CoreWeave earnings put debt-fueled AI build-out under scrutiny

Skip Navigation Markets Business Investing Tech Politics & Policy Video Watchlist Investing Club PRO Livestream Menu Key Points CoreWeave reports third-quarter results after the bell Tuesday. Investors are focused on the neocloud company's spending, financing and credit risk. CoreWeave reported $35.6 billion of debt, $5.5 billion of cash and a $104.2 billion revenue backlog in the second quarter. In this article CRWV Follow your favorite stocks CREATE FREE ACCOUNT Jonathan Raa | Nurphoto | Getty Images CoreWeave faces a pivotal test when it reports its third-quarter financial results after the bell on Tuesday. The market will be closely watching what the neocloud company says about artificial intelligence spending — and how it plans to finance its infrastructure buildout. The outcome could either calm concerns over its debt or stoke more fear. "Investors need neoclouds to quantify how much financing they expect to raise to execute on existing backlog," Wolfe Research said in a note Monday. "We think outlooks that communicate when and which avenues of funding will be tapped will increase investor confidence." CoreWeave stock and bonds have come under pressure as fears deepened about the enormous amount of debt it has taken out to build its data centers. Its stock is down roughly 40% over the past month. Meanwhile, the yield on its 9.75% bond due in 2031 was 15.5% on Tuesday, after jumping to 16.7% on Thursday as investors digested the election results and possible roadblocks to data center construction. Bond yields move inversely to prices. CoreWeave's 9.75% bond due in 2031 The spread on its five-year credit default swaps — which is insurance against default and considered a barometer of perceived credit risk — is also at levels that are considered distressed. On Tuesday, its CDS spread stood around 1,152 basis points, after rising above its October peak to close at 1,278 basis points on Thursday. Rising CDS spreads mean investors view the debt as riskier. CoreWeave's five-year credit default swaps In addition, the New Jersey-based company's leverage is high. CoreWeave has a debt-to-equity ratio of 702%, up from almost 291% a year ago. CEO Michael Intrator has sought to quell investor fear, posting on LinkedIn after the election last week that the company doesn't anticipate "any impact to CoreWeave's existing customer commitments or associated backlog as a result of shifts in the political landscape." The company reported a revenue backlog of $104.2 billion in the second quarter . It has about $35 billion in debt, as of June 30. Capex watch CoreWeave has already given a picture of what it expects for the third quarter. It guided for quarterly revenue of $3.4 billion to $3.6 billion when it reported second-quarter results in August. It anticipated capital expenditures between $11.5 billion and $13.5 billion for the quarter and $35 billion to $39 billion for the full year. The company also expects 1.85 gigawatts in active power by year-end. Wells Fargo expects the company's capex needs for the rest of the year to be largely covered by its remaining undrawn debt, debt issuances in August/September and the $12 billion it is holding for project costs, which will flow into capex, analyst Michael Turrin said in a note Sunday. However, its 2027 capex could reach $66 billion, based on an expected capacity addition of 1.5 gigawatts, Turrin said. That will require at least $25 billion more in debt, he noted. It can be largely funded through delayed draw term loans, which allows CoreWeave to draw down funds over time, and the rest can come through bonds and convertibles, he said. Stock Chart Icon Stock chart icon CoreWeave year to date Turrin has an overweight rating and $115 price target on the stock, implying 135% upside from Monday's close. "While neoclouds sit in the eye of the AI storm, we remain confident that CRWV is the highest quality co in the space," Turrin wrote. "Beyond the noise, we see capacity/revs coming in better than expected (1.95GW this yr vs guide 1.85GW) as margins start to inflect." However, investors likely won't get all the answers they're seeking during CoreWeave's third-quarter results, said CreditSights analyst Jordan Chalfin. "One of the major issues for CoreWeave is whether or not they can obtain all the financing they need," he said. "They may try and calm the markets, but I'm not sure how much color they can and will provide." Investors will be looking for 2027 guidance on capex and free cash flow, though that may not come until Coreweave releases fourth quarter results, Chalfin notes. CoreWeave could ease investor concerns by showing it has plans and approvals in place to scale capacity through 2027, he said. The company can also demonstrate remaining performance obligation (RPO) growth, which shows the total value of its contracted future revenue, and highlight new customer wins. In addition, pricing has been really strong on recent deals, Chalfin pointed out. "That could show up in an operating margin beat for Q3 and expectations for Q4." Alternate funding While CoreWeave faces finances challenges, the company has many ways to access capital, Chalfin said. That includes chip-backed deals, which allow Corewave to borrow money using GPUs as collateral, and original equipment manufacturer financing. For instance, CoreWeave could turn to Dell , which is a big supplier with a strong balance sheet, Chalfin noted. "Despite all the market sentiment, fundamentals are actually quite strong and pricing is strong," he said. "The trends over the next few quarters, I think, should be supportive." Risks could arise after that, but it is "too early to call." 'Start of the end' Some analysts remain skeptical that Coreweave will be able to calm credit fears. Bob Lang, founder and chief strategist at Explosive Options, points out that the company is facing a huge bill in just over two years. CoreWeave owes roughly $15 billion in principal payments through 2028, according to its second-quarter earnings statement . "They don't have enough cash to service all that debt," he said. "Unless some big orders come in, unless some big money flows come in for them in the next 17, 18 months, I think this is going to be the start of the end for CoreWeave, unless somebody comes in and wants to buy them. But who wants to buy all that debt?" However, there could be a "small" window for the company to push out its debt for another three to five years, but it will depend on how strong their cash flow is when they report on Tuesday, Lang said. Plus, issuing equity to help fund infrastructure projects, like Meta and Oracle did recently , isn't an option for CoreWeave, he noted. "They're going to dilute the stock so much that it's going to continue to go down," he said. "They missed that window when the stock was in the hundreds." CoreWeave topped $183 in June 2025. It has since declined more than 73%, recently trading around $47. Despite the fall, analysts remain bullish on the stock with an average overweight rating and $126 target, based on 39 estimates complied by FactSet. —CNBC's Jordan Novet contributed reporting. Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.