In February, Nebius Group (NASDAQ:NBIS) told investors to expect more than 3 gigawatts (GW) of contracted power by the end of 2026. In May, the target became more than 4 GW. In August, alongside second-quarter results, the artificial intelligence (AI) cloud provider raised it again, to 5 GW.
Contracted power is the raw material of Nebius' business. It's the electricity capacity the company has secured for data centers that rent out graphics processing units (GPUs). Three raises in six months say the company keeps finding more of it, faster than it expected. That escalation has my attention.
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Nebius carries a market value of about $56 billion, with shares just above $200 as of this writing. Its revenue over the past 12 months was about $1.4 billion.
What does 5 GW of power have to earn to justify a price like that?
Image source: Getty Images.
Three raises in six months
The escalation is the company's own, laid out in its August shareholder letter. A year ago the target was more than 1 GW. It became more than 2.5 GW in November, more than 3 GW in February, more than 4 GW in May, and 5 GW now.
The business underneath is scaling almost as fast.
Second-quarter revenue grew 454% year over year to $582.3 million, with the core AI cloud business contributing about 98% of the total. Annualized run-rate revenue reached $3.0 billion at the end of June -- up 598% year over year, and up 56% from $1.9 billion just three months earlier.
Profitability is arriving with scale, too. The AI cloud business produced an adjusted EBITDA margin of 50% in the quarter, up from 45% in the first quarter and 24% in the fourth quarter of 2025. Companywide, adjusted EBITDA swung to a positive $236 million from a loss a year earlier. (EBITDA is earnings before interest, taxes, depreciation, and amortization.)
Each megawatt is worth more than it used to be
Nebius closed four landmark deals in the second quarter, averaging more than $1 billion in total contract value, with AI developers Reflection and Cohere among the customers. The company said those deals carry annual contract value of $20 million to $25 million per megawatt.
That is up from about $12 million per megawatt on its 2026 base of business. And early third-quarter short-term capacity deals are pricing above $40 million per megawatt. All told, the company counts $40 billion in customer commitments.
So what could the full target earn? If Nebius eventually deployed all 5 GW (5,000 megawatts) and sold it at even the older $12 million rate, the implied revenue would be about $60 billion a year. At the second quarter's deal prices, the figure could be far higher.
Against a $56 billion market value, that is the bull case in one calculation.
The capacity can't arrive all at once
However, contracted power is not deployed power, and deployed power is what generates revenue. Nebius says it plans to bring more than 1 GW of capacity online per year starting in 2027. At that pace, turning 5 GW of contracts into running data centers is a project that can stretch toward the end of the decade.
The spending, meanwhile, is immediate. Nebius spent $5.7 billion on property and equipment in the second quarter alone, and management expects $20 billion to $25 billion of capital expenditures for the full year. The company still runs at an operating loss ($176 million in the second quarter), and its quarterly depreciation and interest costs are climbing fast as the build-out compounds.
Of course, customer prepayments help. The company expects more than $9 billion of them in 2026, and prepayments covered 50% to 60% of the capital spending tied to recent deals. The capital markets supply much of the rest, including a convertible note sale that closed in August with about $5.75 billion of gross proceeds. But the model still consumes enormous amounts of money before it returns any.
Even so, management reaffirmed its full-year guidance, including revenue of $3 billion to $3.4 billion and a year-end run-rate target of $7 billion to $9 billion. Hit the top of that range, and today's market value works out to about six times year-end run-rate revenue. For growth like this, that's arguably a fair price. But it leaves no room for deployment delays, softer GPU pricing, or a pause in AI spending.
I believe the contracts will become revenue -- the customers are signed, and the price per megawatt keeps rising. Still, most of those megawatts won't produce a dollar until 2027 or later, and the building costs land now. I'm watching Nebius closely, but I'm not buying shares yet.
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Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
