Why CoreWeave stock is falling despite strong AI revenue growth?

Shares of AI infrastructure provider CoreWeave fell about 6% in premarket trading on Friday after the company issued weaker-than-expected revenue guidance and lifted its capital expenditure outlook for next year.

The company raised the lower end of its 2026 capital spending forecast to $31 billion (approx. ₹2.9 trillion) from $30 billion (approx. ₹2.8 trillion), while maintaining the upper end of the range at $35 billion (approx. ₹3.3 trillion), signaling continued aggressive investment in data center infrastructure to meet surging artificial intelligence demand.

The stock reaction came despite stronger-than-expected first-quarter revenue, as investors weighed the implications of rising costs and heavy spending commitments tied to the rapidly expanding AI market.

Revenue growth beats expectations

CoreWeave reported first-quarter revenue of $2.1 billion (approx. ₹195.5 billion), surpassing analysts’ average estimate of $2 billion (approx. ₹185.1 billion), according to LSEG data.

The company has emerged as one of the leading “neocloud” providers, alongside firms such as Nebius, offering cloud infrastructure and computing capacity tailored for AI workloads.

Demand for such services has accelerated sharply as major technology companies race to secure the hardware and power capacity required to train and deploy increasingly sophisticated AI systems.

CoreWeave Chief Executive Officer Michael Intrator sought to downplay concerns about short-term stock movements, emphasizing the company’s longer-term expansion strategy.

“We are on a fantastic ramp through the balance of this year into 2027 — the why the market takes me up or down on any given day is sort of what the market does,” Intrator told Reuters in an interview.

“It's not what I'm doing, right? What I'm doing is I'm building a company.”

The company said it added more than 400 megawatts of contracted power capacity during the first quarter, taking its total contracted power to more than 3.5 gigawatts.

Expansion drive pushes costs higher

CoreWeave’s rapid growth has been fueled by a string of major agreements in recent months.

The company, which maintains close ties with Nvidia, recently expanded a cloud computing deal with Meta worth $21 billion (approx. ₹2 trillion), while also securing a $6 billion (approx. ₹563.9 billion) agreement with trading firm Jane Street and another deal with Anthropic.

However, the aggressive expansion has also pushed operating expenses sharply higher.

Operating costs more than doubled to $2.2 billion (approx. ₹208.6 billion) in the quarter as the company continued scaling infrastructure and active power capacity, Chief Financial Officer Nitin Agrawal said during a post-earnings analyst call.

For the second quarter, CoreWeave forecast revenue between $2.5 billion (approx. ₹230.3 billion) and $2.6 billion (approx. ₹244.4 billion), below analysts’ expectations of $2.7 billion (approx. ₹252.8 billion).

Investors also focused on rising component prices and the company’s decision to boost future capital expenditure plans as supply constraints continue across the AI infrastructure industry.

Long-term outlook remains strong

Despite investor concerns over profitability and spending, analysts noted that CoreWeave’s long-term positioning in the AI infrastructure market remains strong.

The company reported a revenue backlog of $99.4 billion (approx. ₹9.3 trillion) as of March 31, up sharply from $66.8 billion (approx. ₹6.3 trillion) at the end of December.

Andrew Rocco, stock strategist at Zacks Investment Research, compared CoreWeave’s approach to Amazon during its early growth years, arguing that the company is prioritizing market leadership over short-term earnings.

“If investors are willing to stay the course, CoreWeave positions itself to be a dominant player in the AI infrastructure industry,” Rocco said.

Analysts at Jefferies also pointed to the company’s expanding backlog as a positive sign, even as earnings and guidance fell short of some investor expectations.

They also said that although the company plans to increase capital expenditure in 2026, this increase shouldn't directly impact margins.