Shares of artificial intelligence cloud operator Nebius Holdings NV dropped 16.8% today after it posted third quarter financial results.

The company’s adjusted profit and revenue topped expectations. The selloff may have been sparked by its full-year forecast, which fell short of the consensus estimate.

Nebius swung from a $100.4 million adjusted loss a year ago to a $90.9 million adjusted profit. The latter figure breaks down to adjusted earnings of $0.31 per share. The company’s profitability surprised analysts, who expected a loss of $0.69 per share. 

Nebius’ revenue growth was another bright spot in its quarterly report. Sales jumped 517% year-over-year to $980.8 million,  which put the company well ahead of the $907.5 million consensus estimate. 

One of Nebius’ main growth drivers is its Token Factory service for running open-source AI models. Developers use it to host both post-training and inference workloads. Nebius says that the offering, which launched a year ago, is nearing a “multi-hundred-million dollar run rate” after logging a 17-fold quarter-over-increase in contract value.

Nebius’ largest customers played a particularly important role in its strong quarterly performance. The company signed $12 billion worth of contracts in the three months ended Sept. 30. The haul included multiyear deals with Snowflake Inc., Databricks Inc. and other major tech firms.

Nebius uses customers’ contract prepayments to finance its data center projects. The company says that the value of the prepayments it received in the third quarter exceeded its capital expenditures. However, the ratio of prepayments to capital expenditures is expected to decline as Nebius ramps up its data center spending. That detail may have factored into today’s stock selloff.

Nebius increased its full-year capital spending guidance to $27 billion. According to CNBC, that’s $4.15 billion higher than what Wall Street had expected. The company’s plan to invest between $40 billion and $45 billion in data centers next year surpassed the consensus estimate by an even wider margin.

Nebius’ surging expenses may be related to its shift away from co-location facilities. Today, about 90% of the company’s infrastructure is located in rented data centers. In contrast, the next two gigawatts of computing capacity that it plans to bring online will be mostly powered by internally operated data centers.

“Our focus remains on building a healthy, profitable business for the long term,” said Nebius founder and Chief Executive Officer Arkady Volozh. “We will continue to invest across the business – in our capacity and infrastructure build-out, in our platform and products, and in the team that takes this to market.”

Nebius expects its full-year revenue to be “at the low end” of its $3 billion to $3.4 billion target range. Analysts expected $3.37 billion. For 2027, Nebius is forecasting $12 billion to $13 billion in revenue.

Photo: Nebius