CoreWeave Shares Plummet 20% After Mixed Q2 Results

NEWARK, N.J. — CoreWeave‘s stock dropped 20% in trading on Wednesday after the company reported mixed second-quarter financial results. Despite announcing revenue that surpassed analyst expectations, the company’s larger-than-expected adjusted loss of 27 cents per share discouraged investors.

The New Jersey-based AI infrastructure provider generated $1.21 billion in revenue, significantly exceeding the $1.08 billion forecast, driven by strong demand in the AI sector. However, the adjusted loss was worse than the expected loss of 21 cents per share, prompting analysts to reassess their outlook.

Analysts noted that this volatility comes at a precarious time as CoreWeave’s lock-up period following its IPO is set to expire, allowing insiders to sell their shares. This could flood the market with additional shares and further depress stock prices. Stifel analysts expressed a cautious outlook, saying the near-term upside potential is limited by the dilution risk from the lock-up expiration.

CoreWeave is also facing challenges related to rising interest expenses and infrastructure investments. The company projected a third-quarter operating income of $160 million to $190 million, which fell below Wall Street’s expectation of $192 million, raising concerns about future profitability.

Despite the mixed results, some analysts remain optimistic. Wells Fargo raised its price target on CoreWeave stock to $105, citing robust demand and a significant revenue backlog of $30 billion. Conversely, a Bank of America analyst lowered their target to $168 due to underwhelming growth in backlog.

Moreover, analysts from Morgan Stanley pointed out that delays in capital expenditures could impact revenue recognition negatively.

As CoreWeave continues to grow, it aims to reach 900 megawatts of data center capacity by year-end. The company is now signing deals with major players like OpenAI, Microsoft, and Meta, indicating strong confidence in the demand for its services. However, its aggressive expansion poses execution risks and financial pressures.

In a recent call with analysts, CoreWeave’s finance chief Nitin Agrawal said the company sees demand outpacing supply, further highlighting the need for continued expansion in response to market needs.