI business reached $1.9 billion at the end of March, up over 50% from $1.25 billion in the previous quarter. As we delivered strong top-line growth, we also remain focused on profitability. Group adjusted EBITDA was $130 million compared to $15 million last quarter and compared to a loss of $54 million a year ago. Group adjusted EBITDA margin was 32%, continuing the inflection in Q4 and reflecting operating leverage in our model.

Nebius AI business adjusted EBITDA margin expanded to 45% up from 24% in Q4. This improvement was driven by strong revenue growth. The gap between Group and Nebius margin essentially reflects our investments in Avrite and 110. Both are still early-stage companies and require substantial operating investments as they scale. We expect Nebius to represent the significant majority of group adjusted EBITDA for the foreseeable future. As mentioned in the past, our intention is to find strategic and financial partners for these businesses and to consolidate them in the future.

Net income of $621 million benefited from a valuation adjustment on the back of Clickhouse's recent Arctic round. This is a non-cash item that captures the growth in the underlying value of the asset. And now turning to our balance sheet, since our last call we have continued to strengthen our financial position. In March we closed a private offering of convertible senior notes raising $4.3 billion in gross proceeds at attractive premiums and coupons of 1.25% and 2.60%.

In the same month, we announced a $2 billion equity investment from Nvidia, reinforcing our alignment with one of our key strategic partners. Prepayments from our customers also reached a new quarterly record. Operating cash flow of $2.3 billion was up from an operating cash outflow of $198 million in Q1 last year. The sharp increase was primarily driven by upfront payments from our customers. Together, these sources of capital increased cash and cash equivalents to $9.3 billion.

Now let's speak about our CapEx. As Arkady mentioned, today we are raising our CapEx expectations to 20 to 25 billion dollars for the year. The expansion of our infrastructure footprint remains one of our highest priorities given the strength of market demand and customer anticipation. We are building for 2027 demand where we have customer commitments already in place and so we have near-term visibility into future revenue associated with this investment.

As always, we will invest in capacity with discipline and rigor, including the capacity we are bringing online in 2026. In terms of how we deal and how we'll fund the capacity in the year ahead, we will continue to leverage a diversified range of funding sources. On the debt side, during the past year we built our ability to take on debt capacity. For example, with our Microsoft contract and our two Meta contracts, we expect to unlock the ability to raise significant capital through asset-backed financing.

We expect this to be at attractive terms based on Microsoft and Meta credit ratings and will inject this capital into building our cloud business. In addition, we expect to raise corporate-level debt. We plan to start tapping into these financing options in the near term and on top of that, our financing options include our at-the-market program. We have not utilized this program to date, but we are evaluating it regularly. Obviously, we are very focused on generating prepayments from our current and future customers in order to reduce the capital needed from equity and debt financing.

We may also evaluate other financing options but will ultimately pursue whichever vehicles serve best the long-term interest of the business to support our respective capital spending in 2026. The bottom line is that as of now, given our strong balance sheet and the work we have done putting in place the various long-term contracts, we have laid the foundation to enable us to access a wide range of potential funding sources. And now turning to our outlook for the year.

While it remains early in the year, our strong Q1 performance reinforces our confidence in our annual targets. As such, we are reiterating our full-year 2026 guidance for annualized run rate revenue of 7 to 9 billion dollars, group revenue of between 3 and 3.4 billion dollars, and group adjusted EBITDA margin of around 40%. Three key parameters will determine our growth profile and margin progression throughout the year: utilization, pricing, and capacity.

At present, neither of the first two parameters is limiting our growth. The third, capacity, will play an important role in unlocking our growth potential and driving margin flow forward. On utilization, we continue to sell out our capacity and we expect this to be the case for the foreseeable future due to strong market demand and our healthy pipeline. On pricing, strong market demand is translating into pricing gains in our native stadiums. On capacity, the timeline of deploying the new capacity impacts both top and bottom line results from quarter to quarter.

We anticipate a non-linear quarterly adjusted EBITDA margin progression during 2026. We will see this in Q2 given the back-end weighted nature of the capacity we bring online. These investments unlock growth by increasing capacity substantially from Q2 to Q3, leading us to be confident in our adjusted EBITDA margin, returning to Q1 levels in Q3 before moving even higher in Q4. Overall, we are confident in our full-year targets. In closing, Q1 was another quarter of rigorous execution across the business.

We delivered strong revenue growth, margin expansion, new business wins, and continued capital discipline. As we look ahead, we will continue to scale rapidly to capture the tremendous market opportunity ahead while remaining balanced, disciplined, and focused on delivering long-term value for our shareholders. With that, I'll turn the call back over to Gili for Q and A.

Gili Novdolovich, Head of Investor Relations

As a reminder, if you would like to ask a question, please click the Ask A Question tab in the top right of the Livestream player. Then just type in your question and click Submit. Thank you. The first question from our investors on the portal is from Alex Duvall at Goldman Sachs. To what extent have you started to see the impact of stronger GPU pricing reflecting in your core AI business? Additionally, is there a way for us to think about the share of older, shorter-term contracts that could benefit from this pricing dynamic? Mark, would you be able to answer this one for us?

Mark Biegstraaten Gorissen, Head of Treasury

Thank you Alex. We continue to see strong pricing across both old and new GPU generations as demand continues to exceed our available capacity. We just raised prices again in the latest quarter and we are still selling out across all chip types at the higher prices. We're in a very dynamic market and we have built a resilient set of processes that allow us to adapt and respond accordingly in any market environment for both new and existing customers.

The strength is showing up in a number of ways beyond just price. Contract durations are extending with the average duration of contracts growing meaningfully over the past few quarters. Also, average contract values continue to increase across new logos and existing accounts where we're seeing strong expansion as well. And finally, prepayments are becoming more significant. Customers of all types are prepaying in order to lock in future capacity, including the hyperscalers.

This improves our working capital position and gives us flexibility around external financing needs. Our go-to-market model is being built to be agile and adapt to the market and yield outcomes that can best help us continue to scale our business.

Gili Novdolovich, Head of Investor Relations

Thanks Mark. We have a few questions coming in on a CapEx guide and cost inflation. Andre, can you please discuss how much our raise in CapEx is driven by higher capacity growth versus component cost inflation?

Andre

Sure. Thanks Gili. Well, the increase in this spending is driven by visibility into 2027 and our need to invest ahead of capacity that we expect to bring online. We will add much more capacity in the first half of 2027 than this year and that requires more CapEx spend starting from now in the later part of this year. We have been able to secure sites and power and customer commitments for 2027 and so we are ramping up construction activities accordingly.

In short, the high number reflects confidence in our contracted demand pipeline and our ability to secure the infrastructure that we need. It's not the cost pressure. The impact of the component inflation in our 2026 program was quite material, around low single digits as a percentage of total spend. Also, because we secured a lot of 2026 back in 2025 at the previous price levels.

Gili Novdolovich, Head of Investor Relations

Thank you Andre. Next question we have is from James Kisner at Water Tower Research. Nebius AI cloud adjusted EBITDA margin nearly doubled quarter over quarter to 45% in Q1 while you're targeting around 40% for the full year. What's driving the implied step down? Can you walk us through the adjusted EBITDA margin progression for the year, Dara?

Dara

Thanks James. Yeah, indeed, indeed. As you saw in the quarter, our Q1 margins were really strong. Nebius AI adjusted EBITDA margin reached 45% nearly doubling from Q4. And that really reflects the underlying strength of the business. On the one hand, the demand we are seeing in the market, then the terms that we are also able to negotiate with our contracts and the unit economics of the platform itself. So as I mentioned earlier, as we move throughout the year you will see some quarter to quarter variability and I think this is worth taking a moment to explain the dynamic.

We have made a number of important investments in the first half of the year, hiring across go-to-market and engineering, our recent acquisitions, and continued development of new product capabilities. And those investments are already in the cost base today and we expect them to actually benefit the business going forward. On the capacity side, our delivery this year is back-end weighted and we have a meaningful step up coming in Q3. We have very clear visibility into both the investments that we have made and also the capacity that we are bringing online.

So really what you are seeing across the quarters is a timing dynamic, not a structural one. The investments land first and the capacity and the revenue it supports come online shortly after. So given the timing of our investments in Q2 and the timing of the deployment towards the end of the quarter, we actually expect those margins in Q2 to go a little bit lower, returning to Q1 levels in Q3 and stepping even higher in Q4. So for the full year group, we expect a margin around 40% as we have guided and in the longer term those dynamics will smooth over time and our capacity footprint continues to scale and higher value software solutions will become a larger part of the mix.

Gili Novdolovich, Head of Investor Relations

Thank you Dara. The next question is around capacity from Andrew Beal at Ari. Andre, maybe I can come to you here. Can you talk about the timing of capacity additions beginning in Q2 and when you expect key sites such as Pennsylvania to reach full capacity?

Andre

Thanks Gili. So Andrew, first about Pennsylvania. Pennsylvania is going to have lights up by the end of 2027 with the first around 250 to 300 megawatts probably. And then this schedule looks like adding 300 megawatts each year up to 1.2 gigawatts in total actually and 1.2 according to our power contract. We have now a position by mid-2030 or the beginning of 2030 to be more correct, more precise. But overall our capacity schedule is just ramping up.

This year is heavily towards the second half of the year. Q3 is a very significant improvement for us in terms of the capacity going online. Q4 also very significant. And then Q1 next year is where our bigger projects like Alabama and probably the first Missouri will kick in also.

Gili Novdolovich, Head of Investor Relations

Great, thank you. We'll probably stick with you Andre, as we have a question from Josh Baramore. Can you address the media reports indicating delays at Previnland, NJ site? Understanding you've delivered commitments so far, are there any delays to note for the remainder of the Microsoft contract?

Andre

So we delivered all our capacity commitments across our Microsoft and Meta customers. So the first Meta, as we already spoke, I believe the first Meta contract was fully delivered in Q1 this year. The Microsoft contract is way more stretched and we have the delivery schedule up to the end of this year. We delivered the first tranche in November last year. We continue to be in the contract schedule again. It ramps up starting from mid-year and most of the volumes will be coming in Q3 and Q4.

Gili Novdolovich, Head of Investor Relations

Great. Thank you. So we have had a number of questions.

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