CoreWeave (NASDAQ: CRWV) had a strong second quarter, beating Wall Street’s expectations and giving investors more confidence in the company’s future. That would explain why the stock was up more than 18% in pre-market.
The AI cloud computing company reported an adjusted loss of $1.03 per share. That was better than the $1.20 loss analysts expected. Revenue was also slightly better than expected. CoreWeave brought in $2.58 billion during the quarter, up 112% from a year earlier. Analysts had expected revenue of about $2.56 billion.
The company also gave investors another reason to be optimistic: its huge backlog of future business. CoreWeave said it had $104 billion in revenue backlog at the end of the quarter.
The AI cloud computing company is also continuing to expand its data centers. By the end of June, the company had 1.5 gigawatts of active power capacity across its data centers. Its total contracted power capacity reached 4.2 gigawatts in early August, up from 3.5 gigawatts previously.
Analysts Raise Their Price Targets
Several Wall Street analysts were bullish on the earnings report and raised price targets.
Deutsche Bank (NYSE: DB) kept a Buy rating and a $150 price target. The bank said CRWV showed strong execution, growing demand, and improving profitability. It also pointed to the company’s growing backlog and expanding data center capacity.
JPMorgan (NYSE: JPM) was more cautious. The bank kept its Neutral rating but raised its price target from $110 to $120. Analysts said the biggest positive from the quarter was CoreWeave’s improving margins. Citi (NYSE: C) was more bullish, keeping its Buy rating and $142 price target. The bank said AI demand remains strong and that CRWV is gaining pricing power. The company has raised prices by about 25% across some of its services.
Even Bernstein, which remains bearish on the stock, admitted that the quarter was CRWV’s strongest performance so far. The firm raised its price target from $67 to $74 but kept an Underperform rating.
Bernstein said CoreWeave’s backlog is growing, its power capacity is increasing and its customer base is slowly becoming more diverse. However, the firm still does not believe these improvements are enough to change its long-term view of the stock.
Bank of America (NYSE: BAC) kept its Buy rating and $140 price target. The bank expects CRWV’s margins to improve during the second half of the year as newly activated data center capacity starts producing more revenue.
Wells Fargo (NYSE: WFC) was even more optimistic. It raised its price target from $155 to $160 and kept an Overweight rating. The bank said CoreWeave’s margin story is becoming clearer. The company reported contribution margins of around 30% to 35% during the second quarter, compared with the mid-20% range previously.
Some Investors Are Still Worried
Morgan Stanley (NYSE: MS) remains cautious, keeping an Equal Weight rating and a $99 price target. The bank said demand and pricing trends look positive but that it remains concerned about CoreWeave’s long-term returns and execution.
Barclays (NYSE: BCS) also maintained an Equal Weight rating with a $90 price target, although it said the company’s latest results showed strong operating improvement.
What’s Next for CoreWeave
CRWV’s second-quarter results were clearly better than many investors expected. Revenue is growing, the company has a significant backlog of future business, and its margins appear to be improving. Strong demand for AI computing is also allowing CoreWeave to raise prices. However, the company still faces major challenges, including high debt, heavy spending, and growing competition.
That explains why Wall Street remains divided. Some analysts believe CoreWeave is becoming a major winner from the AI boom, while others think investors are overlooking the risks. For now, the latest earnings report gives the bulls more evidence that CoreWeave can turn the huge demand for AI computing into a profitable business. The next challenge will be proving that this growth can continue.
