Cerebras Stock: Buy the Dip After Revenue Surge?

Cerebras (CBRS) reported its first quarterly results as a public company on June 23. Revenue surged 92% year over year to $193.4 million, while net loss narrowed to $14 million. Hardware revenue rose 60% to $111.6 million, and cloud service revenue jumped 167% to $79.8 million.

The company also announced two major partnerships: a $20 billion multi-year deal with OpenAI and a collaboration with Amazon Web Services (AWS) to combine Amazon's Trainium chip with Cerebras' CS-3 system.

Looking ahead, Cerebras guided for full-year 2026 core revenue between $855 million and $865 million, representing about 69% growth. For Q2, it expects revenue to soar 88% to $194 million. However, gross margin guidance disappointed, with projections of 38% to 41%, down from 46.5% in Q1. The CEO later explained the drop is due to renting back capacity from an existing customer.

Despite strong growth, the stock has been declining since its IPO and briefly traded below its $185 IPO price last week. The market is reacting to the margin guidance and high valuation.

The report shows that Cerebras is growing rapidly in the AI inference market, but the margin compression raises concerns about profitability. The partnerships with OpenAI and AWS are significant validation of its technology, but they also require substantial investment.

Cerebras uses a unique wafer-sized SRAM-based chip that offers superior performance but comes with higher costs and cooling requirements, making it a niche player. The company needs to prove it can scale and compete with larger players like Nvidia.

With a market cap of around $40 billion and projected revenue of less than $900 million, the stock trades at a high price-to-sales multiple. Investors are weighing the potential of its technology against the risk of execution and competition.

The guidance for lower gross margins is a key indicator that profitability may be further away. However, the CEO's explanation suggests it's a temporary adjustment. The Q2 and future quarters will be closely watched for margin recovery.