Is NBIS a good stock to buy?We came across a bullish thesis on Nebius Group N.V. on Studio Innovation's Substack by Studio. The thesis was published on August 12th, when the stock was trading at $259.20, and NBIS has pulled back since then. The decline appears to reflect dilution concerns following Nebius's $5 billion convertible-note offering and broader worries about financing AI data center expansion, creating a near-term headwind to sentiment while the long-term growth case remains intact. In this article, we will summarize the bulls' thesis on NBIS. Nebius Group N.V.'s share was trading at $153.27 as of October 26th 2026. NBIS's trailing and forward P/E were 74.61 and 32.05 respectively according to Yahoo Finance.
This isn't the first time we see a cloud computing company pitched as a great investment. NBIS shares gained 83.11% year to date. Comparable stocks like DigitalOcean gained 106.84% during the same period. Why are cloud computing stocks rising so much and does NBIS's recent weakness make this a good time to buy?
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In May, we published an article about the 10 Stocks With Remarkable Gains and NBIS ranked #7 in that article. Btw, the #1 stock in that list returned 151.37% since then. This article explains why hedge funds were bullish on NBIS. Before getting into our analysis, let's take a look at the business and why some investors like the stock so much.
Nebius Group N.V. (NASDAQ:NBIS) provides AI cloud infrastructure services designed to support the growing demand for artificial intelligence workloads. Its investment case rests on whether it can become a major provider of AI computing power as companies race to secure this kind of infrastructure. In the second quarter of 2026, revenue jumped 454% year over year to $582.3 million, and adjusted EBITDA came in at $236.2 million, a sharp turnaround from a $21 million loss a year earlier. Nearly all of that revenue, $575 million, came from AI cloud services. The company still posted a net loss of $190.4 million and a loss per share of $0.68, but the swing from an EBITDA loss to a strong profit is why investors are focusing more on where the business is headed than on where it stands today.
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The bullish case is built on the idea that demand for AI infrastructure is growing faster than the supply of computing capacity, and that Nebius Group N.V. is well placed to capture that gap. Management called the quarter its strongest ever for new business, signing four customer agreements each worth more than $1 billion, with clients including Reflection, Cohere, an unnamed AI lab, and a large U.S. quantitative trading firm. These deals were priced at $20 million to $25 million per megawatt of capacity. Management said it could sell out its entire 2027 capacity right now but is deliberately holding some back for customers willing to pay more ( see Nebius's planned GPU and CPU price increases amid strong demand ). Adding to the confidence, the company expects customer prepayments to top $9 billion in 2026, and nearly 70% of this quarter's deals came with money paid upfront, a sign that demand is real rather than speculative.
Management also raised its outlook. It now expects to have 5 gigawatts of power under contract by year-end, up from a prior target of just over 4 gigawatts, and reaffirmed its 2026 guidance of $3 billion to $3.4 billion in revenue, $7 billion to $9 billion in annualized revenue run-rate, an adjusted EBITDA margin near 40%, and capital spending of $20 billion to $25 billion. To fund this expansion without stretching its balance sheet too far, the company introduced an asset-light partnership model, raised about $2.8 billion through an at-the-market equity program, and secured a $775 million debt facility backed by more than $40 billion in customer contracts still to be delivered.
Profitability is also improving faster than expected. The overall adjusted EBITDA margin reached 41% in the quarter, and the margin on the AI business alone was even higher at 50%, showing that profits are growing faster than revenue as the company scales. Operating cash flow came in at roughly $2.3 billion, and Nebius Group N.V. ended the quarter holding $8 billion in cash, giving it room to keep investing aggressively. Looking ahead, management plans to add more than 1 gigawatt of new capacity every year starting in 2027, with its next-generation Vera Rubin chips expected to go live in late 2026 or early 2027. Successfully building out this infrastructure while protecting margins remains the company's biggest task.
Nearly all of the company's growth is currently coming from a small number of very large AI customers rather than a broad customer base. This concentration is central to the investment case: big contracts are driving the rapid revenue growth, but it also means the company's fortunes are closely tied to just a handful of relationships. Whether Nebius Group N.V. can broaden its customer base over time remains an open question for investors to watch.
Another risk for the stock is that expensive computing hardware loses its earning power faster than expected. New chip generations improve performance, but they can also make older equipment less attractive to customers. Nebius acknowledges that technological change and hardware replacement cycles affect estimates of how long its assets remain useful. If older GPUs command lower rental prices sooner than planned, the company could earn less from equipment it has already purchased. Replacing that hardware earlier would also require additional cash. Strong adjusted EBITDA would not capture the full financial burden, since it excludes depreciation and capital spending. In our opinion, the valuation becomes harder to justify if hardware needs replacing before it generates the returns investors expect.
Ultimately, the long-term opportunity depends on AI demand staying strong enough to justify the company's ambitious spending plans. Nebius Group N.V. has shown fast growth, improving margins, and solid customer commitments, but a slowdown in AI infrastructure spending could hurt returns on the billions of dollars it plans to invest. Because growth depends so heavily on a small number of large contracts, execution risk stays elevated if customer demand, pricing, or capacity use don't play out as expected.
Hedge fund positioning shows a strong signal. As per our database, 86 hedge fund portfolios held Nebius Group N.V. at the end of the second quarter, up from 60 in the previous quarter. That kind of jump points to institutional investors growing meaningfully more confident in the company's growth story. By comparison, CoreWeave, Inc. (NASDAQ:CRWV) was held by 71 hedge funds, up from 63, DigitalOcean Holdings, Inc. (NYSE:DOCN) was held by 53 hedge funds, up from 47, and Oracle Corporation (NYSE:ORCL) was held by 119 hedge funds, up from 115. All four companies saw hedge fund ownership rise, underscoring broad institutional interest in AI infrastructure, with Nebius Group N.V. posting the largest increase of the group.
Short interest data also paints a fairly cautious picture for Nebius Group N.V. relative to its peers. About 18.93% of Nebius Group N.V.'s float is sold short, slightly below CoreWeave, Inc. at 19.24%, but above DigitalOcean Holdings, Inc. at 11.52% and well above Oracle Corporation at 2.60%. This suggests Nebius Group N.V. is drawing considerably more skepticism than DigitalOcean Holdings, Inc. and Oracle Corporation, while bearish bets remain broadly in line with CoreWeave, Inc. as investors weigh valuation, execution risk, and the sustainability of AI infrastructure spending.
Valuation Analysis
NBIS's EV/Revenue is 33.42x. CoreWeave, Inc., Oracle Corporation, and DigitalOcean Holdings, Inc. trade at EV/Revenue multiples of 10.01x, 7.05x, and 11.59x, respectively. NBIS's own EV/Revenue was 57.67x on December 31, 2025, making its current valuation approximately 42% lower. We believe the current valuation reflects investor expectations for exceptional AI infrastructure growth, alongside concerns about customer concentration, funding requirements, and execution. However, the premium remains substantial despite the historical decline, leaving investors dependent on rapid growth translating into sustainable profits. Nebius's revenue increased 454% to $582.3 million in the second quarter of 2026, while adjusted EBITDA reached $236.2 million, although the company still posted a $190.4 million net loss. We believe NBIS needs sustained revenue expansion and stronger returns on its infrastructure spending to justify its current valuation, without assuming that its recent growth rate can continue indefinitely. If Nebius delivers its contracted capacity and converts customer demand into lasting profits, its premium could be justified, but we would wait for a lower valuation before buying given the risks surrounding its expansion.
Previously we covered a bullish thesis on Nebius Group N.V. (NBIS) by Oliver | MMMT Wealth in April 2025, which highlighted AI infrastructure scalability, 240,000 GPU deployment plans, $3.5–4B and annual recurring revenue potential. NBIS's stock price has appreciated by approximately 628.12% since our coverage. We believe NBIS's growth and customer commitments are promising, but would wait for a lower entry price until its heavy infrastructure spending produces sustained profits and cash returns.
Nebius Group N.V. is not on our list of the 40 Most Popular Stocks Among Hedge Funds . While NBIS could benefit from rising AI infrastructure demand and its large customer contracts, we believe certain AI infrastructure stocks offer far stronger long-term potential at a much more attractive entry point. If you are looking for an AI stock more promising than NBIS that operates as a critical AI tollbooth and stands as the most important company in the world, check out our report about this must-own AI stock .
Disclosure: None.
