Is Nebius Group Stock a Buy?

Nebius, formerly Russian tech giant Yandex, has successfully rebranded as a cloud-based AI infrastructure provider after divesting its Russian assets and resuming Nasdaq trading. The company secured a substantial five-year, $17.4 billion AI infrastructure deal with Microsoft, driving projected revenue growth at a 231% CAGR to $4.25 billion by 2027, with EBITDA expected to turn positive in 2026. Nebius plans aggressive data center expansion from 190 MW to 1 GW by 2026, supported by a $3 billion funding round, and despite high current valuations, is considered reasonably priced relative to its long-term growth potential.

Analysis

Nebius Group (NBIS), following a strategic divestiture of its Russian assets and rebranding from Yandex, has successfully repositioned itself as a high-growth AI infrastructure provider. This pivot is anchored by a substantial five-year, $17.4 billion AI infrastructure contract with Microsoft, which underpins analyst projections for a 231% compound annual revenue growth rate from 2024 to 2027, reaching an estimated $4.25 billion. The company's aggressive expansion plan, supported by a recent $3 billion funding round, aims to increase data center capacity from 190 megawatts to 1 gigawatt by 2026. While currently unprofitable, with a negative adjusted EBITDA of $266.4 million in 2024, Nebius is forecast to achieve positive EBITDA in 2026 and reach $852 million in 2027. Despite its strong growth trajectory and a vote of confidence from Nvidia's 0.5% ownership stake, Nebius' valuation warrants attention; with an enterprise value of $25.02 billion, it trades at approximately 6 times its projected 2027 sales, a slight premium compared to its key peer CoreWeave, which trades at less than 5 times its 2027 sales.

Key Decisions for Investors

• Investors should consider the significant long-term growth potential fueled by the $17.4 billion Microsoft contract and aggressive capacity expansion, but be prepared for high volatility and negative near-term profitability.
• Carefully monitor the company's execution on its capital-intensive data center expansion and its ability to manage cash burn, as these are critical to achieving its target of EBITDA profitability in 2026.
• Evaluate Nebius' valuation relative to its primary competitor, CoreWeave, noting its current premium on a 2027 forward sales multiple, and consider this in position sizing.
• Given the substantial revenue concentration with Microsoft, investors must remain vigilant about the health and stability of this key partnership as a primary driver of the investment thesis.