Nebius Reports $5.6574 Billion in Capital Expenditures for Q1: Where Does the Expansion Funding Come From?

On August 12, AI cloud infrastructure company Nebius released its Q2 results for the period ending June 30. According to the company’s earnings press release and shareholder letter, the group’s revenue for the quarter was $582.3 million, while cash expenditures for fixed and intangible assets reached $5.6574 billion.

On one side are the newly reported revenues, and on the other, the preemptive investments in GPUs and data centers. Nebius also disclosed four landmark AI cloud contracts during the same quarter, with an average total contract value exceeding $1 billion. When these figures are put together, a smooth narrative emerges: clients are signing contracts, the company is expanding, and revenues continue to rise.

However, the contracts, cash, equipment, and revenues in this chain do not operate on the same timeline. The real point of interest in Nebius’s Q2 is how customer demand influences the funding arrangements for expansion, as well as which items have already entered the financial statements and which remain in the realm of contracts or management estimates.

$3 Billion ARR: What Has Happened

First, let’s look at what has already occurred. According to Nebius’s Q2 2026 shareholder letter, the group’s revenue rose from $227.7 million in Q4 2025 to $582.3 million this quarter. In Q2, the AI cloud business contributed $574.9 million, accounting for nearly all of the revenue.

The orange line in the chart represents the $3 billion AI cloud ARR. This is not revenue locked in for the next 12 months, but rather the AI cloud revenue for the last month of the quarter multiplied by 12 to derive an annualized run rate. This metric serves more like a speedometer, indicating the current pace of this business at the end of the quarter.

According to our calculations, the Q2 ARR grew by 56.3% quarter-over-quarter, slightly faster than the group’s revenue growth of 45.9%. The two figures are not entirely comparable; the former only observes the last month of the AI cloud business, while the latter is the confirmed revenue for the entire group for the quarter. They are presented together to highlight the time lag between demand rhythm and confirmed revenue, rather than treating ARR as order value.

Profit metrics also need to be viewed separately. According to the company’s earnings press release, the group’s non-GAAP adjusted EBITDA rose to $236.2 million in Q2. Meanwhile, the GAAP net loss from continuing operations was $190.4 million. The adjusted EBITDA excludes items such as depreciation and amortization, stock-based compensation, transaction-related costs, and interest, which can describe adjusted operational performance but cannot be directly translated into cash profits already realized.

Revenue growth does not mean that the construction costs have been covered by revenue itself. For a company that continuously purchases GPUs, connects to power, and builds data centers, this money often needs to be spent before services are delivered.

Why Customer Payments and Equipment Investments Are Misaligned

The second chart lays out several easily confused figures from the cash flow statement side by side. In Q1 2026, the change in deferred revenue was higher than capital expenditures. By Q2, capital expenditures suddenly surged, far exceeding the change in deferred revenue.

According to Nebius’s unaudited consolidated financial statements for Q2, the change in deferred revenue for the first half of the year was $4.395 billion, while capital expenditures were $8.1303 billion. The change in deferred revenue for Q2 shown in the chart is calculated by subtracting the first quarter disclosure from the first half disclosure. It does not represent Q2 revenue and cannot be directly referred to as all customer prepayments received for the quarter.

This distinction is crucial. The change in deferred revenue is an item in the cash flow statement that affects operating cash flow, while the ending deferred revenue balance is a stock on the balance sheet. Both are related to the rhythm of customer payments but cannot be summed up and referred to as customer deposits for a particular quarter.

The operating cash flow for Q2 remains positive, but capital expenditures, calculated as cash outflows, are approximately 9.7 times the revenue for the quarter. According to the company’s financial report, this resembles first installing the power, cabinets, and servers of a computing marketplace and then waiting for customers to settle according to their usage rhythm. Customer cash can alter the timing distribution of construction funds, but it cannot be inferred that every piece of equipment investment has already been covered by customer payments.

What Portion of Customer Prepayments Is Covered

Nebius provided a closer look at contract economics in its shareholder letter. The four landmark AI cloud contracts signed during the same quarter had an average TCV, or total contract value, exceeding $1 billion. This figure describes the scale of the contracts, not the revenue already confirmed by the company.

Another set of data is broader in scope and requires more caution. The company disclosed that approximately 70% of all transactions completed in Q2 included customer prepayments. These prepayments cover 50% to 60% of the related capital expenditures. This does not mean that each of the four landmark contracts meets this ratio, nor can it be extrapolated that all of Nebius’s capital expenditures have been covered by customers.

Nebius estimates that the capital expenditures and operating costs corresponding to these newly signed transactions will have a payback period of 1 year and 10 months, while the historical range has been 2 to 3 years. The key term here is "estimate." It relies on projected costs and contracted future capacity, including parts that have yet to be built. The company disclosed that the annual contract value per megawatt is between $20 million and $25 million, calculated on a revenue recognition basis, excluding prepayments.

Most of the capacity corresponding to transactions completed in Q2 will gradually be in place by the end of 2026, primarily contributing to revenue in 2027. Thus, prepayments, capital expenditures, and revenue recognition form an uneven relay. Prepayments initially alleviate some of the related expansion funds, equipment is deployed first, and revenue will only enter the profit and loss statement once capacity is truly delivered.

Five Clocks in the Same Financial Report

The fourth chart does not rank the figures by size but separates five metrics that are often mentioned in the same breath. $582.3 million is the confirmed quarterly revenue as of the end of June. $3 billion is the annualized run rate of the AI cloud business at the end of the quarter; both describe business that has already occurred, just with different observation windows.

Over $40 billion in customer commitments reflects the contractual commitments disclosed by the company, indicating the rhythm of future performance and revenue. According to the company’s shareholder letter, customer prepayments are expected to exceed $9 billion in 2026. This is management’s forward-looking expectation, not cash already listed on the Q2 balance sheet.

It is also important to note the 5GW. Nebius refers to the contracted power target expected to be reached by the end of 2026, supported by already signed land and power commitments. This does not represent the currently operational GPU capacity, nor can it be directly converted into computing power deliverable to customers for the quarter.

In Q2, Nebius should avoid adding contracts, prepayments, equipment, and revenues together to arrive at a larger growth figure. They are entering the same expansion chain at different speeds.