Key Takeaways
- First-quarter revenue reached $193.4M, surging 94% from the prior year and exceeding the $181M analyst estimate
- Second-quarter revenue forecast of $194M surpassed Wall Street’s $178M projection
- Shares plummeted more than 9% in extended trading despite positive results, falling from a $226.72 closing price
- Profit margins face headwinds throughout the year as the company leases hardware back to OpenAI amid skyrocketing demand
- A major lock-up period expires Thursday, unlocking approximately 13% of IPO shares for potential sale
Cerebras Systems (CBRS) delivered its inaugural quarterly report as a publicly traded company following its May debut, showcasing impressive financial metrics. Revenue figures, forward-looking guidance, and operating losses all exceeded analyst projections. Yet the stock tumbled over 9% during after-hours trading.
Shares finished Tuesday’s regular session at $226.72, well above the $185 IPO pricing from May.
First-quarter revenue totaled $193.4 million, representing a 94% year-over-year increase and beating the Street’s $181 million expectation. Cloud and service segment revenue exploded 178% compared to the previous year. The company’s adjusted operating loss narrowed to just $3.5 million, a substantial improvement from the $19.3 million deficit recorded in the comparable 2024 period.
For the second quarter, management issued revenue guidance of $194 million, comfortably ahead of the $178 million consensus forecast, signaling 88% growth versus last year.
Profitability Margins Face Headwinds
The challenge lies in margin compression. Full-year gross margin projections stand at 38-41%, with Q2 guidance even tighter at 36-38%. The culprit: Cerebras is leasing back infrastructure it previously sold to existing clients, reallocating it to OpenAI as demand from the AI giant exceeds available new server capacity.
The massive $20 billion multi-year agreement with OpenAI serves as Cerebras’ primary growth catalyst, yet it’s simultaneously creating near-term profitability challenges. Management indicated it expects to convert $3.7 billion of its $24.6 billion order backlog into actual revenue during 2026 and 2027.
Another complication exists. Cerebras issued OpenAI warrants covering 33.4 million shares at essentially zero cost. These warrants vest progressively and are accounted for as contra-revenue, creating a non-cash deduction that diminishes reported sales. Needham analyst Quinn Bolton has highlighted this as an increasingly significant obstacle as the OpenAI partnership expands.
OpenAI leverages Cerebras’ cloud infrastructure to power Codex-Spark, its coding-focused model. The firm has also recently initiated enterprise testing of Kimi K2.6 and Gemma 4.
Share Lock-Up Expiration Creates Additional Headwinds
Merely 15% of outstanding shares were distributed during the initial public offering. The remaining equity remains restricted.
This Thursday marks a critical milestone when approximately 13% of IPO shares become eligible for sale — covering insiders and early-stage investors. This development could exert additional downward pressure on share price momentum.
A second, more substantial unlock is scheduled for two days following the Q2 earnings release, liberating another 17% of total shares.
Since the first trading day when shares peaked at $386, 19 of 26 trading sessions have experienced price swings exceeding 3%. The pronounced volatility shows no signs of subsiding.
Eleven Wall Street analysts have published initial coverage reports, establishing an average price target of $294 with a consensus Buy recommendation, per FactSet data. Analysts forecast core revenue climbing to $7.2 billion by 2028, alongside adjusted earnings per share of $5.53. Based on Tuesday’s closing price, shares trade at 41 times that forward earnings estimate.
Cerebras also secured a revolving credit facility worth up to $850 million in April to fund data center expansion initiatives, supplementing the $6.4 billion generated from its IPO and a $1 billion working capital loan extended by OpenAI.
