TLDR
- Cerebras stock dropped ~14% pre-market Wednesday after its first earnings report since its May IPO
- Q1 revenue came in at $193 million, up 94% year-on-year, beating estimates of $181 million
- Full-year adjusted gross margin guidance of 38–41% disappointed investors, well below Nvidia’s mid-70% range
- The margin pressure stems from Cerebras renting back its own equipment to meet demand from its $20 billion OpenAI contract
- Morgan Stanley, Wedbush, and TD Cowen all raised price targets, with an average analyst target of $294
Cerebras Systems (CBRS) stock dropped roughly 14% in pre-market trading on Wednesday following its first earnings report since going public in May. The stock had closed Tuesday at $226.72 and was on track to hit its lowest level since listing, wiping out more than $6 billion in market value.
The results themselves weren’t bad. Q1 revenue reached $193 million, up 94% year-on-year and ahead of the $181 million Wall Street expected. The adjusted operating loss came in at $3.5 million, a sharp improvement from a $19.3 million loss a year ago. Q2 revenue guidance of $194 million also topped the $178 million consensus.
So what spooked investors? The full-year margin outlook.
Cerebras guided for adjusted gross margins of 38% to 41% for 2026, down from the 47% it posted in Q1. That’s well below rivals — Nvidia sits in the mid-70% range, AMD in the mid-50% — even though it came in above the analyst estimate of 29.58%.
Why Margins Are Falling
The margin squeeze is directly tied to Cerebras’ $20 billion multi-year deal with OpenAI. Demand from OpenAI is accelerating faster than Cerebras can bring new servers online. To keep up, the company is renting back systems it previously sold to other customers and redirecting them to OpenAI. That arrangement carries a lower margin.
CEO Andrew Feldman said on the earnings call that OpenAI’s GPT 5.4 is already running on Cerebras chips, and that the ChatGPT maker will deploy 750 megawatts of its semiconductors under the deal. He also confirmed that Amazon Web Services will begin using Cerebras chips in its data centers, with revenue expected to flow within the next year.
There’s also a revenue accounting wrinkle. Cerebras granted OpenAI warrants for 33.4 million shares at nearly no cost. As the contract ramps, the value of those warrants gets recorded as a contra-revenue charge — a noncash discount that reduces reported revenue. Needham analyst Quinn Bolton flagged this as a growing headwind.
Concentration Risk Remains a Concern
Customer concentration is still an issue. In Q1, 74% of revenue came from just two entities: G42 and the Mohamed bin Zayed University of Artificial Intelligence — both linked to the UAE government. Another 9% came from OpenAI. That means 83% of first-quarter sales came from three customers.
The company’s $25 billion backlog is largely made up of the OpenAI deal. Cerebras expects to recognize $4 billion of that as revenue over the next two years.
Despite the selloff, analysts stayed constructive. Morgan Stanley raised its price target to $273 from $250. Wedbush bumped its target to $280 from $270, keeping an Outperform rating. TD Cowen pointed to the Amazon and OpenAI deals as key to long-term growth. The average analyst price target across 11 initiating firms sits at $294, with a Buy rating.
One near-term technical factor: a lockup expiry this Thursday will make almost 13% of IPO shares eligible for sale by insiders and early investors.
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