The Real Reason This Analyst Still Calls Nebius His Favorite Neocloud Player

Core Insights - Nebius Group N.V. is significantly expanding its global data center capacity, aiming to more than double it by 2026 due to increasing demand for AI compute [1][2] - The company reported a remarkable 237% year-over-year revenue increase, reaching $146.1 million, driven by its core AI compute business [4] - D.A. Davidson maintains a Buy rating on Nebius with a price target of $150, highlighting its strong growth potential and operational efficiencies [9] Capacity and Revenue Projections - Management projects contracted power of 2.5GW by the end of 2026, with an annualized revenue run-rate expected to be between $7 billion and $9 billion [2][6] - Revenue is anticipated to grow from $571.8 million in 2025 to $5.38 billion in 2026, with GAAP earnings per share expected to rise from $1.00 in 2025 to $6.11 in 2026 [10] Strategic Partnerships - Nebius has secured a $3 billion, five-year deal with Meta Platforms, in addition to a contract with Microsoft, which is expected to reach full capacity by the fourth quarter of 2026 [4][5] - The company is expected to achieve additional capacity through expansion at its New Jersey site and is likely to secure more mega-deals, potentially expanding existing contracts [7] Operational Efficiency - Nebius employs an ODM model for NVIDIA racks, which reduces compute costs by 15-20% compared to OEM alternatives, contributing to its competitive edge [8] - The company is positioned to generate double-digit returns on capital, significantly higher than peers like CoreWeave, which currently posts a 4% return [9]