On August 12th after US market hours, AI cloud unicorn CoreWeave released its Q2 2026 earnings report. Following the announcement, the stock price rose approximately 15%. Overall, from the perspective of earnings surprise, the quarterly performance wasn't exceptionally stellar.
The core positive factor is that, from a trend perspective, while the company's business and revenue scale continue to accelerate, profitability indeed shows signs of having bottomed out and rebounding. Additionally, the pace of compute capacity delivery, which had been delayed multiple times previously, significantly improved this quarter.
Regarding guidance, although the outlook for the next quarter and full year wasn't significantly above expectations either, it continues to point towards accelerating growth and a sustained upward trend in profitability, which is also favorable for the mid-to-long-term narrative. Looking in detail:
1. Growth Continues to Accelerate, But Not a Surprise: This quarter, the company's total revenue reached nearly $2.58 billion, a year-over-year increase of 112%, with a net increase of nearly $1.4 billion, showing continued upward momentum. However, this figure was slightly below the upper end of previous guidance and only roughly in line with market expectations, so it wasn't a positive surprise from an earnings surprise perspective.
Also, by the end of the quarter, the Remaining Performance Obligations (RPO) balance stood at $104 billion, up only $4.6 billion sequentially from last quarter. Given the absence of recent news reports about the company signing major new contracts, market expectations for RPO growth were indeed not high. However, Dolphin Research noted that some investment banks had expected around $100 billion, making the actual performance slightly below expectations as well.
Additionally, according to company disclosure, the value of new contracts signed so far in Q3 is approximately $25 billion, indicating a rebound in growth momentum.
2. Accelerated Pace of Compute Capacity Deployment: The most important operational metric—deployed compute capacity scale (Active Power)—reached 1,500 MW this quarter, representing a net sequential increase of 500 MW, a record high, significantly exceeding market expectations of 250~300 MW.
A major point of market skepticism last quarter was the slow pace of compute capacity deployment, raising concerns about the company's execution efficiency. This quarter's performance effectively dispels such doubts with concrete action and, as a leading indicator, suggests a significant acceleration in subsequent revenue realization.
Corresponding to the substantial acceleration and outperformance in compute capacity build-out, quarterly CapEx investment reached $9.4 billion, an increase of $2.6 billion sequentially, also hitting a new record high and significantly above market expectations of $7.96 billion.
According to company guidance, next quarter's CapEx will further increase to $11.5~13.5 billion (based on full-year guidance, it may fall back below the $10 billion level in Q4). Although the increased CapEx is partly due to hardware price increases, it also implies that the scale of compute capacity deployed next quarter should exceed this quarter's, indicating an acceleration phase for both compute build-out and investment.
3. Has the Profitability Inflection Point Arrived? Along with the rapid expansion of revenue scale, the company's economies of scale and profitability inflection point also appear to have emerged. This quarter's "real" gross margin (deducting cost of revenue and Tech & Infra expenses) reached 7.3%, an improvement of 3 percentage points compared to the low point last quarter.
The largest single cost item—depreciation and amortization reached $1.39 billion, a year-over-year increase of 149%, accounting for 54.1% of revenue, a decrease of 1.1 percentage points sequentially. This shows that, under stronger revenue scale effects, the inflection point for diluting the depreciation expense rate has begun to appear.
With improved gross margins, and the company's sales and administrative expenses being relatively "sticky" with limited growth, these expense rates are continuously being diluted by the growing revenue scale, contributing roughly an additional 0.3 percentage points of margin sequentially this quarter.
Furthermore, the proportion of stock-based compensation expense to revenue also decreased by about 1 percentage point sequentially. With these multiple tailwinds, the company's key metric of adjusted operating margin reached 5% this quarter, a significant improvement from 1% last quarter.
This aligns with management's previous commitment that Q1 would be the low point for profitability and supports Dolphin Research's earlier in-depth analysis that the profitability of cloud providers' AI businesses may be generally underestimated.
4. Debt Continues to Grow, But Pressure Isn't Increasing: As the company's current investments far exceed its cash generation, the business is essentially financed by capital raising. Therefore, the ability to secure sufficient funding and the associated risks are crucial factors.
Net debt reached nearly $27.3 billion by quarter-end, an increase of about $6.6 billion sequentially, with growth slightly decelerating compared to last quarter. The debt ratio (to total assets) reached 37%, also slightly down from 39% last quarter.
Meanwhile, interest expense reached $640 million vs. $540 million last quarter, continuing to climb. However, whether looking at interest expense as a percentage of revenue (declining from 26% to 25%) or the average interest rate on debt (decreasing from 9.2% to 8.5%), the pressure from debt and its erosion of profits is relatively easing.
During the earnings call, the company also announced it has secured over $14 billion in cumulative equity/debt financing, ensuring funding sources for investments in the coming quarters.
5. Key Earnings Information at a Glance
Dolphin Research Viewpoint:
1. As seen from the above analysis, the core positive signals conveyed in this earnings report mainly include: a. Compute capacity build-out speed significantly exceeded expectations, and more, faster compute supply implies faster revenue ramp-up. b. With accelerating business scale growth and stronger economies of scale, depreciation, expenses, and interest costs are being diluted. Both gross and operating margins have bottomed out and rebounded, showing a sustained improvement trend in the market's most-worried-about ROI.
2. It's not just the current quarter's performance; guidance also points towards continued acceleration in revenue growth and a sustained upward trend in profitability.
First, for the next quarter's guidance, the midpoint implies Q3 revenue of $3.53 billion, a growth rate of 158%, with both absolute amount and growth rate showing further significant acceleration compared to this quarter. Adjusted profit guidance for next quarter is $230 million, with a margin of 6.5%, slightly below market expectations of $260 million. However, the implied margin still continues to rise compared to this quarter.
Furthermore, the company once again raised its full-year 2026 guidance. Calculations suggest this implies Q4 revenue expectations of $4.3~4.9 billion, with a midpoint year-over-year growth rate of 194%, accelerating further from Q3.
Meanwhile, the adjusted operating profit expectation for Q4 is $610~740 million, implying a margin of 14.6%, indicating a very rapid pace of subsequent margin expansion, making the 25%~30% steady-state margin target seem not so distant.
3. Recent Developments and Investment Logic
Disregarding the earnings, judging solely from the recent stock performance of many tech companies followed by Dolphin Research, there are signs of a slight recovery in market risk appetite. This includes, but is not limited to, Shopify, Airbnb, Sea, Unity, Palantir, etc., which all saw stock price increases of at least 10% after reporting better-than-expected results (regardless of whether the magnitude of the beat was exceptionally large), with gains of 15%~20% not uncommon. Therefore, for a naturally high-beta company like CoreWeave, the after-hours gain isn't particularly exaggerated.
Additionally, the market once worried that cloud providers, as the primary bearers of CapEx spending and major victims of hardware price increases like memory, faced unprecedented concerns about ROI, leading to them becoming the short side in pairs trades. Consequently, their stock performance was generally poor, with new cloud providers suffering even greater declines.
But recently, with cloud business growth at giants like Microsoft and Amazon accelerating beyond expectations, and AI cloud profitability appearing not as bad as feared, market sentiment towards cloud providers has reversed again.
Regarding recent developments, there are two particularly significant positive news items. First, the company announced that after July, it has implemented a general price increase of 25% across its product lines (partly to offset hardware price increases). We believe this undoubtedly reflects the current significant supply-demand imbalance for compute and will notably aid the improvement of the company's profitability.
Secondly, beyond its "bare metal" direct hardware rental business, the company has begun offering a TaaS-like service—Managed Inference. This involves deploying models on servers and providing users with API access directly. According to Dolphin Research's previous analysis, TaaS-like services typically offer significantly higher margins than "bare metal" rentals, which is also a positive for the company's profitability.
Therefore, currently, achieving a steady-state margin of around 25%~30% no longer seems so distant for the company.
4. Long-term, the competitive landscape for new cloud providers doesn't appear particularly favorable. Once the current phase of compute scarcity passes and customer demands shift from who can deliver more efficiently to who can provide better services at more affordable prices, it's difficult to predict the ultimate fate of new cloud providers.
However, considering the company is inherently a high-risk, high-reward investment, with opportunities more focused on medium-term trends rather than long-term holding, the recent increase in market focus and recognition for cloud service companies, coupled with their generally better-than-expected earnings, means that more volatile new cloud providers might continue to deliver faster returns.
This article is from the WeChat public account "Dolphin Investment Research" (ID: haituntouyan), author: Dolphin Research
