Neocloud CoreWeave eased financing concerns alongside solid third-quarter results. Shares surged about 20% in Wednesday morning trading.
CoreWeave has been a hot-button company since even before it went public in March of last year. It pioneered the "neocloud" business model -- a cycle of debt, capital expenditures, and hypergrowth. In the process, it has gone from a company with $16 million in annual sales in 2022 to $8.3 billion in the first nine months of 2026. It also has $66 billion in debt and lease liabilities that underlie that speedy expansion.
But investor appetite for neocloud debt seems to have weakened. CoreWeave has seen its weighted average cost of debt come down over time -- falling 2.5 percentage points year-over-year -- but this new environment may reverse that trend or even freeze it out entirely. This would be disastrous because access to financing is foundational to the business model. If CoreWeave can't borrow money, its ability to deliver additional cloud capacity could be impaired, and it could breach contracts.
On the earnings call, CEO Michael Intrator said that the company was abandoning unsecured public debt in favor of delayed-draw facilities it has used before, which use customer contracts as collateral, and allow CoreWeave to borrow the money as it needs it. The company also expects to collect approximately $9 billion in customer prepayments and deposits in the next three months.
"We expect these sources to fund the significant majority of our capital needs through 2027," says Intrator.
The stock was unmoved during this part of the presentation.
Then chief financial officer Nitin Agrawal said that at current overnight rates, the next delayed-draw loan was expected to come in at a yield ranging from 7% to 7.5%, which is well below what the company's unsecured senior notes are trading at, around 15%.
The stock had been trading in the red when Agrawal began this section of his presentation, but it turned green after he revealed that range, and the stock continued to climb, bringing most of the AI trade with it.
Revenue for the quarter reached $3.66 billion, ahead of Wall Street analysts' expectations of $3.54 billion, and up 168% on the year. Adjusted operating income was $379 million, rising 75%. Adjusted operating margin dropped from 16% to 10% year over year.
As CoreWeave projected would happen three months ago, interest expenses offset the operating profit and then some, coming in at $846 million, up from $310 million last year.
The company's guidance for the fourth quarter and year was good, especially adjusted operating income.
CoreWeave's growth begins with its close relationship with Nvidia, which is a 9% shareholder, a customer, and the neocloud's most important supplier. CoreWeave's business is renting out Nvidia servers in the cloud, and the access it's had to Nvidia gear is what catapulted it from obscurity.
CoreWeave has leveraged that access into large cloud contracts with heavy-hitters like Microsoft and Meta Platforms, and the once-tiny company has a $133 billion revenue backlog, up from $104 billion at the end of the second quarter.
To execute on its end of these contracts, CoreWeave has raised capital in successive rounds of financing that have included debt, convertibles, and equity, using the proceeds to buy Nvidia equipment to fill leased data centers. The company added $12 billion in property, plant and equipment to its balance sheet during the quarter.
With one notable exception a year ago, CoreWeave has been able to deliver capacity on time, which then converts backlog to revenue at increasing rates every quarter, and delays from reluctant capital could slow down the train.
During the question-and-answer session, Intrator also addressed an investor concern about political opposition to data centers, now especially salient since the Democratic wave on Election Day last week, when the issue was central.
"We do not anticipate any impact from the seismic regulatory shift that's occurred," he said. "Based on the permitting status as well as the construction status of the data centers that our backlog is going to go into, we are very comfortable with our pipeline."
For those who crave excitement, CoreWeave stock hasn't disappointed. Since going public, its average absolute daily percentage change has exceeded 5%. Its average absolute share-price change following earnings has been almost 15%. It's traded as high as $187 and as low as $33.52. At the close on Tuesday it was trading at $48.74.