CoreWeave (NASDAQ: CRWV) closed Friday at $71.88, down 11.4% for the session. The drop wiped out the artificial intelligence (AI) cloud provider’s entire week and knocked down shares from levels above $86 at one point during the week, leaving shares below Monday’s close of $73.06.
The timing is strange. Two days earlier, one of the biggest spenders in AI infrastructure said it wanted more of what CoreWeave sells. Alphabet lifted its 2026 capital spending outlook by $15 billion on Wednesday, to as much as $205 billion. On Alphabet’s second-quarter earnings call, chief financial officer Anat Ashkenazi said the company would “expand the use of third-party capacity in Q3 as a bridging strategy.”
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CoreWeave shares rose in after-hours trading on that comment. But they gave it back Thursday, and more on Friday, alongside fellow neocloud Nebius Group, which fell 15% on Friday alone.
So, what gives? Friday’s sell-off for these stocks arguably wasn’t a verdict on demand. It was a verdict on what meeting that demand costs.
Here’s a closer look.
Image source: The Motley Fool.
The demand story is the easy part
CoreWeave’s revenue climbed 112% year over year in the first quarter, to $2.08 billion, and its revenue backlog stood at $99.4 billion at the end of March. To be fair, few companies of any size can grow like that.
But the picture thins as you move down the income statement. Non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (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 all those graphics processing units and data centers, fell year over year to $21 million from $163 million. On that line, the margin went from 17% to 1%. Management expects it to expand each quarter from here, into low double digits by the fourth quarter.
The spending is running years ahead of the revenue
But here’s the problem.
Management expects capital expenditures of $31 billion to $35 billion this year. CoreWeave’s revenue over the past 12 months was about $6.2 billion. That gap may be part of what’s spooking investors.
In other words, the company plans to spend about five times its past year’s sales on capacity in 2026. Zoom out, and the step-up is steep: CoreWeave reported $14.9 billion in capital expenditures in all of 2025.
Story Continues
One quarter tells the same story. CoreWeave generated $2.98 billion of operating cash flow during the first quarter and spent $7.7 billion on property and equipment.
Debt helps fill that gap. And the interest on it is climbing fast.
Net interest expense was $264 million in the first quarter of 2025. It reached $388 million in the fourth quarter of 2025, then $536 million in the first quarter of 2026. Management guided for $650 million to $730 million in the second quarter.
At that midpoint, CoreWeave’s first-half net interest expense this year would nearly match the $1.23 billion it recorded across all of 2025.
And the balance behind it keeps growing. Total debt stood near $24.9 billion at the end of March, up from $21.4 billion three months earlier.
The backlog, meanwhile, arrives slowly. CoreWeave counted $98.8 billion of it as unsatisfied remaining performance obligations (contracted work not yet delivered) at the end of March, and expects to recognize just 36% within 24 months. The rest stretches as far out as seven years.
“This revenue backlog is near-term weighted, with 36% expected to be recognized in the next 24 months and 75% in the next four years,” chief financial officer Nitin Agrawal said on CoreWeave’s first-quarter earnings call.
Near-term weighted is one way to put it. The spending happens this year, the interest accrues every quarter, and about two-thirds of that revenue isn’t due until after March 2028.
And 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.
So does an 11% drop make the stock cheap? At about $39 billion, CoreWeave’s market value is still about six times its trailing-12-month revenue — too high, in my opinion, for a company as speculative as this one.
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Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Meta Platforms. The Motley Fool has a disclosure policy.
CoreWeave Stock Fell 11.4% on Friday. The Sell-Off Is About What It’s Spending, Not What It’s Selling. was originally published by The Motley Fool
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