Nebius Group (NASDAQ: NBIS) shed 31.1% of its value in July, per S&P Global Market Intelligence, cutting a large slice from a year-to-date gain that still stands at 125%. The growth story behind that run is intact: first-quarter revenue climbed from roughly $50 million a year earlier to $400 million. The complication is that the stock trades at about 14 times forward sales, and the company spent approximately $2.5 billion in a single quarter chasing the capacity needed to hold that valuation.
The capacity buildout
Since last August, Nebius has raised its contracted power capacity projections from a minimum of 1 gigawatt to over 4 GW. The company disclosed it had already secured up to 1.2 GW of power and land for an AI factory at a new site in Pennsylvania. Management pointed to rising co-location and operating lease costs, along with recruitment to support expanding operations, as the main drivers of higher Q1 expenses. Customers have been announcing intentions to secure Nebius cloud capacity at an increasing rate, which tightens the link between capex and future revenue.
The capital stack
In mid-July, Nebius announced $775 million in debt financing. That came after $6.3 billion raised in the first quarter: a $2 billion equity investment from Nvidia and $4.3 billion from convertible securities. The Nvidia stake matters beyond the dollars. Nvidia's involvement signals confidence from the dominant GPU supplier that Nebius can absorb the hardware it is buying, primarily GPUs and GPU-related equipment.
The counterargument
The counterargument belongs to valuation. At roughly 14 times forward sales, the stock prices in a demand curve that stays steep and a customer base that does not flinch. Any sign that enterprises are pulling back plans to use Nebius cloud infrastructure would hit the share price hard. Q1 capital expenditure of approximately $2.5 billion, in a single quarter, means the company is betting demand continues to justify the pace. Investors waiting for free cash flow will be waiting a while.
On balance
Q2 results are due Wednesday, Aug. 12, and will give investors a clearer look at whether the capacity pipeline and customer commitments held through the summer. What's changed since the July selloff is the price, not the thesis. The risk that remains is that 14 times forward sales is a thin margin for error when quarterly capex is running at $2.5 billion.