Nebius Group Q1 2025 Earnings Report

Nebius Group EPS Results

• Actual EPS: N/A
• Consensus EPS: -$0.41
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Nebius Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $61.55 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Nebius Group Announcement Details

• Quarter: Q1 2025
• Date: 5/23/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, May 20, 2025
• Conference Call Time: 8:00AM ET

Nebius Group (NASDAQ:NBIS), a technology company, builds intelligent products and services powered by machine learning and other technologies to help consumers and businesses navigate the online and offline world. The company's services include Nebius AI, an AI-centric cloud platform that offers infrastructure and computing capability for AI deployment and machine-learning oriented solutions; and Toloka AI that offers generative AI (GenAI) solutions at every stage of the GenAI lifecycle, such as data annotation and generation, model training and fine-tuning, and quality assessment of large language model for accuracy and reliability. It also offers Avride, an autonomous driving solution which targets ride-hailing, logistics, e-commerce, and food/grocery delivery as application domains, as well as focuses on autonomous vehicles and delivery robots; and TripleTen, an EdTech service that prepares specialists for STEM roles, and equipping them with essential technology skills. The company was formerly known as Yandex N.V. and changed its name to Nebius Group N.V. in August 2024. Nebius Group N.V. was founded in 1989 and is based in Schiphol, the Netherlands.

Nebius Group Q1 2025 Earnings Call Transcript

Presentation

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Durshi. I'm head of investor relations. Joining me today to discuss our results are Arkady Voloj, Founder and CEO and members of the management team. Our remarks today will include forward looking statements, which are based on assumptions as of today. Actual results may differ materially as a result of various factors, including those set forth in today's earnings press release and in our annual report on Form 20 F filed with the SEC.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

We undertake no obligation to update any forward looking statement. During the call, we will present both GAAP and certain non GAAP financial measures. A reconciliation of GAAP to non GAAP measures is included in today's earnings press release. The earnings press release and accompanying shareholder letter and an investor presentation are available on our website at group.nebius.com/investorhub. We ask that you enter your questions into the webcast portal, and we will be reviewing and consolidating the questions for Q and A.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

And now I'd like to turn the call over to Arkady and the team who will go over a few slides that we've presented for this investor presentation.

[Arkady Volozh, Founder, CEO & Non Independent Executive Director at Nebius Group]

Yeah. Thanks. Thanks, Neil. Thank you everyone for joining our q one twenty twenty five results call. I will start with saying that demand for AI compute was very strong in first quarter, and, actually, our results show it.

[Arkady Volozh, Founder, CEO & Non Independent Executive Director at Nebius Group]

Our revenue grew nearly 400% year over year, and our annualized run rate revenue grew nearly 700%. We saw great momentum, in our core infrastructure business. We ended the quarter with a solid cash balance of $1,400,000,000, and we actually continued to invest in our infrastructure. To that point, we are rapidly building our capacity to serve customers around the world. This is a global race as you understand, and we are well placed with our footprint in The US, Europe, and now in The Middle East.

[Arkady Volozh, Founder, CEO & Non Independent Executive Director at Nebius Group]

As you can see here on the slide, we added three new locations recently, and there is more to come. We're exploring new locations for capacity build out, and we hope to share more with new news with you very, very soon. We also announced some new partnerships this quarter to build our strong relationship with NVIDIA as well as Metal LAMM. And finally, we had a very productive quarter with respect to building out our technology stack, and we are getting industry recognition for our AI cloud offering. Here, as an example, semi analysis run ranked us in golden tier of the GPU cloud cluster marks rating system.

[Arkady Volozh, Founder, CEO & Non Independent Executive Director at Nebius Group]

And now I'll hand over to Preikh Ralyanka to discuss some of the key products we launched in q one.

[Andrey Korolenko, Chief Product & Infrastructure Officer at Nebius Group]

Thank you, Arkali, and hello, everyone. We believe the depth and the quality of our is significant differentiator against the other neo clouds. We made great progress in q one in further developing our AI cloud offering and had a number of notable product launches. We first of all, we launched the SLURM based cluster upgrades, such as automatic recovery for the failed nodes, proactive system health checks to detect the issues before jobs actually fail. These changes reduces downtime for customers and improved capacity availability on our infrastructure, which led to around 5% improvement on available nodes for the commercial use, which is quite significant.

[Andrey Korolenko, Chief Product & Infrastructure Officer at Nebius Group]

Several platform services were released and moved from the beta phase to the general availability, MLflow and JupyterLab notebook as an examples, but there was much more. We also invested a lot of time and efforts in reliability and performance of the platform. Notably, we launched enhanced object storage, and this ensures that large datasets can be assessed and saved quickly during model training runs, reducing time to results. And building on that foundation of our homegrown storage capabilities, we have also partnered with three leading storage providers such as DDN, West, and Viyaqa. And that enables us to deliver the best possible experience for all customer scenarios going forward with the black hole generation clusters.

[Andrey Korolenko, Chief Product & Infrastructure Officer at Nebius Group]

Last but not least, we expanded integrations with external AI platforms such as Metaflow, DSTACK, Skypilot, and that allows customers to bring their existing tools into our ecosystem with minimal friction. And partners, Daniel will talk about our partners.

[Daniel Bounds, Chief Marketing Officer at Nebius Group]

Thanks, Andre. In addition to strengthening our product in Q1, we also made significant progress towards expanding our partner ecosystem. From further building out our data storage solution portfolio, as Andre mentioned, with industry leaders, We extended our core AI cloud capabilities to the ISV landscape with tight technical integration, and we made announcements enabling customers to consume Nebius infrastructure across a wide segment of the industry. Equally important are the relationships we have with the full range of AI marketplaces, established channel partners that help us meet the customer demand for our AI infrastructure across the globe. I'd also like to talk about NVIDIA.

[Daniel Bounds, Chief Marketing Officer at Nebius Group]

As you know NVIDIA is an investor in our company and we have a long history of working with the NVIDIA team and we want to continue to build on that relationship. In Q1, we made several announcements with them. Point one, in the q one time frame, Nevis and NVIDIA announced that Nevis would be one of the first AI clouds to offer the NVIDIA Blackwell Ultra AI factory platform. We also became a launch partner for NVIDIA Dynamo, one of the most efficient solutions for scaling compute during inference. And Nebius was also named one of five reference platform NVIDIA cloud partners, in this timeframe, helping us as we specialize and deliver AI accelerated services built on NCP reference architectures.

[Daniel Bounds, Chief Marketing Officer at Nebius Group]

And and finally, some some breaking news. Nebunis will support the NVIDIA DGX Cloud Leptin marketplace at launch. We couldn't be more excited with our partnerships, not to with not just with NVIDIA, but across the landscape. So with that, I would like to hand it over to Roman.

[Roman Chernin, Chief Business Officer at Nebius Group]

Yeah. Thank you, Daniel. Let's speak a little bit about customers. Our strategy is to serve wide variety of customers with our robust platform. We have hundreds of customers, both managed and self-service, who use Nebios Cloud Platform for training and inference workloads across various industries such as tech, media, and entertainment, life science, and more.

[Roman Chernin, Chief Business Officer at Nebius Group]

With our expanding capacity footprint and global sales support, we are now able to serve customers twenty four seven with truly tailored approach of our high level experts on both sides of Atlantics that together with advanced software platform goes beyond commoditized GPU as a service offerings. This highlights our flexibility and ability to rapidly adapt to the evolving needs of our diverse customer base while delivery high quality solutions powered by our tech stack. This is what our customers value the most. They recognize that we are building an AI specialized cloud with hyperscaler level of capabilities. Actually, all those factors contributed to our strong q one results.

[Roman Chernin, Chief Business Officer at Nebius Group]

And going forward, the demand environment for AI compute remain remains robust, and our sales momentum has continued into q two. April's annualized run rate revenue was $310,000,000, and we are continuing to experience strong demand into May. And now I'll pass it to Tom Blackwell to walk through our guidance.

[Tom Blackwell, CCO at Nebius Group]

Yeah. Thanks very much, Roman. And so, you know, as Roman said, we've had we've had a great start to the year. A very, very strong first quarter, and we've carried in we're carrying in strong momentum into the second quarter. So we feel very confident in our ability to achieve the ARR guidance for the whole year that we gave, which was $750,000,000 to 1,000,000,000 we're well on track to achieve this.

[Tom Blackwell, CCO at Nebius Group]

So we're also reiterating our overall revenue guidance for the group, which is in the range of 500,000,000 to $700,000,000 So thinking returning to profitability here. So we're maintaining our adjusted EBITDA guidance for the full year. So just to elaborate on that a bit, we expect while we expect adjusted EBITDA to be negative for the full year, we plan to turn positive at some point in the second half of twenty twenty five. On CapEx, we're currently planning CapEx of approximately $2,000,000,000 for 2025. And this is a bit up from the previous guidance of $1,500,000,000 due to a couple of factors.

[Tom Blackwell, CCO at Nebius Group]

First, we had some CapEx spend that had been planned for late q four, which actually fell in early q one. So some of that would that would leads to the increase towards 2,000,000,000. And also, as you know, we've always said that we wanna be opportunistic when it comes to really ramping up our our infrastructure capacity with as we see demand, and so we wanna be able to sort of chase demand secure that demand well. And so we've had we've considered some additional investments beyond the initial data center expansion plan. For example, you may have seen some coverage recently around the data center in Israel, which we think is a great opportunity.

[Tom Blackwell, CCO at Nebius Group]

It's a great market, and, actually, we'll come on and give some more color around that later in the call. So looking to the midterm, this is a great business. It's in a great industry, and we think the future opportunity is immense. When we look at the midterm, we're thinking we we believe that this business will achieve mid single digit billions of rep end of dollars in revenue, and we're actively building out our capacity pipeline to support that scale of revenue growth. You know, the the reality is that there are also scenarios where we could grow more aggressively.

[Tom Blackwell, CCO at Nebius Group]

And so we're Andre and his team are very focused on really building out the whole infrastructure potential pipeline that would enable us to deliver potentially more than eight gigawatts of capacity in the midterm. So if we do that, that would obviously that would allow us to achieve significantly more revenue than the kind of midterm guidance that we're talking about here. So we'll be opportunistic, and we'll go after opportunities as we see them. Yeah. I think some of some of the factors that could drive that additional incremental growth on top of the midterm guidance is as we see more adoption from enterprise level customers and also potential sort of larger, longer term contracts.

[Tom Blackwell, CCO at Nebius Group]

And, again, get back Adi will give a bit more color on that at a later stage. In terms of profitability, you know, this is a this is a business that we can grow profitably, and we anticipate medium term EBIT margins to range in the sort of 20% to 30% range. So this will be supported by our AI cloud business reaching scale. We also have you know, we have an important differentiator, which is the the full stack and particularly the software at the top end of the stack. And the software is it's a very important part of our our business model, what makes us attractive to clients, sticky to clients.

[Tom Blackwell, CCO at Nebius Group]

And, ultimately, we think it's what's gonna allow us to achieve higher margin, create higher margin business models, and really service customers in different ways and at a wider range of customers that allow us to basically get increase the effective revenue per GPU. So not just the GPU as a service model, but it's a broader range of sort of revenue sources. So we also I think it's also important to note that we actually take a very conservative view on depreciation. So, actually, with all of these numbers, we apply here a four year depreciation schedule while others, I think, use typically, we use more of a five or a six year depreciation schedule within our industry. Longer term, you know, I think while we see 2030% as the EBITDA EBITDA margins in midterm, you know, longer term, we could go beyond that.

[Tom Blackwell, CCO at Nebius Group]

I think there is a number of scenarios as we continue to scale up and expand the business where we could go well north of 30% in in the longer term. So just to wrap up, we're building AI infrastructure successfully and at scale. And I think as you've heard Akari talk about on previous calls, fundamentally, we think our differentiation and what sets us apart really comes down to two things. Above all, I think it's the quality of our technology. There's also our access to capsule that allow us to take advantage of that technology and to ramp up and to scale up quickly.

[Tom Blackwell, CCO at Nebius Group]

So briefly on the technology. We have an amazing team of engineers. We're building amazing hardware, software, and services. These engineers, they're really they're the best of the best in the industry. It would take years to build a team of that of that quality, and we're really proud to have them.

[Tom Blackwell, CCO at Nebius Group]

They're building great tech. We're building out our native AI cloud, and we're expanding the range of AI native customers that we're able to service. And, really, this the AI cloud that we build, it goes well beyond what you might call a classic bare metal offering. We're building out strong partnerships, as Daniel talked about, within the ecosystem, and all of this is allowing us to reach and service a broader range of customers. In terms of Capsule, so we're we think we're actually in a very favorable position and actually quite a a unique position among Neo Clouds to really finance this future growth in an efficient way.

[Tom Blackwell, CCO at Nebius Group]

So we have significant capital funding potential for the core business, which actually comes from our various ownership and equity stakes of noncore businesses. And these the monetization of these potential equity stakes can really translate efficiently into bottom line results of the core business. So just to give some examples of what we what we're referring to here. You may have seen ClickHouse in the news lately. We have a 28% or roughly 28% minority stake in the business, and this can potentially be a very important source of future capital.

[Tom Blackwell, CCO at Nebius Group]

So according to some of the recent press reports, there's a fundraising round underway at the moment, which would potentially value the business at around $6,000,000,000, and we believe that business will continue to perform extremely well and grow significantly from current levels. We have Taloca, and we're extremely pleased to announce that the the arrival of the emergence of strategic investors from Jeff Bezos and Mikael Perakin coming in coming into the structure. And we think that their investment involvement in the business is really gonna help Talalca to scale up among the top tier of AI data companies globally with great backing from these investors. And but what's important for us, we think this is great for Talalca, it's great for us as well because we and for our shareholders because we maintain a significant majority economic interest in Teloka. So we'll benefit from all of the upside.

[Tom Blackwell, CCO at Nebius Group]

We also have AV Ride. It's one of the best autonomous vehicle teams in the world. They're they're they're doing great this year. In the last quarter, we've announced they've entered into partnerships with players like Uber, Hyundai, Grubhub, Rakuten. These partnerships really underscore, I think, the strength of their tech and the team and places them really among a select group of global leaders in their field.

[Tom Blackwell, CCO at Nebius Group]

The regional on AV right, as we've mentioned in previously, we're actually we're we're in fairly active talks with potential third party investors and strategic investors that could come into the business that we believe would really help them to scale up even faster and truly build and to build their businesses. But, again, while we while we would always look to retain significant economic interest in the upside. So it's really our ability to use these assets and these stakes, which gives us a a really a very attractive source of financing. So when we think about the future, you know, so billions in, you know, dollars of investment in the core business, we'll be able to very effectively monetize these businesses and to grow extremely efficiently in a way that really minimizes any dilution to existing shareholders while allowing us to stay very disciplined in terms of debt. So just again, just to sort of summarize, you know, once we achieve adjusted EBITDA profitability, our strong balance sheet, and continued low interest burden, we believe will allow revenue growth to translate very efficiently into bottom line results.

[Tom Blackwell, CCO at Nebius Group]

So I'll stop there. And, Neil, I'll hand back over to you for q and a.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. We'll pause for just a minute just a moment just to collect some of the questions.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Alright. So let's start with our first question. You just guided to midterm revenue and margins. What do you mean by midterm, and what are the building blocks to get it there? Roman?

[Roman Chernin, Chief Business Officer at Nebius Group]

Yeah. Thank you, Neil. Our base case plan calls for several billion dollars of revenue in the midterm over the next few years. While while our base case assumes that we grow our capacity to support this type of revenue goal from twenty twenty five levels of hundred megawatt, our ambition is to grow much larger and much faster. For that, we are building a data center pipeline to provide scalability to more than one gigawatt of power.

[Roman Chernin, Chief Business Officer at Nebius Group]

Also, as Tom said earlier, how quickly we get there will be a function of how fast we'll can scale and capture demand through more enterprise level customers and longer term contracts. And also a few words about the margins. Our target of twenty, thirty EBIT margins is the function of few factors. First, greater mix of workloads where we can run our GPU fleet with a high level of utilization for a longer period of time. Second, I would say, is software.

[Roman Chernin, Chief Business Officer at Nebius Group]

We put a lot of efforts into developing our software, which allow us assume contribution from high margin software and services revenue over the long term. And worth to mention, in addition, we take a more conservative view on the prick on depreciation where we use a four year depreciation schedule while others use, five or six year. So when more more close shift to inference, this will come to higher margins for us as well.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. Thanks, Roman. And, Roman, maybe you could take the next question too, which is around q one ARR was ahead of what you discussed on the last earnings call. What really drove that strength, and and how are you feeling about the full year?

[Roman Chernin, Chief Business Officer at Nebius Group]

Yeah. As I said, overall demand environment in q one was strong. Customers wanted access to GPUs, and we see that demand strengthen each month. Customers, I believe, recognize the value of our infrastructure and software. We we were able to provide reliable and scalable service.

[Roman Chernin, Chief Business Officer at Nebius Group]

Our software enables customers to start accessing clusters with thousands of GPUs just within a matter of days and not weeks, and we heard from some of our core customers recognition of that. We also saw the benefits of our sales team ramping up and especially the investments in our presales and solution architects and customer success team. Now we can provide twenty four seven wide globe support, And I believe it, like, significantly contributed to improve our sales process and, obviously, post sale customer success. Our brand awareness is also growing. We put a lot of papers there and also thanks to industry recognition.

[Roman Chernin, Chief Business Officer at Nebius Group]

For example, seminar analysis, cluster marks, gold status that Arkady mentioned contributed. And we see that our pipeline becomes more deep and strong. Also, we see that our approach to bring the newest chips online as early as possible, like, not responding to specific contracts, but in this, like, more cloud manner. And our flexibility to provide the real cloud terms, the combination of pay as you go or reservations of different length is paying back as well. A good example when was the deep sick moment in February, we could very quickly respond to the big demand to NVIDIA h 200 chips that we had deployed in more volumes that made some other players at that moment.

[Roman Chernin, Chief Business Officer at Nebius Group]

All that resulted in a strong growth, and we reached a record high number of our managed customers during q one. Few words about, like, the the full year. We are seeing we we continue to see a solid start of q two. The demand remains robust. April annualized run rate revenue of 310,000,000 confirms that, and we are seeing the strong momentum continue to May.

[Roman Chernin, Chief Business Officer at Nebius Group]

And in the second half of the year, we expect to bring Blackwells for customers, which should provide further support to our revenue profile and gives us confidence that we can deliver on our guidance of 750 to 1 billion dollar annualized revenue by the end of q four twenty twenty five.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. Thanks, Roman. Let's see. So you discussed getting to positive adjusted EBITDA margins by the end of the year. Can you provide an update when you think that'll happen?

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Maybe we'll go to Tom for this.

[Tom Blackwell, CCO at Nebius Group]

Yeah. Sure. So I guess I I touched on this briefly in the presentation, but just to pick up so, you know, first of all, achieving positive adjusted EBITDA is an important milestone for us, and it really highlights that we're very focused on getting to profitability. And and as we set out in some midterm targets, we believe this is a business that can post really strong profitability going forward. So specifically with again, with respect to adjusted EBITDA, we intend to reach positive territory at some point during the second half of the year.

[Tom Blackwell, CCO at Nebius Group]

One thing I would note is actually if we break it down and look at the core infrastructure business, then we'll we'll we'll get we'll move in faster there, and we'll get to positive adjusted EBITDA probably sometime in the third quarter. And the next goal will obviously be to then focus on reaching positive adjusted EBIT, and we're working full steam towards that goal.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. And, Tom, maybe sticking with you. You know, there's a question here about CapEx. We've raised the CapEx guidance. Can we provide any update on the reasons for this?

[Tom Blackwell, CCO at Nebius Group]

Yeah. Sure. I mean, you know, so look. I you know, our primary business model is predicated on building capacity for demand, and we've been very fortunate to be able to finance a lot of our CapEx without cash on hand up until now. So looking at this year so first of all, in terms of the kind of the specific guidance for this year, as I mentioned earlier, we had some CapEx spend that had been keyed up for the end of the fourth quarter last year, which got pushed into the first quarter, there was that's that's just down to sort of typical quarter to quarter fluctuations based on sort of various factors related to data center build outs.

[Tom Blackwell, CCO at Nebius Group]

But, you know, we again, you know, we we wanna be opportunistic. You know, we've we we we we view the targets that we've set out as as base cases, but, you know, there's there are lot of scenarios where we can do more and go more aggressively. And where we see an opportunity to do so that's in a way that's value accretive to our shareholders, we wanna be able to do so. So for example, you know, again, when we see an opportunity to ramp up capacity faster around the existing demand that we can see, you know, we wanna be able to do so. So the again, the the the Israel Data center is one that we haven't initially had in our our road map, but it was an opportunity that came along and felt and we felt that was a good one for us to go for.

[Tom Blackwell, CCO at Nebius Group]

And so we're we're we're we're very pleased. And I think I I think probably at at a later stage, I'll ask perhaps Roman to give a bit more color around that. But, you know, it's a great market, and we're very excited to be getting into that market. So and that sort of it's a new geography on top of some of the previous geographies that we've been focused on. So but in terms of those in in sort of incremental data center build outs like Israel, from a revenue standpoint, it will we'll be we'll be investing, putting the capacity in place later this year, and and the the revenue will be we'll see more contributing to 02/1926, you know, keeping us very much on that path towards the sort of

[Tom Blackwell, CCO at Nebius Group]

mid single digit billions of revenue that we spoke about earlier in the presentation.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. Maybe, you know, keeping with the theme of of CapEx, Tom, I know you touched a little bit in the slides on on how we're gonna finance our future growth. So how do we expect to finance the CapEx expansion given that the cash balance now is below what we're planning to spend?

[Tom Blackwell, CCO at Nebius Group]

Yeah. Sure. So so just to kind of recap, so in in fact, if you look at q one, so we've we've already spent, I think, $544,000,000 in the first quarter towards that overall $2,000,000,000 CapEx that we're talking about. And at the end of the quarter, we have 1,440,000,000.00 of cash remaining on the balance sheet. So we you know, we feel good about our our ability to finance that that CapEx.

[Tom Blackwell, CCO at Nebius Group]

And, also, again, I just come back to this point. So, you know, kind of going beyond that and, you know, look looking further afield, you know, the equity stakes that we have in these noncore businesses, again, we believe will provide us a very significant funding sources for future, so we can continue to ramp up and scale beyond this year in in ways that really minimize, again, dilution to shareholders and allow us to stay very disciplined and that, I think, is

[Tom Blackwell, CCO at Nebius Group]

a really important

[Tom Blackwell, CCO at Nebius Group]

point. Obviously, as a public company, we have access to more traditional funding sources, and we will look at those from time to time when we when we believe they make sense and and and are value accretive. And and I guess I just, you know, another point that I would make is that, again, given that we have right now, we have very, you know, almost no debt, and we we anticipate continuing to have relatively low levels of debt. So that means that we're gonna be able to reinvest a significant amount of our revenue back end to drive driving value creation in our core AI infrastructure business.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Looks like we're getting a kind of

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

a a higher level question here, which is around future growth. So so maybe, Arkady, maybe you can tell us where where you're seeing the growth in the future in this business.

[Arkady Volozh, Founder, CEO & Non Independent Executive Director at Nebius Group]

Well, our current customer base, the majority of them, they are all those new AI companies that emerged in the recent couple of years, and actually, they can continue coming to the market every month. They are very advanced in AI technology. We call them AI natives. They are smart. They are very fast growing.

[Arkady Volozh, Founder, CEO & Non Independent Executive Director at Nebius Group]

Actually, we are like them, and they like us. Those companies are usually venture backed, and understandably, the majority of them are in The US. That's why we're so focused on building our data center capacity in The US All the growth you currently see in Nebius, all these quarter results, year results, most of our revenues, they come mostly from this market now. The second very promising sector, which by the way is not in our revenue yet, is all those follow frontier AI labs, big customers.

[Arkady Volozh, Founder, CEO & Non Independent Executive Director at Nebius Group]

We haven't tapped this market yet, but we're doing a lot to be ready to serve them and help them to grow faster. In order to serve these those customers, we will need much more and much bigger data centers. And we are actually getting ready for this. This way, we have our pipeline to get to this more than a hundred gigawatt of data center capacity. So we are not there yet, but we will be there soon.

[Arkady Volozh, Founder, CEO & Non Independent Executive Director at Nebius Group]

That's the second sector. The third sector, maybe the most promising sector in terms of growth is the enterprises. AI technology today has reached just a small fraction of the corporate clients. Everybody talks about it. But at the same time, this is where the world expects the majority of added value which AI will be creating.

[Arkady Volozh, Founder, CEO & Non Independent Executive Director at Nebius Group]

And by the way, our full stack solution and higher level services which we provide is very much relevant exactly here. This market is much more global by nature because the real industry real enterprises are everywhere in the world, many countries. And this is where our European and global infrastructure presence will be in high demand, I think. And by the way, outside of just several hyperscalers, we are one of very few AI clouds cloud providers that actually can serve corporate clients in multiple geographies. So this is the most promising sector for us, I believe, in near future.

[Arkady Volozh, Founder, CEO & Non Independent Executive Director at Nebius Group]

And there's also the fourth sector, which we're also watching carefully. It's a potential market among national AI projects. We hear more and more about them. And here again, we see a huge opportunity for us, and we plan to build our AI factories in different countries and geographies in US, in Europe, in Middle East, and actually also elsewhere. But all in all, those four sectors, know the whole market is just the beginning for AI technology for AI business.

[Arkady Volozh, Founder, CEO & Non Independent Executive Director at Nebius Group]

AI infrastructure will be in high demand in many indices and in many geo geographies, and that is will be there to serve this demand.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

That's great. Thanks, Arkady.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Alright. Let's see. Next question. How does Teloka deconsolidation impact your business? I can probably take this.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

So Teloka is our AI data solutions provider. They've done a really good job in terms of building their business. They have high quality customers like Amazon, Anthropic, Microsoft, Poolside, Recraft, and Shopify. And we believe Toluca really has great growth prospects. And this is really validated by their investments from the Bezos Expedition and Mikhail Barakian, the CTO of Shopify.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

You know, given these growth prospects, we're happy to retain a significant majority economic stake in Toloka. And, you know, as we now our our voting shares dropped below 50%, we will be deconsolidating Toloka. Since the transaction closed in May, we will be updating our financials and guidance ex Toloka, in our q two earnings report. Alright. Looks like we have a few questions around infrastructure.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Maybe we can start with, Andre on this one. Andre, can you provide us an update on your capacity expansion plans for this year?

[Andrey Korolenko, Chief Product & Infrastructure Officer at Nebius Group]

Sure, Neil. We we are aggressively building and acquiring generally our data center capacity and expanding the footprint. What we announced in February was the New Jersey data center, and this is a build to suit project built by partner according to our specifications and design. And this is quite important because of it helps us to deliver the efficiency of the power usage and the cooling efficiency again, what we what we demand from ourselves. And we expect that the first capacity in Jersey to be operational in late summer, and then it will continue to roll out on a periodical basis in conjunction with the demand.

[Andrey Korolenko, Chief Product & Infrastructure Officer at Nebius Group]

We also announced the Kansas City, and the first part of it is already fully operational, and that was a first was the last deployment of the GPU generation for us. And at the moment, there are black holes deployed in the second part of the Kansas City, and they will be available on the platform bit later in second quarter. We will also announce and actually launched the Iceland, which is fully operational at the moment. And our build out in Finland is going quite well and exactly on track, and we expect the the first phase of the extension will be operational in, like, late in q three, and the second phase will be will pull it closer to the year end. And I expect that, operationally, we'll have over hundred gigawatts of capacity

[Andrey Korolenko, Chief Product & Infrastructure Officer at Nebius Group]

deployed this year.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. Thank you, Andre. Let's see.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Can you share more about the new site in Israel, and can you discuss your expansion strategy beyond the EU and US? Tom, I know you kind of alluded to this. Maybe, Roman, you can you can talk a little bit more about this and elaborate on on Israel.

[Roman Chernin, Chief Business Officer at Nebius Group]

Yeah. Thank you, Neil. So first of all, launching launching in Israel is means for us that we opened in one more market. Like, as Andre said, like, we were very much and continue to be focused to scale our capacity in Europe and US, but we don't wanna continue to dominate those markets. So first of all, it's a new market in.

[Roman Chernin, Chief Business Officer at Nebius Group]

Israel has a great AI market with a lot of AI native startups, enterprises, and r and d centers of the global corporates. This is a great aid for us to a lot of customers. But what also important that this is our first but probably not the last step in supporting national AI factories. And we hope to support and build more national AI factories around the world, and we'll look to see how we can plug into those initiatives across Europe, Middle East, and rest of the world. We open, like, opportunistic and looking to to this market as Arkady mentioned.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. Thanks, Ram. Alright. Can you share

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

an update on your GPU rollout plan for this year? Andre?

[Andrey Korolenko, Chief Product & Infrastructure Officer at Nebius Group]

So

[Andrey Korolenko, Chief Product & Infrastructure Officer at Nebius Group]

aside from the Israel capacity, we are very much on track with the rollout that we planned earlier. We this year, we deployed in q one, specifically. We deployed the hoppers generation h 200 specifically. At the moment, we are rolling out the black holes, as I already mentioned, and they will be available on the platform shortly. And we also start to deploy the Grace Black hole family, so the g p 200 family.

[Andrey Korolenko, Chief Product & Infrastructure Officer at Nebius Group]

We expect that in q three, the black hole ultra generation will start with the first deployments. And the majority of this year, we will be actually deploying the black holes.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. Thank you, Andre. Andre, may maybe sticking with you again, and we have

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

a question around, you know, regulatory issues around tariffs. Any any thoughts on on kind of the impact of tariffs on our data center expansion plans? And also, just how are you thinking about the cost to our business?

[Andrey Korolenko, Chief Product & Infrastructure Officer at Nebius Group]

Good question, Neil. There's definitely was in this a certain mean, it's not clear around global tariffs. And but based on where we stand now, we don't believe that the current status would result in major changes to our expansion plans. We also believe that we can navigate through the current environment of tariffs without significant impact to our costs. I would however, it's just a very dynamic situation, and things can change quite quickly as we already saw during the q one, and we are actually monitoring the situation.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. Thanks, Andre. So it looks like we have, you know, some questions about customers. So maybe I'll give this to Daniel. Daniel, tell us more about, you know, Nebius' customers and why are they choosing Nebius over over other providers?

[Daniel Bounds, Chief Marketing Officer at Nebius Group]

Great.

[Daniel Bounds, Chief Marketing Officer at Nebius Group]

Thanks, Neil, and thanks for the question. You know, first of all, our customers choose us because we offer a high performance, resilient, and scalable alternative for other cloud providers. But what what really makes a difference, our differentiation lies in our deep expertise and hyperscale infrastructure and our role as a hands on practitioner along with our customers. So we're not just another platform vendor. What this does is ultimately enable us to drive a greater return for every AI dollar our customers spend.

[Daniel Bounds, Chief Marketing Officer at Nebius Group]

Some examples of that in q one, we saw great momentum and new wins in vertical industries like health care and life sciences, like media and entertainment and financial services. One one customer of ours, captions, is a a leading AI video platform. They partnered with us to scale GPU training for the next generation audio to video model Mirage. And so by leveraging our infrastructure, they accelerated their time to market. They empower their creators to deliver emotionally compelling and story driven content, and ultimately push the boundaries of AI powered storytelling.

[Daniel Bounds, Chief Marketing Officer at Nebius Group]

So a great example in the media and entertainment industry. Another example would be Quantori. They're a top biopharma partner of ours. They used Nebius to build a framework for three d molecular generation. And ultimately, by increasing the amount of molecules that they could model, they achieved, chemically valid structures and really enabled faster scalable r and d and accelerate the innovation that they have in drug and materials discovery.

[Daniel Bounds, Chief Marketing Officer at Nebius Group]

So really monetizing and unlocking the power for AI for those customers. And that's just the beginning. So looking ahead, and we're doubling down on the verticalization of AI solutions across the enterprise. Customers ranging from retail to robotics as they embed AI deeper into their core operations, we want to be right there with them to drive measurable results.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. Thanks, Daniel. We're getting a few questions around contracts. So maybe Roman, can you tell us a little bit more or give us an update on what type of contracts we're seeing in the market, maybe in terms of structure and duration?

[Roman Chernin, Chief Business Officer at Nebius Group]

Yeah. Thank you, Neil. The first thing I want to highlight that the benefits of coming to Nebios is our flexibility that allow us to support and grow with the native AI tech startups and meet their needs and flexibility. Contract plans tend to go from several months and to year and beyond. In addition, as we are just starting to bring the fleet of Blackwells, that opening up more discussions about longer term contracts.

[Roman Chernin, Chief Business Officer at Nebius Group]

New generation, high interest, and GB two hundreds and GB three hundreds. We expand this to drive more demand and give us flexibility on the types of the contracts we will be able to secure.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. Thanks, Roman.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Alright. Quicker on NVIDIA. Can you talk a little bit more about the NVIDIA relationship? How's that progressing? Daniel, I know you shared some thoughts in your slide, but anything more you wanna elaborate there?

[Daniel Bounds, Chief Marketing Officer at Nebius Group]

Yeah. I think between Andre and I, we we've covered a lot. I'll do a little bit of reiterating here just in case anybody missed a few details. Obviously, we have not just a tight collaboration, but a long standing collaboration with NVIDIA. They have been an investor in a capital raise last December with us.

[Daniel Bounds, Chief Marketing Officer at Nebius Group]

And we have a very robust go to market that we've built with them. In Q1, in particular, like I mentioned before, across the Blackwell family, but particularly as we announced the Blackwell Ultra AI factory platform, you know, we are gonna be one of the first vendors to stand at the g b 300, NVL 72 powered instances. And we think this is gonna be a real game changer in the market, and we we're right there with NVIDIA as those roll out. We also talked about the ecosystem and NVIDIA Dynamo, this open source inference framework. And so as we continue to roll out the scale and the variety of the AI factories that are needed in the market, we're right there with them in real time.

[Daniel Bounds, Chief Marketing Officer at Nebius Group]

And then, you know, the other thing that I mentioned earlier, but it's still important is, the ability to stand up a a cloud based off of NVIDIA architecture that actually performs to spec and delivers at least a dollar for every dollar invested, if not more, is what the NVIDIA cloud partner program is all about and what the reference architectures that we're one of five partners really delivers for customers. It's a clear validation of our technical leadership, and that that just rolls over into, the the the marketplace that they're standing up with DGX Cloud Leptin and lots of other opportunities, whether it be with the startup community or expanding out and helping enterprises monetize AI. We've been very much in in lockstep with NVIDIA for for a very long time and and look to have

[Daniel Bounds, Chief Marketing Officer at Nebius Group]

a very bright future.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. Thanks, Daniel. We're definitely getting some questions around our our software stack. We also get these questions quite a bit when when speaking with with shareholders and investors.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

So, you know, it seems like we've launched a lot of products in in q one on the software side. And how does how does our software stack compare with our competitors? And what what really were kind of the biggest launches? Andre, maybe you wanna take this.

[Andrey Korolenko, Chief Product & Infrastructure Officer at Nebius Group]

Yeah. Neil, we started maybe with a clear goal to build a full stack AI cloud. That means from the day one, our focus has been to create a stack that is specifically built for the AI workloads. And our stack is basically three layers. The first one is that the layer that manages our hardware.

[Andrey Korolenko, Chief Product & Infrastructure Officer at Nebius Group]

And since we designed our hardware, we also can offer the tools to monitor its performance and optimize the usage. The second layer is that we build a full cloud platform. It's pretty similar to the big hyperscalers. It's a virtualized environment, so customers get more flexibility and better stability overall. And the third layer, there's an application layer where the where you can deliver the preconfigured third party AI tools and that simplify the entire AI development process.

[Andrey Korolenko, Chief Product & Infrastructure Officer at Nebius Group]

So we shipped quite a lot of products in q one. I think it's around 50 products across the AI cloud and the AI studio. Notably, as I was saying in the on the opening, we launched the slurm based cluster upgrade and such as automatic recovery, proactive system checks, issue detection before the actual jobs fail. And these changes significantly reduce the downtime for the customers and improves the time to recover on our side. We made a lot of efforts and made a lot of improvements on the our object storage.

[Andrey Korolenko, Chief Product & Infrastructure Officer at Nebius Group]

Now just we boost the speed of read and write for our compute node that, again, ensures that the data set datasets can be assessed and saved quickly quickly enough for the training runs, and that improves the time to results during training. Also, the partnership with the leading storages companies helps us to provide more flexibility to our customers. And as I said earlier as well, the integrations, we believe that it's very important to integrate with the existing AI platforms, again, such as Metaflow, D Stack, and Skypilot, and that just allows the customers to bring their jobs and their tools existing tools on us with minimal friction.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. Yeah. Thank you, Andre. What is it so, you know, in terms of financial performance, thanks to our to our back to our finance. You know, how how does that drive, you know, revenue and and margins?

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Tom, maybe you can you can take a stab at this question.

[Tom Blackwell, CCO at Nebius Group]

Yeah. Sure. I mean so I think, look, it's important to understand that the our software stack, it's a it's a critical part of the offering. Right? So many of our customers rely on the stack to help them manage and execute their workloads.

[Tom Blackwell, CCO at Nebius Group]

And, again, we think we're relatively unique in having that full stack offering within, you know, among the neo clouds in our space. Makes it also just makes us very sticky with customers. So some of the some of the things that, you know, for example, it it allows us to do. It allows us to provision large clusters of GPUs quickly so customers can start their jobs not wasting. We've created various tools to help them manage their data, models, and track their progress.

[Tom Blackwell, CCO at Nebius Group]

And so, I mean, when we think about revenue contribution, I mean, I I suppose the revenue contribution that you could break out as of today is it's relatively small. But, you know, it's it's it's really a very much an added value part of the offering. And, again, it just drives overall cost customers coming to us and drives overall revenue. And so it's part of it's part of the broader offering. And, you know, we're gonna we we're gonna be very focused on building it out, building out use cases, and continuing to make the products more sticky with customers sort of going forward.

[Tom Blackwell, CCO at Nebius Group]

So I think over time, it can be it probably, it can become even a more significant standard driver of high margin revenue, but it's it's it's it's really about helping us access a wider range of customers offer higher margin services, higher margin products, keeping them on the platform. And so it's an important part of our overall revenue growth kinda going into midterm.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. And, you know, coming back to the funding question, you know, just maybe a little bit more pointed here. So, you know, question is, you will need funding for this year, but also for the coming years. And and how are you thinking about financing options? You know, I know, Tom, you you talked a little bit about that on the slides and kind of in the CapEx question, but anything else you wanna kind of reiterate on this point?

[Tom Blackwell, CCO at Nebius Group]

I'll I'll I'll I'll just actually kind

[Tom Blackwell, CCO at Nebius Group]

of reiterate quite briefly on this. Again, you know, it's important for us as we think about funding the growth. We wanna do this in a way that minimizes shareholder dilution and allows us to be prudent in in terms of debt. We're in a great position to do that with the cash we have on the balance sheet and with potential to monetize these various stakes in the in in the in the noncore businesses.

[Tom Blackwell, CCO at Nebius Group]

We'll, of course, like, in two course, we'll look

[Tom Blackwell, CCO at Nebius Group]

at other you know, we'll we'll we'll be considering other more classical opportunities through the capital markets, and we'll update us on when we have more. But, again, we feel very good about our ability to continue to fund this growth based on what, you know, the available sources of capital that we have to us.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. We there's a question on on the other business, specifically AV Ride. Now you said you may explore strategic options. Can you maybe share a little bit more about, you know, why you're excited about AV Ride and maybe what those options could potentially be? Arkady?

[Arkady Volozh, Founder, CEO & Non Independent Executive Director at Nebius Group]

Well, yeah, we covered it several times. There's just few independent autonomous vehicle platforms that can compete in on The US market today. Definitely, the market is excited about what Waymo has achieved. It already sees it. And one of the very few players that that can actually build a platform comparable to that is Everite, like we did in.

[Arkady Volozh, Founder, CEO & Non Independent Executive Director at Nebius Group]

And as you can see, other market players big market players actually recognize this. Look at their recent announcements of EverRide partnerships with Uber, with Hyundai, with other big players. And as we said, they need to grow. They need to grow much faster. It's yet another capital intense businesses in our portfolio, and we are in active discussions.

[Arkady Volozh, Founder, CEO & Non Independent Executive Director at Nebius Group]

We can confirm that. We can we're in active discussions with potential strategic partners and investors who can actually really help to drive growth to this ambitious project.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Maybe one one last question, a a clarifying question. Can you can you explain exactly what you mean by by midterm? Tom, maybe you wanna take this one.

[Tom Blackwell, CCO at Nebius Group]

Yeah. Sure. So, again, just to just to, you know, to recap on that. So we but as we look into the midterm, you know, we really believe this business can scale up quickly and achieve, you know, sort of single mid single digit billions of dollars of revenue. So what we mean by midterm, I mean, with effectively a few years, you know, and but at the, you know, at the same time, as we've tried to sort of outline, you know, we will we're working very hard to go as aggressively as we can, and we'll get there and to get there as soon as possible, and we have I think our Carrie sort of framed how how we're thinking about the future growth.

[Tom Blackwell, CCO at Nebius Group]

And so, again, a a lot of a lot of, you know, existing revenues and forecast systems around this kind of AI native customer base, but I think Arkady set out the the the other sort of incremental sources growth around the enterprise customers, the big sort of the the big labs, and and and so on and so forth. So I you know, in our mind, think midterm is a few years, and we'll go as quickly as we can.

[Neil Doshi, Vice President & Head of Investor Relations at Nebius Group]

Great. Alright. Thank you everyone for participating on our first quarter twenty twenty five earnings call, and we will see you again on our q two call. Thanks. Thank you.

Participants

Executives

• Neil Doshi, Vice President & Head of Investor Relations
• Arkady Volozh, Founder, CEO & Non Independent Executive Director
• Andrey Korolenko, Chief Product & Infrastructure Officer
• Daniel Bounds, Chief Marketing Officer
• Roman Chernin, Chief Business Officer
• Tom Blackwell, CCO