Nebius Stock Up 74% in Six Months: Should Investors Hold or Offload?

Core Insights - Nebius Group N.V. (NBIS) stock has increased by 73.8% over the past six months, significantly outperforming the Zacks Computer & Technology sector and the Zacks Internet Software Services industry, which grew by 22.7% and 2.1% respectively [1][7] - The company is facing challenges such as macroeconomic uncertainty, rising operating costs, and substantial capital expenditures, with a notable increase in sales, general, and administrative expenses by 87% year over year in Q3 2025 [3][4] - Nebius has tightened its full-year revenue guidance to $500–$550 million, anticipating results near the midpoint due to delays in capacity expansion [5] Company Challenges - The company is experiencing elevated capital expenditure levels, increasing its guidance from around $2 billion to approximately $5 billion for full-year 2025, which poses a risk if revenue growth does not keep pace [3][4] - Execution risks are present as Nebius scales aggressively with multiple data centers, and while adjusted EBITDA is expected to turn slightly positive by year-end 2025, it will remain negative for the full year [5][16] - Nebius faces stiff competition from major players like Microsoft, Amazon, and CoreWeave, with Microsoft’s capital spending raising concerns about return on investment [8][9] Company Valuation - Nebius appears overvalued with a Value Score of F, and its shares are trading at a Price/Book ratio of 4.59X, higher than the industry average of 3.84X [10][11] Company Tailwinds - Nebius operates in a supply-constrained AI infrastructure market, targeting 2.5 gigawatts of contracted power by 2026, up from an earlier projection of 1 gigawatt [12] - The company has secured significant hyperscale agreements, including a $3 billion contract with Meta and a $17.4–$19.4 billion deal with Microsoft, indicating strong demand visibility [13] - Nebius plans to expand its data centers in the UK, Israel, and New Jersey, aiming for $7–$9 billion in annual recurring revenue (ARR) by 2026, with a target of $900 million-$1.1 billion in ARR by the end of 2025 [15] Investment Considerations - Despite long-term growth potential from large contracts and rapid expansion, near-term risks such as stretched valuation, execution challenges, and rising costs may impact performance [16] - Existing investors may consider exiting positions to mitigate potential downside, while prospective investors might remain cautious [17]