Nebius's $5B Raise Raises Questions: Is AI Cloud Spending Outpacing Reality?

Nebius Group borrowed five billion dollars in a single week, and the market immediately marked the stock down ten percent. The company, which sells cloud computing power to artificial intelligence companies, had announced a convertible note offering on Wednesday. By evening, the deal had grown and priced. Shares of the AI infrastructure company would settle the following day, delivering nearly five billion dollars in net proceeds to the balance sheet.

To understand what this means, you need one number: Nebius generated one point three six billion dollars in revenue over the past twelve months. The company just borrowed more than three and a half times that amount in one transaction. The gap between what a business earns and what it borrows to build says something about the pace it's trying to maintain, and the faith—or the desperation—behind the financing.

The deal came in two pieces. Three billion dollars of notes maturing in 2030 would pay half a percent interest, convertible into stock at two hundred thirteen dollars per share, a forty percent premium over the closing price that day. Two billion more, due in 2034, would pay four and a half percent, convertible at a forty-five percent premium. The interest rates look modest on paper. They are not the real cost. Both series accrete, meaning the principal owed grows over time. At maturity, Nebius would repay one hundred ten percent of the original principal on the 2030 notes and one hundred twenty-five percent on the 2034s—an extra three hundred million and five hundred million dollars layered on top. When you add the annual interest coupons to the accretion, the true annual cost approaches two hundred fifty-eight million dollars, roughly nineteen percent of trailing revenue. The coupons alone suggested eight percent. The real number is more than double.

The company is spending this way because its customers are signing enormous deals. In the second quarter, Nebius reported revenue of five hundred eighty-two million dollars, up four hundred fifty-four percent year over year. But capital expenditures in that same quarter reached five point seven billion dollars—nearly ten times the quarterly revenue. The money goes almost entirely to graphics processing units, the specialized chips that power AI systems, and to the data centers that house them. Nebius closed four deals in the quarter with contract values averaging more than a billion dollars each. The annualized run-rate revenue for its AI cloud business had reached three billion dollars by the end of June, fifty-six percent higher than three months prior. The company expects more than nine billion dollars in customer prepayments during 2026. This is the engine driving the borrowing: customers are committing to capacity that does not yet exist.

Nebius ended the quarter holding eight billion dollars in cash. In July, it raised seven hundred seventy-five million more in secured debt. Now five billion more is arriving. The company is assembling money from every available source because of what it has promised to build. Management expects to end 2026 with five gigawatts of contracted power capacity—a target it has raised repeatedly from just over one gigawatt a year ago. Most of that capacity must be built before it generates revenue. The hardware has to be in place first. The customers are waiting.

There is profitability on the books. Nebius produced two hundred thirty-six million dollars of adjusted earnings before interest, taxes, depreciation, and amortization in the second quarter. But depreciation and amortization ran two hundred fifty-nine million dollars—larger than the adjusted profit. Graphics processing units wear out and lose value quickly. Whether the growth remains profitable once the full cost of the hardware flows through the income statement is a question that matters more than any single quarter's revenue figure.

The stock trades near two hundred twenty dollars, down from two hundred forty-eight dollars just before the offering was announced. That values the company near sixty billion dollars—forty-four times its trailing revenue and twenty times its annualized run rate. Investors selling this week were likely reacting to the visible costs of the strategy. But the less visible cost is that a company spending five point seven billion dollars a quarter will almost certainly need to raise again, on whatever terms the market offers next time. The deal itself was well executed: the conversion prices are high, the maturities are long, and the money is committed before it's needed. But the coupons flatten what this actually costs, and what it risks. Nebius is buying its growth in advance, and the revenue that pays for it has not yet arrived.