Alphabet’s Earnings Report Highlights Growing Demand for Neocloud Providers

Google parent Alphabet recently released its latest earnings report, which not only highlighted the company’s continued growth in the AI market but also underscored the increasing importance of neocloud providers in the AI infrastructure landscape.

During the earnings call, CFO Anat Ashkenazi revealed that Google plans to expand its use of third-party computing capacity as a temporary bridge while additional in-house infrastructure comes online. This admission has caught the attention of Wall Street and reinforces one of the biggest investment themes in AI today – companies offering specialized cloud infrastructure are becoming increasingly crucial as enterprises race to secure GPU capacity.

Investors have quickly connected the dots, and shares of Nebius Group (NBIS) and CoreWeave (CRWV) have climbed following Alphabet’s earnings call and management’s comments. These neocloud providers are well-positioned to capitalize on the booming demand for AI compute, and investors looking to ride this trend should consider NBIS and CRWV stocks.

Nebius Group: A Leader in Neocloud Infrastructure

Nebius Group is an AI infrastructure company building a full-stack cloud platform for AI applications. Headquartered in Schiphol, the Netherlands, the company provides large-scale GPU clusters, AI cloud services, and developer tools that help enterprises train and deploy AI models. Beyond its core AI business, Nebius owns TripleTen, a technology reskilling platform, and Avride, an autonomous driving and delivery robotics company.

Backed by a strategic partnership with Nvidia and led by founder and CEO Arkady Volozh, Nebius is rapidly expanding its AI supercomputing and cloud infrastructure, serving customers across industries and boasting a market capitalization of roughly $55.9 billion.

Nebius has been one of the standout performers in the AI infrastructure space, rewarding investors who stayed patient through the volatility. Over the past 52 weeks, NBIS stock has soared 277.4%, while gaining 135.2% year-to-date (YTD). The rally accelerated after the company delivered blockbuster first-quarter fiscal 2026 earnings in May, and momentum strengthened further when Nebius was added to the Nasdaq-100 Index in June, bringing even more attention from investors.

Key Takeaways from Nebius’ Q1 2026 Earnings Report

• Revenue surged 684% year-over-year (YOY) to $399 million.
• The core AI business – excluding Avride and TripleTen – grew even faster, with revenue soaring 841% to $390 million.
• Adjusted EBITDA climbed to $129.5 million, representing a 32% margin, while the core AI business expanded its adjusted EBITDA margin to 45%.

Nebius strengthened its balance sheet, raising $4.3 billion through convertible senior notes and securing Nvidia’s $2 billion strategic investment. The quarter ended with $9.3 billion in cash and cash equivalents, while operating cash flow jumped to $2.26 billion, giving the company plenty of financial flexibility to continue expanding its AI infrastructure.

Management unveiled a transformative five-year, $27 billion agreement with Meta Platforms (META), including a $12 billion dedicated compute commitment and $15 billion in optional capacity, providing greater revenue visibility while preserving flexibility to serve higher-margin AI cloud customers.

Nebius also strengthened its partnership with Nvidia, earning Nvidia Exemplar Cloud status for GB300 training workloads and gaining access to future GPU platforms, including Vera Rubin. The company’s customer pipeline grew 3.5x sequentially, prompting the company to expand contracted power capacity beyond 3.5 GW, with a target of more than 4 GW by 2026, supported by a new 1.2 GW Pennsylvania AI factory and acquisitions that broaden its full-stack AI platform.

Looking ahead, management estimates annualized run-rate revenue to be between $7 billion and $9 billion in 2026, with total group revenue projected between $3 billion and $3.4 billion and an adjusted EBITDA margin of roughly 40%. The company raised its 2026 capex forecast to $20 billion to $25 billion.

The company is all set to release its second-quarter earnings report for fiscal 2026 soon. Analysts monitoring the company anticipate Q2 revenue of $582.8 million, with losses coming in at $0.67 per share. Looking further ahead, fiscal 2026 loss per share is expected to widen by 7.9% YOY to $1.91, before narrowing down by 63.9% annually to -$0.69 in fiscal 2027.

Baird Initiates Coverage of NBIS with an ‘Outperform’ Rating

Baird initiated coverage of NBIS with an ‘Outperform’ rating and a $250 price target, citing the company’s expanding role in AI inference. The brokerage firm believes Nebius is well-positioned for long-term growth, supported by its strong software capabilities, growing customer base, experienced management team, and strategic acquisitions that have broadened its AI platform and service offerings as enterprise AI demand continues to evolve.

Overall, NBIS stock carries a consensus ‘Moderate Buy’ rating. Among the 16 analysts in coverage, 11 suggest a ‘Strong Buy,’ and five analysts recommend a ‘Hold.’ The stock has a mean price target of $254.92, implying upside potential of 32.1% from the current price.