Shares of CoreWeave (CRWV) slumped about 16% on Friday after mixed fourth quarter results while analysts discussed investor concerns over margins.
Morgan Stanley kept its Equal-weight rating and $99 price target on the stock.
“Q4 revenues up 110% YoY to $1.6B represent unprecedented scaling within our coverage, targets of $30B in ARR exiting FY27 and 8GWs of active power exiting FY30 show mgmt’s confidence in the TAM. However, a reset of FY26 margin expectations strikes at the heart of the CRWV debate, keeping us EW,” said analysts led by Keith Weiss.
The analysts noted that targeting adjusted operating income at $900 to $1.1B, suggesting operating margins of 8% at the mid-point, fell well below consensus expectations of 21% operating margins in 2026.
The analysts added that the compounded fourth quarter margins coming in light of expectations strike at the heart of the investor debate on CoreWeave: “What are the durable margins of this business?”
The analysts said that CoreWeave’s management’s explanation of timing differences between the delivery of powered shells, provisioning of graphics processing units, or GPUs, and the monetization of those GPUs appeared at odds with the team’s assertion that it gets GPUs up and running faster than any other provider in the market and left them with more questions than answers.
“Bottom line, if investors can gain confidence in the durable margin profile of CoreWeave being in line with management’s mid-20s target, the stock currently well under prices the potential FCF [free cash flow] associated with a ramp to >$80 billion in ARR [Annual Recurring Revenue] over the next 5 years. However, we remain on the sidelines at EW, awaiting more clarity on the unit economics of this rapidly scaling GPUaaS [GPU as a Service] business and the potential for software (including the recent partnership with Nvidia) to tilt the margin equation more positively,” said Weiss and his team.
Evercore maintained its Outperform rating but lowered the price target on the stock to $150 from$160.
Analysts led by Amit Daryanani said that CoreWeave reported a top-line beat in the fourth quarter as demand remained robust. However, the analysts noted that fourth quarter operating income ($88M versus Street at $133M) and EBITDA ($898M versus consensus at $929M) came in below consensus as ramp-up/installation costs related to an uptick in capacity coming online weighed on profitability.
“While the ramp dynamics will create noise around margins near term as CRWV adds more capacity, we note that the overall demand backdrop remains robust and believe CRWV remains well-positioned to capture an outsized share of the AI cloud opportunity. Furthermore, we see potential for upside from 1) monetization of software stack, 2) continued ramp up/installation period management, and 3) upsell of other cloud solutions (CPU, storage),” said Daryanani and his team.
Related stocks: Nebius (NBIS) fell about 7%, while Super Micro Computer (SMCI) rose around 2% on Friday.