CoreWeave falls 11% as $35bn capex overshadows backlog
CoreWeave shares plunged 11.4% on Friday as investors shifted their focus from the AI cloud provider's surging revenue to a capital expenditure plan that outstrips its trailing sales by a factor of five.
CoreWeave closed at $71.88 on Friday, a drop of 11.4% that erased the AI cloud provider's gains for the week. The selloff dragged the stock below its Monday close of $73.06 and mirrored a 15% decline for peer Nebius Group. The broad neocloud retreat occurred despite a highly positive demand signal from Alphabet just days earlier.
On Wednesday, Alphabet raised its 2026 capital spending outlook by $15 billion to as much as $205 billion. Chief financial officer Anat Ashkenazi noted the tech giant would "expand the use of third-party capacity in Q3 as a bridging strategy." While CoreWeave initially rallied after hours on that news, investors quickly looked past the demand to the sheer cost of fulfilling it.
The underlying demand for CoreWeave's infrastructure remains robust by almost any standard. First-quarter revenue climbed 112% year over year to $2.08 billion, and the company ended March with a $99.4 billion revenue backlog.
However, the income statement reveals a business under severe pressure from hardware depreciation. Non-GAAP EBITDA came in at $1.16 billion, but the margin narrowed to 56% from 62% a year earlier. Adjusted operating income, which charges the quarter for depreciation on graphics processing units and data centers, collapsed to $21 million from $163 million. On that metric, the margin shrank from 17% to just 1%.
Management projects this adjusted operating margin will expand each quarter, reaching low double digits by the fourth quarter. Yet the real anxiety for the market lies in the scale of the upfront spending required to get there.
CoreWeave expects capital expenditures of $31 billion to $35 billion this year. Against trailing 12-month revenue of roughly $6.2 billion, the company is preparing to spend approximately five times its annual sales on capacity in 2026. This represents a steep step-up from the $14.9 billion in capital expenditures recorded for all of 2025.
Friday's sharp selloff suggests the market is no longer willing to value AI infrastructure stocks solely on top-line growth. For investors, the calculus is shifting firmly toward capital efficiency and the timeline to actual cash generation.
