Neocloud Inc CoreWeave(NASDAQ: CRWV ) It released its fourth quarter 2025 results on February 26, and investors were not impressed with the company’s numbers and outlook. The stock fell sharply following the report and is now trading 60% below the 52-week high reached in June last year.
CoreWeave stock has risen impressively since its initial public offering (IPO) in March of last year. However, the stock has been under pressure in recent months due to its large capital spending and concerns about an artificial intelligence (AI) bubble. As such, it was easy to see why investors hit the panic button after the company reported a bigger-than-expected loss and delivered lower-than-expected earnings guidance for the current quarter.
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However, savvy investors may be wondering if this is a good time to buy this AI stock. Let’s take a closer look at its results and direction and see if the pullback is really a buying opportunity.
Image source: Getty Images.
CoreWeave’s 2025 revenue is up 168% year over year to $5.1 billion. However, its capital expenditures last year were much higher at $14.9 billion. CoreWeave spent $8.2 billion in capital expenditures in Q4 alone, a 242% increase over the prior year period. As a result, its adjusted net loss increased nearly tenfold to $606 million in 2025.
However, CoreWeave’s aggressive capital expenditure is a necessity. This is because the demand for AI-focused cloud computing capacity is growing at an incredible pace, and there is not enough supply in the market to meet the demand. according to Goldman SachsDemand for data center power capacity in the United States will decrease by 9 gigawatts (GW) in 2026, followed by a large gap of 10 gigawatts in each of the next two years.
CoreWeave has built an impressive customer base that includes large hyperscale and AI companies, which spend heavily on AI data centers. It ended up with a revenue backlog of $67 billion at the end of 2025, more than four times the $15.1 billion at the end of 2024. The sharp jump in returns was driven by new customer contracts and expansion of existing contracts.
It needs to clear 42% or $28 billion of its backlog over the next few years. So, CoreWeave needs to aggressively add more data center capacity, which explains the sharp increase in its capex. CEO Michael Interter explained in a recent earnings call: “We were able to deploy our data center and server infrastructure faster than expected, while bringing more capacity online this quarter than in our history. This led to a corresponding increase in our revenue and technology and infrastructure spending.”
CoreWeave plans to spend $30 billion to $35 billion in capex in 2026. Again, that would be significantly higher than the $12 billion to $13 billion in revenue it estimates this year. However, the company is confident that its investment will eventually lead to strong earnings growth.
CoreWeave believes it will hit $17 billion to $19 billion in annual run rate revenue (ARR) by 2026. The company calculates this metric by multiplying the revenue in the last month of the year by 12. Even better, CoreWeave is confident it will hit $30 billion in ARR by 2027, meaning it will end next year with at least $2.5 billion in monthly revenue.
So don’t be surprised if CoreWeave’s revenue in 2028 is six times higher than last year’s level. What’s more, the company estimates that long-term adjusted operating margins could be between 25% and 30%, better than last year’s reading of 13%. At the same time, CoreWeave focuses on reducing the average cost of capital.
It cut its weighted average interest rate by 300 basis points last quarter, which will help it save $700 million in annual interest. CoreWeave hopes to further reduce its capital costs by partnering with more investment providers and financial institutions to enable “wider industry participation” in financing facilities.
Analysts therefore expect CoreWeave to become profitable.
CRWV EPS estimates for current fiscal year data by YCharts
CoreWeave is not yet profitable, which explains why it does not have a good price-to-earnings ratio. However, the sales multiple of 6.6 is lower than the US technology sector’s average sales multiple of 8.3.
CoreWeave stock deserves to trade at a higher multiple given the rapid earnings growth it is delivering. However, investors are more concerned with bottom line performance. The good part is that CoreWeave is likely to deliver on this front as well, as evidenced by the chart above. Assuming it actually delivers earnings per share of $2.86 in 2028 and trades at 32 times earnings at that time) Nasdaq-100 Index earnings multiple)) its stock can rise to $91.
This indicates a potential 23% jump from current levels. However, don’t be surprised if it delivers big gains given its focus on quickly turning its large backlog into revenue.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns and recommends positions at Goldman Sachs Group. Motley Fool has a disclosure policy.
This super growth stock is down 60%. Here’s why you should buy it on hand. Originally published by Motley Fool
