NBIS Q3 2025: Capacity Expansion Target Rises 150% to 2.5GW, Powering $7–9B ARR Ambition
NBIS’s Q3 revealed a business bottlenecked by capacity, not demand, with every megawatt of new infrastructure pre-sold and strategic contracts with Microsoft and Meta underscoring its AI cloud relevance. Management sharply raised its contracted power target to 2.5GW for 2026, reflecting unrelenting customer demand and a deliberate pivot to vertical integration. The company’s accelerated capex, diversified financing plan, and focus on enterprise readiness set up a high-stakes race to scale—where execution on infrastructure delivery, not customer appetite, will define its trajectory.
Summary
- Capacity Bottleneck Shapes Growth: Every new data center tranche sells out, making infrastructure build-out the gating factor.
- Strategic Mega Deals Secure Demand Visibility: Long-term contracts with Microsoft and Meta anchor future revenue streams and support financing efforts.
- Enterprise and Product Expansion Accelerate: New platform releases and inference offerings position NBIS to capture broader AI workloads beyond hyperscalers.
Performance Analysis
NBIS delivered explosive revenue growth in Q3, with group sales up 355% year over year and 39% sequentially, but this surge was entirely constrained by physical capacity. The core infrastructure business, representing nearly 90% of total sales, outpaced the group, growing 400% YoY and 40% QoQ. EBITDA margins for core infrastructure improved to nearly 19%, reflecting strong operating leverage as new capacity came online and was immediately monetized.
Annualized run rate revenue for the core business reached $551 million, yet the company’s incremental ARR slowed materially in Q3 versus prior quarters—a direct result of capacity timing rather than waning demand. Management tightened full-year revenue guidance to $500–550 million, citing the precise timing of capacity deployments as the only limiter. CAPEX guidance was raised to $5 billion for 2025, up from $2 billion, underlining an aggressive infrastructure build to unlock further growth.
- Revenue Ceiling Set by Supply, Not Demand: All new capacity is pre-sold, with pipeline generation up 70% QoQ but only partially converted due to infrastructure constraints.
- Margin Expansion as Scale Grows: Core infrastructure EBITDA margin climbed, signaling profitable unit economics even at rapid scale.
- Capex Acceleration Signals Conviction: $5B in 2025 capex reflects management’s intent to secure power, land, and hardware ahead of demand realization.
The business’s ability to convert demand into revenue now hinges on its execution in infrastructure delivery, with mega deals providing both financial stability and pressure to deliver on large-scale commitments.
Executive Commentary
"Q3 demand was very strong. We sold out all of our available capacity. We continue to see a consistent trend. Every time we bring capacity online, we sell all of it."
Arkady Valoj, Founder and CEO
"Adjusted EBITDA margin for the core infrastructure business expanded quarter over quarter to nearly 19%. ... Our current momentum and long-term trajectory remain extremely strong."
Dada Alonso, Chief Financial Officer
Strategic Positioning
1. Capacity as the Revenue Bottleneck
NBIS’s revenue is capped by infrastructure, not customer demand. The company’s rapid sell-out of every new data center tranche—across regions like Israel, UK, and New Jersey—demonstrates that market appetite for AI compute far exceeds current supply. Management’s decision to raise its 2026 contracted power target from 1GW to 2.5GW (gigawatt, a measure of data center power capacity) is a direct response to this constraint, and signals a willingness to outspend rivals to secure future market share.
2. Mega Deals Anchor Growth and Financing
Long-term contracts with hyperscalers are now a structural pillar. The $3B Meta deal and the $17.4–19.4B Microsoft contract provide multi-year revenue visibility, enhance NBIS’s credit profile for asset-backed financing, and validate its relevance in the AI cloud value chain. However, these deals also place execution risk squarely on NBIS’s ability to deliver contracted capacity on schedule.
3. Vertical Integration and Margin Focus
NBIS is deliberately shifting toward owning more of its infrastructure footprint, reducing reliance on third-party colocation. This vertical integration—from securing land and power to building and equipping data centers—aims to drive higher margins and operational control, with management repeatedly emphasizing margin discipline as a core decision driver.
4. Enterprise Cloud and Product Differentiation
NBIS is moving beyond hyperscaler deals to target enterprise and vertical AI workloads. The launch of Ether (enterprise-ready cloud platform) and Nebius Talking Factory (inference-as-a-service, a platform for running AI models at scale) addresses compliance, security, and performance requirements for large organizations. Early traction with AI-native startups and vertical customers (healthcare, media, robotics) suggests a broadening addressable market.
5. Financing Flexibility for Capital-Intensive Growth
The company is deploying a mix of asset-backed debt, corporate debt, and equity—including a new ATM (at-the-market, ongoing equity issuance) program for up to 25 million shares—to fund its multi-billion dollar capex ramp. Management is explicit about being “dilution sensitive” but sees flexible capital access as critical to maintaining growth momentum.
Key Considerations
NBIS’s Q3 underscores a business at the intersection of unprecedented demand and execution risk. The company’s ability to scale infrastructure, manage capital intensity, and diversify its customer base will determine whether it can sustain its current trajectory.
Key Considerations:
- Demand Outpaces Supply: Pipeline generation rose 70% QoQ, but only a fraction converts to revenue due to build-out constraints.
- Execution Pressure on Delivery: Meeting Microsoft and Meta obligations depends on timely infrastructure completion across multiple geographies.
- Capex Allocation Discipline: Management’s staged approach (land/power, shell, GPUs) aims to avoid overbuilding while remaining flexible to market shifts.
- Enterprise Market Entry: Success in enterprise and verticals hinges on rapid feature delivery, compliance wins, and salesforce ramp.
- Financing Mix and Dilution: Asset-backed deals and ATM equity raise flexibility but require margin discipline to protect shareholder value.
Risks
Execution risk is elevated, as NBIS must deliver multi-gigawatt capacity build-outs on tight timelines to meet mega deal obligations. Supply chain, power, and permitting delays could impact delivery and revenue conversion. Capital intensity and dilution risk are material, with heavy reliance on external financing to fund rapid expansion. The AI infrastructure market could face oversupply or pricing pressure if demand normalizes or new entrants accelerate capacity build.
Forward Outlook
For Q4 2025, NBIS guided to:
- Full-year revenue of $500–550 million, pacing to the midpoint
- Adjusted EBITDA slightly positive at group level by year-end
For full-year 2026, management will provide guidance next quarter but reiterated:
- Annualized run rate revenue target of $7–9 billion by end of 2026
- 2.5GW contracted power, with 800MW–1GW connected by end of 2026
Management highlighted that revenue ramp from Microsoft and Meta will largely occur in 2026, with full annual run-rate recognition by 2027. Capex will remain elevated as new sites and phases come online globally.
Takeaways
NBIS’s Q3 results reinforce a theme of demand outstripping supply, but the company’s fate now hinges on its ability to execute a massive, multi-region infrastructure rollout. Investors should focus on capacity delivery milestones, margin progression, and customer mix evolution as lead indicators of sustained outperformance.
- Capacity Unlocks Revenue, Not the Other Way Around: Growth is capped by build speed, not lack of customers, making infrastructure delivery the primary value lever.
- Strategic Deals Anchor but Also Pressure Execution: Mega contracts provide multi-year visibility but raise the stakes for on-time delivery and operational discipline.
- Enterprise and Product Expansion Are Next Growth Vectors: Success with Ether and inference offerings could broaden the business beyond hyperscaler dependency, but require rapid product and sales execution.
Conclusion
NBIS sits at the center of the AI infrastructure build-out, with demand and backlog that most competitors envy. The company’s ability to convert this demand into sustainable, profitable growth will be determined by disciplined execution, capital allocation, and the agility to adapt as the AI cycle matures.
Industry Read-Through
NBIS’s quarter provides a real-time barometer of AI infrastructure demand, underscoring that the bottleneck has shifted from customer appetite to physical capacity and power. The company’s willingness to aggressively raise capex and secure power ahead of demand signals a new phase of capital intensity for the AI cloud sector. For peers and suppliers, the pre-sell dynamic and rapid absorption of new GPU generations (Blackwell, Hopper) suggest continued tailwinds for semiconductor and data center ecosystem players. However, the risk of overbuild or supply-demand normalization in 2027 and beyond will require vigilance as more players scale up infrastructure footprints.