CoreWeave stock surges, but its AI ambitions come with a $1.15 billion problem

CoreWeave stock NASDAQ:CRWV rallied in pre-market trading on Wednesday after the Nvidia-backed cloud provider raised its annual sales forecast, even as it warned that quarterly interest costs could reach $1.15 billion.

The stock was up 15% after CoreWeave reported a 168% jump in third-quarter revenue to $3.66 billion and a record $132.5 billion backlog.

Investors welcomed signs that demand for AI computing remains strong.

Why CoreWeave's borrowing costs keep rising

CoreWeave expects fourth-quarter interest expense of $1.05 billion to $1.15 billion, following net interest expense of $846 million in the three months to September.

Revenue growth has improved its operating performance. Quarterly operating income reached $207 million, up from $52 million a year earlier, while adjusted operating income rose to $379 million.

But net interest expenses were more than four times reported operating income, helping push the company to a $709 million net loss, against $110 million a year earlier.

The pressure reflects the scale of its expansion. CoreWeave is buying computing equipment and securing data-centre capacity before all the associated customer revenue arrives.

Higher interest charges do not necessarily mean borrowing is becoming more expensive per dollar. Management says its average debt cost actually fell to 7.9% from a year earlier, but problem is the volume of financing required.

A $9 billion funding plan offers some relief

CoreWeave expects about $9 billion in customer prepayments and deposits over the next three months, giving it another source of funding beyond traditional borrowing.

It is also pursuing loans secured against computing equipment and customer contracts.

The Financial Times reported that a proposed multibillion-dollar facility backed by Nvidia chips could carry interest of about 7% to 7.5%, below yields demanded on some unsecured debt.

John Blank, chief equity strategist at Zacks, told CNBC that the shift away from unsecured funding had helped restore investor confidence after the stock's steep decline.

The new loan has not been completed, and the expected customer payments have not all arrived.

Even cheaper loans would leave CoreWeave funding a massive construction programme. Its 2026 capital expenditure forecast stands at $37 billion to $39 billion.

Can record demand translate into lasting profits?

CoreWeave's backlog rose from approximately $104 billion at the end of June, and management says demand for computing capacity is roughly ten times available supply through 2027.

Deutsche Bank analyst Brad Zelnick argued in an earlier assessment that financing worries had overshadowed CoreWeave's customer relationships, committed sales and software capabilities.

Management now expects adjusted net losses to narrow in 2027 and positive adjusted net income in the first half of 2028.

The immediate test is whether expanded capacity produces enough cash to service borrowings.

AI disclosure: AI tools assisted with research and drafting of this piece. An Invezz editor reviewed the facts, sources and wording before publication. Any opinions or analysis are Invezz’s, not those of an automated system.