Blab AI
Cerebras Shares Drop 20% After First Post-IPO Earnings, Margin Concerns
On Wednesday, Cerebras Systems Inc. (NASDAQ: CBRS) saw its shares fall 19.6% after the silicon‑based AI chipmaker released its first quarterly report as a public company. The company posted a 94% year‑over‑year jump in first‑quarter sales, reaching $193.4 million and beating consensus estimates of $181.2 million. While revenue growth was strong, the announcement highlighted a sharp decline in gross‑margin expectations, prompting investors to sell.
Cerebras reported a core‑business gross margin of 47% in the first quarter. For the second quarter, the firm guided a margin of 36% to 38%, and for the full year it projects 38% to 41%. The lower guidance reflects the company’s plan to execute temporary system buybacks, a move analysts said would erode profitability in the near term. The margin forecast, coupled with a first‑quarter net loss of 22 cents per share—better than the 25‑cent loss analysts had expected—led to a 4‑cent non‑GAAP loss, well ahead of the 16‑cent loss forecast.
The company’s revenue outlook for the second quarter is $194 million, versus a consensus estimate of $177.7 million. For the full year, Cerebras projects sales of $860 million, ahead of the $828 million consensus. The stock closed at $182.26 after hitting a regular‑session low of $181.56. Cerebras entered the public market on May 14 with an IPO price of $185 per share and a record high of $386.34 on the first day of trading. Thinly held shares, analysts note, can amplify volatility.
Morgan Stanley analyst Joseph Moore raised his price target for Cerebras to $273 from $250 and maintained an overweight rating, citing the company’s conservative margin guidance. TD Cowen’s Joshua Buchalter kept a buy rating with a target of $275, adding that margin pressure is expected as the company scales production. Cerebras designs and sells wafer‑scale processors—the largest AI chips in the market—and operates a cloud‑computing business that provides AI training and inference services. Its customers include OpenAI and Amazon Web Services, and its chips are manufactured by Taiwan Semiconductor Manufacturing Company (TSMC).
The earnings release came amid other AI‑chip news. Nvidia’s shares fell 0.5% after Seaport Research reiterated a sell rating, citing concerns about the company’s balance sheet. Broadcom announced a new AI accelerator, Jalapeno, designed for OpenAI’s large‑language‑model inference, and its stock rose 0.5% to close at $382.07. Cerebras’ wafer‑scale engine uses a 215‑mm silicon wafer and a switched‑fabric interconnect that reduces latency compared with multi‑chip GPU clusters. Competitors in the AI‑hardware space include Nvidia, AMD, Intel, and Broadcom, while its cloud‑service competitors are AWS, Microsoft Azure, Google Cloud Platform, Oracle, and CoreWeave.
The first‑quarter results showed that Cerebras’ revenue nearly doubled from the $103.3 million it generated in the same period last year. The company’s guidance for the second quarter and full year indicates continued growth, but the margin forecast has tempered enthusiasm. Investors will watch for the company’s next earnings release, the execution of its system‑buyback plan, and the performance of its wafer‑scale processors in production. The ability to maintain high margins while scaling production will be a key factor in its valuation.
In summary, Cerebras reported stronger sales than expected but faced margin concerns that led to a sharp decline in its stock price. The company’s guidance for the next quarter and full year shows growth, but investors remain cautious about the impact of planned buybacks on profitability.
Cerebras reported a core‑business gross margin of 47% in the first quarter. For the second quarter, the firm guided a margin of 36% to 38%, and for the full year it projects 38% to 41%. The lower guidance reflects the company’s plan to execute temporary system buybacks, a move analysts said would erode profitability in the near term. The margin forecast, coupled with a first‑quarter net loss of 22 cents per share—better than the 25‑cent loss analysts had expected—led to a 4‑cent non‑GAAP loss, well ahead of the 16‑cent loss forecast.
The company’s revenue outlook for the second quarter is $194 million, versus a consensus estimate of $177.7 million. For the full year, Cerebras projects sales of $860 million, ahead of the $828 million consensus. The stock closed at $182.26 after hitting a regular‑session low of $181.56. Cerebras entered the public market on May 14 with an IPO price of $185 per share and a record high of $386.34 on the first day of trading. Thinly held shares, analysts note, can amplify volatility.
Morgan Stanley analyst Joseph Moore raised his price target for Cerebras to $273 from $250 and maintained an overweight rating, citing the company’s conservative margin guidance. TD Cowen’s Joshua Buchalter kept a buy rating with a target of $275, adding that margin pressure is expected as the company scales production. Cerebras designs and sells wafer‑scale processors—the largest AI chips in the market—and operates a cloud‑computing business that provides AI training and inference services. Its customers include OpenAI and Amazon Web Services, and its chips are manufactured by Taiwan Semiconductor Manufacturing Company (TSMC).
The earnings release came amid other AI‑chip news. Nvidia’s shares fell 0.5% after Seaport Research reiterated a sell rating, citing concerns about the company’s balance sheet. Broadcom announced a new AI accelerator, Jalapeno, designed for OpenAI’s large‑language‑model inference, and its stock rose 0.5% to close at $382.07. Cerebras’ wafer‑scale engine uses a 215‑mm silicon wafer and a switched‑fabric interconnect that reduces latency compared with multi‑chip GPU clusters. Competitors in the AI‑hardware space include Nvidia, AMD, Intel, and Broadcom, while its cloud‑service competitors are AWS, Microsoft Azure, Google Cloud Platform, Oracle, and CoreWeave.
The first‑quarter results showed that Cerebras’ revenue nearly doubled from the $103.3 million it generated in the same period last year. The company’s guidance for the second quarter and full year indicates continued growth, but the margin forecast has tempered enthusiasm. Investors will watch for the company’s next earnings release, the execution of its system‑buyback plan, and the performance of its wafer‑scale processors in production. The ability to maintain high margins while scaling production will be a key factor in its valuation.
In summary, Cerebras reported stronger sales than expected but faced margin concerns that led to a sharp decline in its stock price. The company’s guidance for the next quarter and full year shows growth, but investors remain cautious about the impact of planned buybacks on profitability.
