Key Takeaways
- Shares of Cerebras fell approximately 14% in Wednesday’s pre-market session following its inaugural earnings report as a public company
- First-quarter revenue hit $193 million, marking a 94% annual increase and surpassing Wall Street’s $181 million projection
- 2026 adjusted gross margin forecast of 38-41% fell short of investor hopes, substantially lagging Nvidia’s mid-70% margins
- Compressed margins result from Cerebras leasing back its own hardware to satisfy demand from its massive $20 billion OpenAI partnership
- Major brokerages including Morgan Stanley, Wedbush, and TD Cowen increased their price targets, with consensus at $294
Shares of Cerebras Systems (CBRS) plunged approximately 14% during Wednesday’s pre-market session after the AI chipmaker delivered its debut earnings report as a publicly traded company. Following Tuesday’s close at $226.72, the stock headed toward its lowest point since its May initial public offering, erasing over $6 billion in shareholder value.
The actual quarterly performance wasn’t problematic. First-quarter revenue totaled $193 million, representing a 94% year-over-year surge and exceeding analyst projections of $181 million. The company’s adjusted operating loss narrowed dramatically to $3.5 million from $19.3 million in the prior-year period. Second-quarter revenue guidance of $194 million also surpassed the Street’s $178 million estimate.
What triggered the selloff? The company’s full-year profitability forecast.
Cerebras projected adjusted gross margins between 38% and 41% for 2026, representing a decline from the 47% margin achieved in the first quarter. This guidance trails far behind competitorsāNvidia operates with margins in the mid-70% territory, while AMD maintains mid-50% levelsādespite exceeding the analyst consensus estimate of 29.58%.
The Margin Compression Story
The profitability pressure connects directly to Cerebras’ massive $20 billion multi-year agreement with OpenAI. OpenAI’s demand is accelerating more rapidly than Cerebras can commission new server capacity. As a workaround, the chipmaker is leasing back infrastructure it previously sold to existing clients and reallocating those resources to OpenAI. This operational arrangement generates lower profit margins.
Chief Executive Andrew Feldman revealed during the earnings conference call that OpenAI’s GPT 5.4 model is currently operating on Cerebras processors, and that the artificial intelligence company plans to deploy 750 megawatts worth of its semiconductor technology through the partnership. He additionally disclosed that Amazon Web Services will integrate Cerebras chips into its cloud infrastructure, with revenue contributions anticipated within the coming twelve months.
An accounting complexity adds another dimension. Cerebras issued OpenAI warrants covering 33.4 million shares at minimal cost. As the contract scales, these warrant values are recorded as contra-revenue chargesānon-cash reductions that diminish reported top-line figures. Needham analyst Quinn Bolton highlighted this as an escalating challenge.
Customer Diversification Still Limited
Revenue concentration continues to present concerns. During the first quarter, 74% of total revenue originated from just two sources: G42 and the Mohamed bin Zayed University of Artificial Intelligenceāboth affiliated with the United Arab Emirates government. OpenAI contributed an additional 9%. Combined, these three customers accounted for 83% of quarterly sales.
The company’s $25 billion order backlog consists predominantly of the OpenAI arrangement. Cerebras anticipates converting $4 billion of that pipeline into recognized revenue throughout the next twenty-four months.
Despite the sharp decline, Wall Street analysts maintained positive outlooks. Morgan Stanley elevated its price objective to $273 from $250. Wedbush increased its target to $280 from $270 while reiterating an Outperform recommendation. TD Cowen emphasized the Amazon and OpenAI partnerships as critical drivers of long-term expansion. The consensus price target among eleven coverage-initiating firms stands at $294, accompanied by a Buy rating.
One immediate factor to monitor: a lockup period expires this Thursday, releasing nearly 13% of IPO shares for potential sale by company insiders and early-stage investors.
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