NBIS Stock: Riding the Wave of AI Demand

Nebius Group N.V. (NBIS) has been a standout performer in the stock market recently, with its stock price soaring 42.1% over the past three months. This impressive growth significantly outpaces the Zacks Computer & Technology sector’s decline of 2.5% and the Zacks Internet Software Services industry’s 6.7% drop. Even compared to the broader market, represented by the S&P 500 composite, which is down 1.8% during the same period, NBIS shines. The stock has seen a remarkable 11.7% increase in the last month alone, and a further surge of 29% in the past week.

Market speculation suggests Nebius is in advanced talks to acquire Israeli AI startup AI21 Labs, adding fuel to the bullish sentiment. This potential acquisition underscores the company’s commitment to strengthening its position in the rapidly evolving artificial intelligence landscape.

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Outperforming the Competition

NBIS has not only outperformed the market but has also surpassed its peers, including Microsoft Corporation (MSFT) and CoreWeave, Inc. (CRWV). While MSFT has experienced a 19.1% decline and CRWV has climbed 13.6% during the same timeframe, NBIS’s growth trajectory remains remarkably strong.

Is the Rally Sustainable?

Following this strong rally, investors are naturally questioning whether NBIS still offers upside potential or if expectations have already outpaced the company’s fundamentals. Let’s delve into a comprehensive analysis of Nebius’s strengths and challenges to determine the best course of action.

Strong Demand and Capacity Constraints

Nebius continues to experience robust demand from hyperscalers, large enterprises, and AI-native startups. Customers are rapidly scaling their GPU usage, moving from hundreds and thousands to tens of thousands. Currently, demand significantly exceeds supply, leading to capacity sell-outs in the fourth quarter. Disciplined cost management and increasing operating leverage are contributing to improved profitability.

Exceptional Growth in the AI Cloud Business

The company’s core AI cloud business delivered exceptional growth in the fourth quarter of 2025, with revenue surging 830% year-over-year and 63% sequentially. This growth is driven by high utilization rates, favorable pricing, and effective execution. Enterprise adoption of AI is expanding across critical workflows, resulting in larger and longer-duration contracts. New customer contract durations have increased by 50%, and the pipeline momentum remains strong with improving deal quality and larger average deal sizes.

Strategic Investment from NVIDIA

Nebius secured a significant $2 billion investment from NVIDIA (NVDA), strengthening their collaboration across the AI technology stack. This partnership supports Nebius’s full-stack AI cloud platform, enabling it to scale towards its goal of deploying over 5 gigawatts of AI computing capacity by 2030, with access to next-generation GPUs. The collaboration also includes the deployment of multiple generations of NVIDIA hardware, including early access to advanced architectures like NVDA’s Rubin platform, Vera CPUs, and BlueField storage and networking systems.

Aggressive Expansion Plans

Nebius is aggressively expanding its capacity, announcing nine new data centers and securing over 2 gigawatts of contracted power, with expectations to exceed 3 gigawatts. The company is on track to deliver 800 megawatts to 1 gigawatt of available data center capacity by the end of 2026. Recently, Nebius announced plans to build an AI factory with a capacity of up to 310 MW in Finland, aiming to create “one of Europe’s largest dedicated AI factories.” The company has already secured 750 MW of contracted power in EMEA and is advancing parallel projects, including a 240-MW AI factory near Lille, France.

Furthermore, Nebius received approval to build its first gigawatt-scale AI factory in Kansas City, MO, demonstrating its commitment to expanding its infrastructure footprint.

Innovation and Platform Expansion

Growth is further supported by platform expansion through product innovation and acquisitions, including the launch of Token Factory and Aether, and the acquisition of Tavily. These initiatives are driving strong developer engagement, with a 100% software attach rate for AI cloud customers. The launch of Nebius AI Cloud 3.5, the latest upgrade to its Aether platform, introduces enhancements aimed at simplifying and accelerating AI development and deployment.

Financial Flexibility and Future Outlook

Nebius maintains financial flexibility through various funding avenues, including operating cash flows, debt, asset-backed financing, potential equity issuance, and stakes in non-core assets. The company expects Microsoft to contribute revenue at its full annual run rate beginning in 2027. Nebius targets 2026 revenue of $3 billion to $3.4 billion and an annualized run-rate of $7 billion to $9 billion by year-end.

Challenges and Risks

Despite the positive outlook, Nebius faces challenges. EBIT is expected to remain negative in 2026 due to ongoing capacity expansion and investments in research and development. The company operates in a dynamic environment with macroeconomic uncertainty, rising operating costs, and substantial capital requirements. Nebius plans to invest between $16 billion and $20 billion in capital expenditures in 2026, which elevates financial risk if revenue growth doesn’t keep pace.

The rapid expansion of data centers also introduces execution and operational risks. Currently, NBIS’s Price/Book ratio is 7.91X, higher than the industry average of 3.57X.

Investment Recommendation

Despite near-term risks, Nebius’s robust demand, strategic partnerships, and aggressive capacity expansion position it for long-term growth. Existing investors may consider holding their positions, while prospective investors may want to wait for a more favorable entry point. NBIS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).