IMPLICATOR
Cerebras Systems beat Wall Street's revenue estimate for its third quarter on Thursday and said it has signed a new deal with Microsoft. Core revenue rose 70% from a year earlier to $230.9 million. The shares have slumped about 47% since the AI chipmaker's Nasdaq debut in May.
Analysts polled by LSEG had expected $214.7 million. The year-earlier quarter brought in $135.7 million, and growth slowed from the 103% Cerebras reported for the second quarter.
What Changed
- Cerebras Systems reported third-quarter core revenue of $230.9 million, up 70% from a year earlier and above the $214.7 million analysts expected.
- The company forecast fourth-quarter revenue of $310 million to $330 million, above the $271 million analysts were looking for, and said it signed a deal with Microsoft in October.
- Its chief financial officer said fourth-quarter cloud revenue looks flat because data center capacity remains the constraint.
AI-generated summary, reviewed by an editor. More on our AI guidelines.
An outlook above the Street
For the fourth quarter, Cerebras expects revenue of $310 million to $330 million and a core gross margin of 47% to 49%. Analysts polled by LSEG were looking for $271 million and a 42.1% margin.
The longer forecast lands just short. Cerebras said it expects revenue to triple in 2027, which implies about $2.85 billion. Analysts surveyed by LSEG were looking for $2.92 billion.
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Cerebras has not yet turned a profit. It reported a loss of 67 cents per share, against the 14-cent loss analysts expected, though accounting quirks mean the two numbers are not directly comparable. The adjusted revenue figure also leaves out some pass-through revenue and the warrants Cerebras issues to its major customers, which are amortized as noncash reductions in revenue. The adjusted operating margin came in at minus 14%, better than the minus 24% the company had guided to three months earlier.
Microsoft and the backlog
Microsoft, one of the world's top cloud providers, signed the deal in October, said Andrew Feldman, Cerebras's co-founder and chief executive. "We believe revenue begins to show up in Q1 '27," he said in an interview. The company had already signed deals with Amazon Web Services and Oracle, and it did not provide many particulars about the Microsoft agreement.
The backlog for hardware and cloud services rose to $26 billion at the end of the quarter, from $25 billion in August. Feldman said a significant portion of it is tied to the company's deal with OpenAI, which implies other customers don't have to wait so long for their orders to be processed. SiliconANGLE wrote that the small increase in the backlog does little to settle concerns that the deals are on the small side.
A rival in turmoil
Cerebras is trying to challenge Nvidia in the AI chip market. Its results landed on the same day Nvidia CEO Jensen Huang resigned from the company he co-founded, after multiple scandals involving extramarital affairs. Nvidia, which still dominates the AI chip industry with over 90% of chip sales according to some analysts, appointed longtime chief financial officer Colette Kress as interim CEO.
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Feldman told analysts that competitors are struggling to keep up with customer demand. On the hardware side, he said, "long lead times in GPUs and more expense creates opportunity for us," referring to Nvidia's graphics processing units.
Data center capacity
Cerebras told investors that demand is improving, and it has a limit of its own. Its chief financial officer said fourth-quarter cloud revenue looks flat because data center capacity remains the constraint. The company says manufacturing is not the bottleneck: it has wafer supply lined up with TSMC and is ramping new systems, including its CS4 and a next-generation Wafer-Scale Engine 5.
Feldman said Cerebras is evaluating its financing options to meet the ramping demand. It is not clear what that financing will look like. Capital has become much harder to secure in recent months, amid growing nervousness about the cash being spent on AI infrastructure buildouts.
Frequently Asked Questions
How did Cerebras do in the third quarter?
Core revenue rose 70% from a year earlier to $230.9 million, above the $214.7 million analysts polled by LSEG expected. Growth slowed from 103% in the second quarter. The company reported a loss of 67 cents per share.
When will the Microsoft deal bring in revenue?
Microsoft signed the deal in October, CEO Andrew Feldman said. He said Cerebras believes revenue begins to show up in the first quarter of 2027. The company did not provide many particulars about the agreement.
What is holding back Cerebras's cloud business?
Its chief financial officer said fourth-quarter cloud revenue looks flat because data center capacity remains the constraint. The company says manufacturing is not the bottleneck, citing wafer supply lined up with TSMC.
What does Cerebras expect for 2027?
Cerebras said it expects revenue to triple in 2027, which implies about $2.85 billion. Analysts surveyed by LSEG were looking for $2.92 billion.
How large is the Cerebras backlog?
The backlog for hardware and cloud services rose to $26 billion at the end of the quarter, from $25 billion in August. Feldman said a significant portion of it is tied to the company's deal with OpenAI.
AI-generated summary, reviewed by an editor. More on our AI guidelines.
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Marcus Schuler
Editor-in-Chief and founder of Implicator.ai. Former ARD correspondent and senior broadcast journalist with 10+ years covering tech. Writes daily briefings on policy and market developments. Based in San Francisco. E-mail: editor@implicator.ai
