Nebius Group’s latest $1 billion artificial intelligence contract suggests customer demand is not the company’s biggest problem. Paying to build the capacity may be.AI startup Reflection said on July 14 that it had signed a deal worth more than $1 billion to secure computing capacity from Nebius (NBIS), including access to Nvidia’s (NVDA) latest chips.Nebius shares rose about 4% to $201.81 in midday trading July 15. The stock climbed as high as $203.25 during the session after closing at $194.09 the previous day.Reflection, founded by two former Google DeepMind researchers, develops open-source models positioned as alternatives to systems from OpenAI and Anthropic.We typically see several customers competing for every GPU we bring online.The agreement adds to the evidence that demand for Nebius’ computing capacity remains strong. It also raises questions about how the company will finance the data centers and hardware needed to fulfill its growing backlog.Nebius’ latest deal adds to evidence of strong AI demandAI developers are racing to lock in the computing power needed to train and operate increasingly sophisticated models as demand growth outpaces new data-center supply.That imbalance has benefited Nebius, an Amsterdam-based AI cloud provider that supplies Nvidia graphics processing units and computing platforms to developers.Nebius’ first-quarter revenue nearly octupled from a year earlier, driven primarily by its core AI cloud business. The company said growth came from adding capacity while maintaining strong pricing and utilization.Its customer base already includes Microsoft (MSFT) and Meta Platforms (META). Nebius signed a five-year agreement to provide Meta with as much as $27 billion in computing capacity.The company also said its contracted capacity had exceeded 3.5 gigawatts, prompting it to raise its year-end target to more than 4 gigawatts.More AI:The new Chinese AI model rattling U.S. tech investorsAnthropic restores access to Mythos 5 for select organizationsSoftBank CEO offers stinging critique of Musk’s AI betNebius’ growth plan comes with a $25 billion price tagNebius spent about $2.5 billion on capital expenditures during the first quarter, compared with $544 million a year earlier. The spending was primarily driven by purchases of GPUs, related hardware, and data-center expansion.The company raised its full-year capital expenditure forecast to between $20 billion and $25 billion, from its previous estimate of $16 billion to $20 billion.Nebius ended the first quarter with $9.3 billion in cash after raising $6.3 billion, including a $2 billion equity investment from Nvidia and $4.3 billion from convertible securities.But management has indicated that additional financing will be needed. Nebius is pursuing asset-backed financing and corporate debt and said it plans to raise a mid-single-digit number of billions of dollars through those options in the near term.Related: Morgan Stanley resets Nebius stock price forecastThe company is also seeking more upfront payments from customers to reduce its reliance on debt and equity. It has not used its at-the-market stock-sale program but continues to evaluate that option.Additional borrowing would increase Nebius’ financial obligations, while future stock sales could dilute existing shareholders.Key numbers behind Nebius’ growth storyMore than $1 billion: Value of the Reflection computing agreement$399 million: Nebius’ first-quarter group revenue684%: First-quarter year-over-year revenue growth$389.7 million: First-quarter AI cloud revenue841%: AI cloud year-over-year revenue growth$20 billion to $25 billion: Nebius’ expected 2026 capital expendituresNebius bulls and bears split over the cost of growthSeeking Alpha contributor James Foord upgraded Nebius to strong buy on July 15, arguing that its fundamentals and AI demand remain strong.Foord said Nebius’ growing use of partner-backed data-center projects could help it expand internationally without placing the full cost of every facility on its balance sheet. He disclosed a beneficial long position in Nebius.Cavenagh Research reached the opposite conclusion in a July 6 Seeking Alpha article, rating Nebius a sell.The contributor acknowledged that the company benefits from the current shortage of AI infrastructure but argued that its capital intensity, potential shareholder dilution and uncertain long-term economics could weigh on returns. Cavenagh Research also warned that falling AI-computing prices could eventually pressure margins as more capacity enters the market.The author disclosed no position in Nebius.
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The Reflection deal gives Nebius another major customer. Investors will now be watching whether the company can bring the required capacity online without relying too heavily on additional debt or share issuance.Related: Goldman Sachs revisits Nebius stock price target after earnings