CoreWeave's Q2 Sparks Massive Sell-Off -- Is This the Buy-the-Dip Moment?

Aug 14 - CoreWeave CRWV) posted Q2 results after the bell, delivering a mixed bag that rattled the stock in pre-market trading. Revenue came in at $1.21 billion, well ahead of the $1.08 billion forecast and more than triple last year's $395.4 million. But a larger-than-expected loss per share, $0.60 versus Wall Street's expected $0.52, took some shine off the top-line beat.

Warning! GuruFocus has detected 5 Warning Signs with NVDA.

The market reaction was swift. Shares plunged about 20% on Wednesday's trading. CoreWeave's IPO lock-up period is expiring on Friday, freeing up 83% of Class A shares and potentially adding selling pressure.

While the red ink isn't new for the GPU cloud provider, the company's premium valuation leaves little margin for disappointment. CoreWeave trades at a forward EV/Sales multiple of 15.69x, more than 400% above the sector median. Heavy spending is part of the model, with Q2 CapEx at $2.9 billion and full-year guidance unchanged at $2023 billion.

On the positive side, adjusted EBITDA and operating income beat expectations, and the revenue backlog jumped 86% year-over-year to $30.1 billion, thanks in part to a $4 billion deal with OpenAI. Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META) remain the largest customers, while partnerships with Nvidia (NASDAQ:NVDA), IBM (NYSE:IBM), and Applied Digital (APLD) keep CoreWeave plugged into the AI infrastructure boom.

Given the volatility, some see opportunity. A dip-buying strategy could play out in two phases, after the earnings-driven drop, and again if Friday's lock-up expiry sparks further weakness.

For risk-tolerant investors, the long-term AI demand story remains intact, but patience will be required.

This article first appeared on GuruFocus.

View Comments