CoreWeave closed Friday at $71.88, down 11.4%, a drop that wiped out its entire week. The slide came two days after Alphabet raised its 2026 capital spending outlook — a demand signal for the AI cloud provider. Friday’s sell-off arguably wasn’t a verdict on demand, but on what meeting that demand costs.
CoreWeave closed Friday at $71.88, down 11.4% for the session. The drop knocked shares from levels above $86 at one point during the week to below Monday’s close of $73.06.
Timing made the move odd. Alphabet, one of the biggest spenders in AI infrastructure, lifted its 2026 capital spending outlook by $15 billion on Wednesday, to as much as $205 billion. On Alphabet’s Q2 earnings call, chief financial officer Anat Ashkenazi said the company would “expand the use of third-party capacity in Q3 as a bridging strategy.”
Shares rose in after-hours trading on that comment, then gave it back Thursday and more on Friday. Fellow neocloud Nebius Group fell 15% on Friday alone.
Demand grows while margins thin
CoreWeave’s revenue climbed 112% year over year in Q1, to $2.08 billion, and its revenue backlog stood at $99.4 billion at the end of March. Further down the income statement the picture thins: adjusted EBITDA came in at $1.16 billion for the quarter, a 56% margin, down from 62% a year earlier.
Adjusted operating income, which charges the quarter for depreciation on graphics processing units and data centers, fell to $21 million from $163 million year over year, taking that margin from 17% to 1%. Management expects that line to expand each quarter from here, into low double digits by Q4.
Spending runs years ahead of sales
But the cost of that capacity lands now. Management expects capital expenditures of $31 billion to $35 billion this year against about $6.2 billion of revenue over the past 12 months — about five times its past year’s sales. That step-up follows $14.9 billion in capital expenditures in all of 2025, and the gap may be part of what is spooking investors.
Debt fills much of it, and the interest is climbing fast. Net interest expense reached $536 million in Q1 2026, up from $388 million in Q4 2025 and $264 million in Q1 2025.
Management guided for $650 million to $730 million in Q2, a midpoint at which first-half net interest expense would nearly match the $1.23 billion recorded across all of 2025. Total debt stood near $24.9 billion at the end of March, up from $21.4 billion three months earlier.
Backlog converts slowly
Revenue behind those contracts arrives over years. CoreWeave counted $98.8 billion of unsatisfied remaining performance obligations at the end of March and expects to recognize just 36% within 24 months, with the rest stretching as far out as seven years.
Competition is a concern, too. Bloomberg reported on July 1 that Meta Platforms is building a cloud business to sell surplus AI computing capacity to outside customers.
Meta also committed $21 billion to CoreWeave earlier this year, so one of the company’s biggest customers may be preparing to compete with it. At about $39 billion, CoreWeave’s market value is still about six times its trailing-12-month revenue.
Source: The Motley Fool
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