TLDR
- Nebius Group landed a massive $19.4 billion, five-year deal with Microsoft for cloud computing services
- The deal value exceeds Nebius’ entire market cap before the announcement was made
- CEO Arkady Volozh expects more contracts with leading AI labs and big tech companies to follow
- Company is raising $3.7 billion through public shares and convertible notes while stock price is high
- Nebius stock jumped nearly 50% on Tuesday and remains up 40% for the week
Nebius Group stock has been on a wild ride this week after landing a contract that caught Wall Street completely off guard. The cloud computing company announced a five-year deal with Microsoft worth up to $19.4 billion.
The timing couldn’t have been more perfect for Nebius shareholders. The company’s market cap sat at around $15 billion before the announcement dropped. That means Microsoft just agreed to pay more over five years than the entire company was worth.
Nebius provides GPU-as-a-Service through its neocloud platform. The service typically caters to smaller companies that need AI computing power but can’t afford the massive infrastructure of hyperscale providers. Microsoft already runs its own massive cloud operations.
This partnership represents a major shift in how big tech companies are thinking about cloud services. Microsoft clearly sees value in Nebius’ specialized AI workload capabilities. The deal validates Nebius’ technology in a way that no amount of marketing could achieve.
CEO Arkady Volozh didn’t waste time hinting at what comes next. He told investors the company expects to secure more long-term contracts with leading AI labs and big tech companies. The Microsoft deal is just the first domino to fall.
Strategic Capital Raise
Nebius management knows opportunity when they see it. The company announced plans to raise $3.7 billion while their stock price sits near all-time highs. They’re selling new shares at $92.50 each through a public offering worth about $1 billion.
The company is also issuing $2.7 billion in convertible bonds. These notes come with attractive terms for Nebius. The conversion price is set at $138.75 per share, which represents a 50% premium over the public offering price.
This capital raise explains why the stock pulled back from its weekly peak. New share issuance always creates some downward pressure on existing shares. Smart investors understand this is temporary dilution for long-term growth.
Market Response and Outlook
The stock jumped nearly 50% on Tuesday when the Microsoft news broke. By Thursday afternoon, shares were still up 40% for the week despite the pullback. Some shareholders are clearly taking profits after the meteoric rise.
The convertible bond structure shows management’s confidence in future growth. If the stock hits $138.75, bondholders will likely convert to shares. That price target suggests management expects the stock to keep climbing.
Nebius operates in a sweet spot of the AI infrastructure market. Companies need specialized computing power for AI workloads but don’t want to build their own data centers. The Microsoft partnership proves even the biggest cloud providers see value in outsourcing certain AI capabilities.
The five-year contract provides revenue visibility that most cloud companies can only dream about. Microsoft isn’t known for making $19 billion bets on unproven technology. Their commitment validates Nebius’ position in the AI infrastructure space.
Volozh’s comments about more deals coming suggest this Microsoft partnership is just the beginning. The CEO has access to pipeline information that public investors don’t see. His confidence suggests the company’s sales team has been busy.
The capital raise gives Nebius the resources to fulfill large contracts and potentially win more business. Building AI infrastructure requires significant upfront investment. Having $3.7 billion in fresh capital removes any funding concerns for the next several years.
