AI contests are too expensive! CoreWeave (CRWV.US) Q2 losses surged, Q3 guidance disappointing

The Zhitong Finance App learned that after the US stock market on Tuesday, “Nvidia's son” CoreWeave (CRWV.US) experienced more serious losses due to continued expansion, and its operating profit guidance for the third quarter was lower than expected. The stock fell 11% after the market. According to financial reports, CoreWeave's second-quarter revenue doubled year-on-year to US$1.21 billion, better than market expectations of US$1.08 billion; adjusted net loss increased to US$130.8 million, compared to US$5 million in the same period last year. Analysts had previously predicted a loss of US$96.3 million.

CEO Michael Intrator said in a statement: “We are rapidly scaling up to meet the unprecedented demand for artificial intelligence (AI).”

The competitive trend of expanding supply to meet demand will continue to put pressure on profits. Intrator said in a conference call with analysts that operating profit for the third quarter will reach 160 million to 190 million US dollars, while the market generally expected to be 192 million US dollars.

CoreWeave, a supplier of computing power to customers such as OpenAI Inc. and Microsoft (MSFT.US), has become a Wall Street darling due to investors' optimistic expectations of artificial intelligence. The company is investing heavily in expansion, investing capital in acquisition activities and data center expansion projects. The company agreed to buy data center operator Core Scientific for $9 billion, and last month promised to invest up to $6 billion to build a data center in Lancaster, Pennsylvania.

Looking ahead, CoreWeave raised its full-year revenue guidance to US$5.15 billion to US$5.35 billion, while reaffirming capital expenditure and adjusted operating profit guidelines.

Last quarter, the company's capital expenditure was $2.9 billion, more than $1 billion higher than in the first quarter to meet data center capacity requirements. Capital expenditure for the third quarter is expected to be between $2.9 billion and $3.4 billion.

Some of the world's biggest tech companies continue to bet heavily on artificial intelligence. Earlier in this earnings season, Microsoft announced record capital expenditure and plans to further increase spending. Similarly, Meta Platforms (META.US) and Alphabet (GOOGL.US) have also raised their spending targets for this year. The latter said it plans to invest 85 billion US dollars this fiscal year, which is roughly equivalent to the market value of General Dynamics (GD.US).

CoreWeave said that by the end of the second quarter, the backlog of revenue reached $30.1 billion. Chief Financial Officer Nitin Agrawal said in a conference call that this number has doubled so far this year.

Most of the demand comes from customers using artificial intelligence models. “We've seen a significant increase in the workload used for inference,” said Intrator.

By the close of trading on Tuesday, CoreWeave shares had risen more than 270% since listing in March.