CoreWeave will announce its third-quarter financial results after the market closes on Tuesday, which will be a crucial test for this "new cloud" company.
The market will closely watch how this company discusses its spending on artificial intelligence and how it plans to finance its infrastructure expansion. The outcome could either alleviate market concerns about its debt or further exacerbate panic.
Wolfe ResearchOn Monday, in a report, it was stated: "Investors need new quantitative methods from cloud companies. To execute the existing backlogged orders, they are expected to raise additional funds as well. We believe that if the outlook can clarify when and through which financing channels the funds will be raised, it will boost investor confidence."
As the market becomes increasingly concerned about the huge debts incurred by CoreWeave for building data centers, both the company's stocks and bonds have come under pressure.
Over the past month, its stock price has fallen by approximately 40%. Meanwhile, the yield on its bonds maturing in 2031 with a coupon rate of 9.75% reached 15.5% on Tuesday; previously, last Thursday, after investors digested the election results and the potential obstacles to data center construction, the yield had soared to 16.7%. Bond yields move in the opposite direction to bond prices.
The five-year credit default swap ( CDS ) spread – which is essentially an insurance against default – is also considered a barometer of the market's perception of credit risk, and it is currently in a range that is generally regarded as problematic. On Tuesday, the CDS spread for CoreWeave was around 1,152 basis points; previously, on last Thursday, this indicator broke through its October high, closing at 1,278 basis points. An increase in the CDS spread indicates that investors perceive a higher debt risk.
In addition, this company, headquartered in New Jersey, has a high level of leverage. The debt-to-equity ratio of CoreWeave is 702%, which is higher than the nearly 291% level from a year ago.
CEO Michael Intrator attempted to soothe investors' concerns. Following last week's elections, he stated in a post on LinkedIn that the company expects "changes in the political environment will not have any impact on the existing customer commitments or backlogged orders of CoreWeave."
The company disclosed that it had backlogged orders worth $104.2 billion in the second quarter. As of June 30, its debt amounted to approximately $35 billion.
Pay attention to capital expenditure.
CoreWeave has actually already provided an expected outline for the third quarter.
When the company announced its second-quarter results in August, it provided a quarterly revenue guidance of $3.4 billion to $3.6 billion. It expects capital expenditures for the third quarter to be between $11.5 billion and $13.5 billion, and annual capital expenditures to be between $35 billion and $39 billion. The company also anticipates that by the end of the year, its operating power capacity will reach 1.85 gigawatts.
Bank of America analyst Michael Turrin stated in a report on Sunday that the company's capital expenditure needs for the remainder of this year are expected to be largely covered by the unused debt capacity, debt issued in August/September, and the $12 billion in project cost funds it holds, which will be transferred to capital expenditures.
However, Turrin indicates that based on the expected additional 1.5 gigawatts of production capacity, CoreWeave's capital expenditures in 2027 could reach $66 billion. This would require an additional $25 billion in debt at the very least. He pointed out that most of this funding can be raised by delaying the withdrawal of fixed-term loans, which allows CoreWeave to gradually withdraw funds over time, while the remaining amount can be financed through bonds and convertible bonds.
Turrin has assigned a "buy" rating to this stock, with a target price of $115, which indicates a potential increase of 135% from Monday's closing price.
Turrin writes: 'Although New Cloud Company is at the heart of the AI storm, we still believe that CRWV is the company with the highest quality in this field. Setting aside the noise, we see that its production capacity/revenue performance will be better than expected (1.95 gigawatts this year, higher than the guidance of 1.85 gigawatts), and at the same time, the profit margin has also begun to improve.'
However, analyst Jordan Chalfin indicates that investors may not be able to find all the answers they are looking for in CoreWeave's third-quarter performance report.
He said, "A major issue faced by CoreWeave is whether it can obtain all the necessary financing. They may try to soothe the market, but I'm not sure how much detail they can and are willing to provide."
Chalfin pointed out that investors will be looking at the company's guidance on capital expenditure and free cash flow for 2027, although this information may not become available until CoreWeave releases its fourth-quarter results.
He said that if CoreWeave can demonstrate that it has the plans and approvals required to expand its production capacity by 2027, it may alleviate investors' concerns. The company can also show the growth of its remaining obligations ( RPO ), which reflects the total value of future revenue that has been contracted for, and emphasize new customer orders.
In addition, Chalfin pointed out that the pricing of the company's recent transactions has been very strong. "This may be reflected in an operating profit margin in the third quarter that exceeds expectations, as well as in the forecasts for the fourth quarter."
Alternative financing channels
Chalfin indicates that despite the financing challenges faced by CoreWeave, the company has many ways to obtain capital. This includes chip-backed financing transactions, where CoreWeave can use GPU as collateral for loans, as well as financing from original equipment manufacturers. For example, Chalfin points out that CoreWeave can seek assistance from Dell, which is an important supplier of theirs and has a strong balance sheet.
He said, "Despite the market sentiment, the company's fundamentals are actually quite strong, and its pricing is also robust. I believe that the trend over the next few quarters should provide support. However, there may be risks further down the road, but it's still too early to draw conclusions at this point."
"The beginning of the end"
Some analysts still doubt whether CoreWeave will be able to calm down market concerns regarding its credit status.
Explosive Options Founder and Chief Strategist Bob Lang pointed out that the company will face a huge bill in just over two years. According to its financial report for the second quarter, by 2028, CoreWeave will need to repay a principal amount of approximately $15 billion.
He said, "They don't have enough cash to pay off all these debts. Unless there are large orders in the next 17 to 18 months or a significant influx of funds, I think this will be the beginning of the end for CoreWeave. Unless someone steps in to acquire it. But who would want to take on so much debt?"
However, Lang indicates that the company may have a "very small" window of opportunity to extend its debt for another three to five years, but this will depend on how strong its cash flow is when it announces its financial results on Tuesday.
He also pointed out that financing infrastructure projects by issuing stocks, as recently done by Meta and Oracle, is not a viable option for CoreWeave.
He said, "They will dilute the stock too much, and the stock price will continue to fall. They missed that opportunity when the stock price was still in the hundreds of dollars."
CoreWeave The stock price once exceeded $183 in June 2025. Since then, it has fallen by more than 73%, and the recent trading price is around $47.
Despite the sharp drop in stock prices, according to 39 forecasts compiled by FactSet, analysts are still generally optimistic about the stock, with an average rating of "overweight" and an average target price of $126.
– CNBC’s Jordan Novet has also contributed to the reporting of this article.
