Nebius Margin Surge Meets a $200 Billion Financing Gap

Nebius swung from a negative 24.33% EBITDA margin in Q4 2025 to 44.38% in Q2 2026 — and the market has not paid up for it. The stock, up more than 150% year to date, still trades at 9.34x NTM EV/Revenue, just under its own 9.58x historical average and far below the 31.11x peak it hit in late 2025. The multiple has not re-rated to the margin story. The reason, by management's own account, sits on the balance sheet: Nebius has secured only about 20% of the roughly $250 billion it estimates it needs to fund its 5-gigawatt capacity pipeline.

Pricing power, engineered through scarcity

Nebius Group (NBIS) spent much of 2026 doing something unusual in cloud computing: raising prices while demand kept climbing. On September 17, the company announced its second GPU cloud price hike in three months, lifting pay-as-you-go rates for select Nvidia chips by 17% to 21% and pushing some CPU-only instance prices up 25%. That followed Nebius's first-ever capacity auction, which management said on the Q2 earnings call cleared 15% above any price the company had charged before for Blackwell-generation chips.

The mechanism, as CFO Dado Alonso and CRO Marc Boroditsky described on the call, is deliberate scarcity. Nebius closed four landmark deals in Q2, averaging more than $1 billion each, at $20 million to $25 million per megawatt for one- to three-year contracts. Management said it could sell its entire 2027 capacity today on those terms but is holding some back for shorter, three- to six-month deals commanding $40 million to $50 million per megawatt. On September 8, Nebius also named Palantir as its preferred sovereign AI infrastructure partner, opening a channel into enterprise customers who want their data off shared commercial models.

The numbers back the story — for two quarters

The margin history confirms the shift is showing up in the financials, not just the earnings call script. Nebius's EBITDA margin was deeply negative through 2024 and 2025, bottoming at negative 293.18% in Q4 2024 and still at negative 24.33% as recently as Q4 2025. It turned positive for the first time in Q1 2026 at 21.05%, then more than doubled to 44.38% in Q2. Gross margin climbed from a 40.06% trough in Q4 2024 to 77.06% in Q2 2026, its highest point in the two-year window.

Those figures run close to the 41% adjusted EBITDA margin management cited for Q2, versus 32% in Q1. The gap likely reflects stock-based compensation and other exclusions. Reported and adjusted figures moving in the same direction, by similar magnitude, suggests the improvement is real rather than an artifact of definition. What it does not yet show is durability. The positive-margin period covers exactly two quarters.

The buildout is the swing factor

The same quarter that produced the margin inflection produced a sharp deterioration in cash generation. Free cash flow fell from negative $214.9 million in Q1 2026 to negative $3.41 billion in Q2, consistent with the $5.7 billion in capital expenditures and $2.3 billion of operating cash flow management disclosed on the call. Total debt rose to $10.06 billion while cash and short-term investments fell to $8.04 billion, versus $9.59 billion and $9.37 billion respectively in Q1. That flips Nebius from roughly net cash to about $2 billion of net debt in one quarter — despite a $2.8 billion at-the-market equity raise management said it completed in Q2.

The deterioration came before the proposed $4.5 billion convertible note offering, announced August 19, which will add to the debt load once it closes. At Citi's Global TMT Conference on September 9, management put a number on what remains: roughly $250 billion in total capital for the 5-gigawatt pipeline, with only about a fifth secured — a financing gap of roughly $200 billion.

What decides NBIS from here

The evidence supports a genuine, mechanism-backed improvement in Nebius's unit economics. Capacity discipline and premium pricing are converting into real EBITDA margin. What it does not yet support is confidence that the improvement can outrun the capital required to sustain it. The flat multiple suggests the market is already weighing the financing risk rather than ignoring it.

The next test is Q3 2026: whether free cash flow stabilizes closer to Q1's negative $215 million than Q2's negative $3.4 billion, and whether the $4.5 billion convertible pushes net debt meaningfully higher without a matching jump in prepayment coverage, which stood at 50% to 60% of capex on the four landmark Q2 deals. If Nebius can raise that coverage ratio without further diluting shareholders, the margin story gets easier to trust. If it cannot, the $200 billion financing gap becomes the story that decides where NBIS trades next — regardless of how high auction prices climb.