CoreWeave's $55 Billion Backlog Marks the Next Phase of the Neocloud Boom

The cloud landscape is shifting. Traditional cloud-services providers such as Amazon's (AMZN) AWS, Microsoft's (MSFT) Azure, and Alphabet's (GOOGL) Google Cloud have dominated the cloud space for years. But a new wave of "neocloud" providers is flipping the script by focusing on AI-first infrastructure. This shift is happening faster than many expected, driven by a large AI demand surge that hyperscalers are struggling to fill on their own.

Given infrastructure's critical role in the AI boom, neocloud providers like CoreWeave (CRWV) – as well as Nebius (NBIS) and Lambda – offer investors a new and potentially high-growth opportunity to get in on AI. They're essentially carving out the part of cloud computing that hyperscalers are not designed to handle efficiently.

What Is a Neocloud?

A neocloud is a super-powerful computer network designed only to run the most difficult AI programs using the best chips (graphics processing units, or GPUs).

Hyperscale clouds (like AWS, Azure, and Google Cloud) are typically jacks-of-all-trades and masters of none. Neocloud providers, however, are often considered "masters of one." That's because they're built around a single, specific purpose... providing dedicated, highly optimized GPU computing power. They have no intention of being a general cloud service.

Simply put, hyperscalers are built for flexibility. Neoclouds are built for raw AI horsepower. This means fewer bottlenecks, better efficiency, and infrastructure tuned to run modern AI models.

CoreWeave is one neocloud provider that's reshaping the AI boom. In September, the company struck a deal with Meta Platforms (META) to supply the social media giant with $14.2 billion of AI cloud infrastructure. And the investing world noticed. CRWV shares soared 12% after the news broke.

CoreWeave's Early Validation: Meta, OpenAI, and Microsoft

Niche technology often needs validation to get off the ground and succeed. Securing a major deal, especially with a recognizable name, demonstrates trust in and validation of the technology. It also reduces risk for future customers or investors.

CoreWeave's agreement with Meta did just that. It validated neocloud technology. And, more specifically, it validated CoreWeave by illustrating how specialized cloud providers can legitimately compete with hyperscalers like AWS, Google Cloud, and Azure in certain AI cloud areas.

It also highlighted the intense demand for AI-specific infrastructure and a desire for Big Tech companies to partner with niche service providers. Doing so allows Big Tech to offer new services, adapt to new technologies faster, and offer more tailored products.

It's worth noting that the Meta deal wasn't CoreWeave's first major partnership. OpenAI aligned with CoreWeave in March. And the ChatGPT creator is now paying $22.4 billion for CoreWeave to provide high-performance cloud-computing capacity to train OpenAI's advanced AI models.

Microsoft is also a key CoreWeave client and partner. Microsoft uses CoreWeave's AI infrastructure to support its data centers. And CoreWeave grants Microsoft access to GPUs that are vital to Microsoft's AI infrastructure.

Altogether, these partnerships create a strong validation loop: More clients boost credibility, which in turn helps CoreWeave win even bigger deals.

Looking at the broader cloud landscape, the CoreWeave-Meta deal signified a major strategy shift for Big Tech clients seeking cloud services. It meant that AWS, Azure, and Google Cloud weren't the only featured players anymore. And that businesses are looking beyond the "Big Three" for companies that can deliver secure, specialized AI infrastructure.

For investors, this is all early proof of the trust that major tech companies have in CoreWeave. And that trust has caused an explosion in neocloud demand.

CoreWeave: A Massive Neocloud Backlog Means Less Risk

CoreWeave clearly accomplished its early mission of validating its products... and neoclouds in general. Its contracts with Meta and OpenAI prove that. And those contracts have created a significant backlog – one that is worth around $55.6 billion in customer contracts as of the end of the third quarter of 2025 and nearly twice as large as the second quarter's backlog.

This type of backlog is rare for a company this young. And it gives CoreWeave unusually strong visibility into future revenues.

This is huge for CoreWeave for a couple of reasons.

For one, the company has tons of revenue coming its way for the foreseeable future. That's obviously a massive boost to CoreWeave's bottom line. But it's also a jolt of confidence for investors, who always appreciate a steady flow of long-term revenue. A large backlog also acts as a buffer against short-term volatility, since demand has already been contractually secured.

Another significant win for CoreWeave (and investors) is its portfolio diversification. As recently as fiscal year ("FY") 2024, 62% of the company's total revenue came from Microsoft. A staggering 77% of its 2024 revenue came from Microsoft and one other customer! That lack of diversification is a risky play for investors.

Today, with Meta and OpenAI in the fold, no single CoreWeave customer accounts for more than 35% of CoreWeave's business. Because of this newfound portfolio diversification, investors pounced on CRWV after its Meta deal was announced because this shift dramatically reduced concentration risk.

CoreWeave's giant backlog – and its huge future payoff – is outstanding news for the company and its investors. But CoreWeave still faces an uphill climb toward profitability.

CoreWeave Sees Explosive Growth but New Revenue Headwinds

Make no mistake... CoreWeave is having a fantastic year, revenue-wise. Its 2025 third-quarter revenue was $1.36 billion, a 134% year-over-year ("YOY") increase. During its third-quarter earnings call, CoreWeave's management projected its full-year 2025 revenue will land between $5.05 billion and $5.15 billion. That would represent between 164% and 170% YOY growth.

That's impossible to ignore.

But so is its $110.1 million in net losses... in the third quarter alone.

Year to date through the third quarter of 2025, CoreWeave has totaled $716 million in net losses. But the $110 million net loss in the third quarter is down from a $360 million loss during the third quarter of 2024. It's also lower than the $315 million loss in the first quarter of 2025 and the $291 million loss in the second quarter of 2025.

The silver linings? Some of this loss can be attributed to data-center delays, supply-chain constraints, and outstanding debt. More importantly, much of those losses can be attributed to depreciation from the company's capital expenditures ("capex"), which it's investing to drive growth. CoreWeave's depreciation and amortization expense for the third quarter of 2025 alone was $630.5 million, a huge YOY increase from the third quarter of 2024's $254 million. And its capex during the third quarter of 2025 was $1.9 billion.

CoreWeave's High-Risk, High-Reward Capex Strategy

You know the adage, "You have to spend money to make money." That embodies CoreWeave right now. The company's 2025 capex figures are set to land between $12 billion and $14 billion against projected revenue between $5.05 billion and $5.15 billion.

Its projected capex-to-revenue ratio is between 2.3 times and 2.8 times for FY 2025. That means CoreWeave is spending between $2.35 and $2.77 in capex for every dollar of revenue it earns. As a result, CoreWeave is unprofitable. And 2026 will be even worse. CoreWeave's capex is expected to more than double to around $30 billion.3

This spending adds a hefty element of risk to investment in the company. If AI demand slows anytime soon, CoreWeave could be in serious financial trouble.

However, there is logic behind CoreWeave's financials. The success of the company depends on its continued growth. That's why CoreWeave has invested so much capex in its build-out of data centers and purchases of high-end GPU clusters, among other investments. It firmly believes these investments will pay off in the long run.

Yes, this is a high-risk strategy. But it's also very high-reward. And its $55 billion-plus backlog demonstrates that the strategy will likely pay off in the long term. Assuming the demand for AI cloud services and infrastructure remains high, of course.

Is CoreWeave Overvalued?

CoreWeave's valuation has analysts divided. Those who believe CRWV is overvalued point to its high price-to-sales (P/S) ratio of 8.8 times (as of early December). This means that the market is willing to pay about $8.80 for every dollar of CoreWeave's revenue. For comparison, the S&P 500 Index's 2025 high P/S ratio was 3.32 times in September.

This valuation illustrates that CoreWeave is a high-growth company that isn't profitable yet, and that the market is pricing future growth into its share price.

But some analysts view CoreWeave stock as undervalued. They point to its huge current growth and its long-term prospects. Its valuation is indeed high right now. But considering the company's revenue as well as general AI demand, some believe CoreWeave's valuation is where it should be.

Since CoreWeave only went public in March, its overall stock profile is still somewhat incomplete. That's reflected in our Stansberry Score below.

The "D" in valuation would imply that those in the "overvalued" camp are correct.

And something interesting happened as I was writing this piece... CoreWeave shares nosedived in early trading after it announced plans to raise $2 billion through the sale of convertible senior notes due in 2031 in a private offering. The tumble reflects investors' concerns over the company's significant debt load as well as potential stock dilution. And that immediately impacted the valuation of CRWV shares.

CoreWeave's Competition: Nebius, Lambda, and Hyperscalers

Right now, CoreWeave is the neocloud market-share leader thanks to impressive growth and a very healthy revenue backlog. It also has another ace up its sleeve.

CoreWeave has maintained a longstanding partnership with AI chip giant Nvidia (NVDA). Nvidia also made a $100 million investment in CoreWeave in 2023. And the AI bellwether signed a $6.3 billion deal in September to acquire CoreWeave's unused computing capacity.

But, even with Nvidia in the fold, CoreWeave does have competition.

Why Nebius Is a CoreWeave Competitor

Nebius delivers a fully connected system for building and running AI, so it's easier to use globally. The company's full-stack cloud platform offers hyperscaler-like flexibility, scale, and performance. And that platform is something CoreWeave doesn't offer.

In the second quarter of 2025, Nebius reported an impressive 625% YOY revenue increase to $105.1 million. The company also received $700 million in private-equity funding from Nvidia and Accel. And it brought in another $4.2 billion through its public offering of Class A shares as well as a private offering of convertible senior notes.

Nebius' $28-billion-plus market cap pales in comparison with CoreWeave's nearly $71 billion. But its recent deals and funding influx make it worth watching. In September, Nebius announced a five-year, multibillion-dollar partnership with Microsoft to supply its Azure cloud platform with GPU capacity and AI infrastructure. That will open the door for more deals with large customers.

Analysts recognize the company's large growth potential. But they also see its extremely high capex. That number is projected to reach $2 billion for FY 2025 as it strives to reach 800 megawatts ("MW") to 1 gigawatt ("GW") of connected data-center capacity by the end of 2026.

Plus, Nebius' most recent annual free cash flow ("FCF") is hemorrhaging at negative $1.13 billion. In fact, its FCF is expected to remain negative through 2028.

Our Stansberry Score reflects the trepidation many investors have toward Nebius. While its financials are average (C), the company's sky-high capex and overvaluation drag the stock's overall grade down.

Patient investors may reap long-term rewards in the coming years. But Nebius has a long way to go before it's a profitable business.

Why Lambda Is a CoreWeave Competitor

Another neocloud making noise is Lambda, which brands itself as the "Superintelligence Cloud." Lambda provides AI infrastructure that includes cloud services, hardware, and software built for training and deploying machine-learning ("ML") models. Its powerful, on-demand GPU clusters (primarily Nvidia GPUs) offer rental access to high-performance computing for AI workloads.

What makes Lambda stand out, however, is its enterprise-grade platform for building and deploying AI models. Known as a "builder's cloud," Lambda specializes in flexible, developer-friendly AI infrastructure. And its goal is to simplify infrastructure management for its customers who need on-demand GPU access.

Lambda's annual run-rate revenue as of May was around $505 million. That's a solid increase over its 2024 total of $425 million. And news hit in September that the company hired investment banks in preparation for an upcoming IPO, likely to happen in early to mid-2026.

Along with the potential IPO, Lambda has big goals for 2026.

• It's estimating $1 billion in cloud revenue in 2026.

• In November, Lambda and Microsoft agreed to a multibillion-dollar deal to deploy tens of thousands of cutting-edge Nvidia GB300 NVL72 GPUs for AI infrastructure. They're expected to be integrated into Microsoft Azure's cloud AI.

• Also in November, Lambda closed an expectation-shattering $1.5 billion funding round led by investing firm TWG Global.

• Lambda plans to increase capacity from its current 47 MW to 3 GW by 2030.

• It's launching a next-generation AI factory in Kansas City, Missouri in 2026. The facility will house 10,000 NVIDIA Blackwell Ultra GPUs and will launch with 24 MW of capacity, which could expand to 100 MW.

Lambda's IPO will be highly anticipated by analysts and investors, especially with its Microsoft deal and $1.5 billion of funding in hand.

Why Hyperscalers Are CoreWeave Competitors

Don't think for a second that AWS, Azure, and Google Cloud haven't taken notice of CoreWeave and its neocloud competitors. They have, and they're adjusting their playbooks in response by:

• Creating custom AI hardware: Hyperscalers are investing in their own AI acceleration chips and hardware to counter neoclouds' AI-specific capabilities. Google developed its own tensor processing units ("TPUs"). And AWS custom-built its own Trainium and Inferentia ML accelerator

• Pushing their own full-stack cloud packages: Hyperscalers already offer a range of AI services, tools, and integrations with their general cloud platforms. Once businesses invest in the Amazon, Google, or Microsoft ecosystems, they're more likely to rely on them for their cloud and AI offerings as well.

• Emphasizing their enterprise strengths: Hyperscalers already have enterprise-scale traits like compliance, security, expansive reach, and managed services. That separates them from the niche neoclouds by offering businesses a more comprehensive and secure environment.

• Using size to their advantage: Amazon, Microsoft, and Google are swimming in cash. That allows them to spend $30 billion per quarter just on AI infrastructure without a second thought. That spending includes massive quantities of GPUs and investing in data-center build-outs. And that helps hyperscalers gain some ground in neocloud providers' areas of specialization.

CoreWeave and other neocloud companies have demonstrated success. But hyperscalers are hyperscalers for a reason. And they won't lose ground in AI infrastructure without a fight.

CoreWeave's Case for Investors: Big Upside, Big Risk

Let's take a quick look at the bull and bear cases for CoreWeave.

Bull Case

• Its $55.6 billion backlog offers unmatched revenue visibility for neocloud providers.

• The importance of CoreWeave's partnership with Nvidia can't be overstated. It ensures that CoreWeave is the first-to-market cloud provider for Nvidia's latest, most advanced GPUs. The alliance also lends invaluable credibility to CoreWeave.

• Its relationship with Nvidia also helps CoreWeave gain a first-mover advantage in AI-optimized, GPU-dense infrastructure. This helps enable superior performance and cost efficiency compared with traditional cloud providers.

• CoreWeave's newly diversified customer mix greatly reduces its prior single-client dependence, which is huge for investors.

Bear Case

• CoreWeave's capex may soar past $30 billion in 2026. With that level of spending, achieving profitability will take time.

• Hyperscalers are coming for neocloud providers by building their own custom chips and full-stack AI platforms. This, along with hyperscaler name recognition and seamless ecosystem integration, could erase some neocloud momentum.

• CoreWeave trimmed its FY 2025 revenue guidance by $100 million to $200 million because of delays with a third-party data-center developer. When that news broke, CRWV tumbled by about 16%. And its price continued to plunge in the following weeks... between 30% and 40%... AI stocks are volatile.

• Neoclouds are basically in their infancy. That makes it difficult to determine how much they'll take off as AI expansion continues. What's safe to say, however, is that CoreWeave is clearly a high-risk/high-reward investment.

Final Takeaway

CoreWeave offers plenty of promise – and a fair amount of risk. With its massive revenue backlog, the future looks bright for the neocloud market-share leader. But AI investment is a rollercoaster ride. And niche businesses in an already-volatile industry pose even more risk.

CoreWeave, Nebius, and Lambda offer tons of upside. But they all come with caveats – notably, their alarmingly high capex and current lack of profitability. For long-term investors, however, the appeal is obvious.

But hyperscalers like Amazon, Microsoft, and Alphabet won't go down quietly. They have the cash to spend. And, perhaps more importantly, they have brand recognition and the trust of millions of customers. CoreWeave and the other neocloud providers don't yet have that luxury.

Of the neocloud players, CoreWeave looks like the strongest play. But, again, competition is fierce. And the AI market is turbulent. The long-term gain, however, could be worth any short-term pain.

Regards,

David Engle

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