CoreWeave (NASDAQ:CRWV) stock popped after the company published strong financial results, which demonstrated that its revenue growth was accelerating. It jumped to a multi-month high of $117.30, up by 93% from its lowest level in July. This rally may be derailed as the company faces some major risks.
CoreWeave Stock Jumped After Earnings
CoreWeave, the biggest neocloud in the industry, published strong financial results, helped by the rising demand for its services. It counts most of the biggest AI companies like Microsoft (NASDAQ:MSFT), OpenAI, Anthropic, and Cohere as its clients. Jane Street, the giant high-frequency trading company, is also a big client.
The results showed that its revenue jumped by 112% to $2.6 billion, while its revenue backlog soared to over $104 billion. More numbers showed that the adjusted EBITDA jumped by 59% to $1.5 billion.
The company predicts that its third-quarter revenue will jump to between $3.45 billion and $3.6 billion. Analysts expect the results to show that its revenue will be $3.54 billion, up by 160% YoY. The real figure will likely be better than these estimates. For the year, CoreWeave expects the revenue to be between $12.4 billion and $13.2 billion.
These numbers are a reflection of the rising demand for compute among large hyperscalers and AI labs like Anthropic and OpenAI. This growth will likely continue in the foreseeable future.
CoreWeave Faces Some Major Risks That May Derail the Rally
Despite the ongoing revenue growth, there are potential risks that may derail its performance. First, there is a risk of its soaring capital expenditures, which management expects will be between $35 billion and $39 billion this year.
It will need to raise cash in the form of debt or even share issuance to fund this spending. Its earnings report showed that its total long-term and short-term debt has jumped to over $26 billion.
Further, the company continues to report strong depreciation metrics. Its depreciation and amortization rose to $1.39 billion from $560 million in the same period last year. This depreciation was 52% of its revenue, which is substantial.
The company is also contending with the increased competition in the neocloud industry. Firms like SpaceX (NASDAQ:SPCX) and Meta Platforms (NASDAQ:META) have moved to the industry.
CRWV Stock Price Technical Analysis
The daily chart shows that the CRWV stock faces some technical risks. It formed a large fair value gap after its earnings report. As such, there is a risk that the stock will retreat as bears attempt to fill the gap.
Most notably, it has formed a head-and-shoulders pattern and is now in the handle section. Therefore, these patterns suggest that the stock will continue falling, potentially to the psychological level of $90.
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