Shares of AI chipmaker Cerebras sink following first earnings report since going public

Chipmaker Cerebras Systems Inc. delivered mixed results in its first earnings report since going public last month, beating Wall Street’s revenue projections but falling short on earnings, sending its stock lower after-hours.

The company reported a first-quarter earnings loss before certain costs such as stock compensation of 22 cents per share, trailing the Street’s target of a 16-cent-per-share loss. Revenue for the period jumped 92% from a year ago, to $193 million, ahead of the analyst forecast of $181 million. Meanwhile, the company’s net loss narrowed to $14 million, down from $23.9 million in the same quarter one year ago.

However, investors reacted negatively to a gross margin forecast that revealed the reality of its struggle to surpass artificial intelligence chip leader Nvidia Corp. in key markets.

Cerebras went public following an initial public offering last month that aimed to capitalize on the growing enthusiasm among investors to bet on anyone providing the infrastructure needed to run powerful AI models. After pricing its IPO at $185 per share, its stock opened at $350 per share before closing its first day of trading at $311.07. The company raised more than $6 billion through the offering, but its stock has since declined further, and with today’s 10% after-hours drop, it’s currently trading at around $202 per share.

Chief Executive Andrew Feldman (pictured) offered an optimistic view of the company’s first earnings report, insisting that it had gotten off to an “outstanding” start to the fiscal year. “AI has moved from being a novelty to being useful and productive,” he said. “Cerebras’ wafer-scale technology delivers the fastest AI in the world. And fast AI is more valuable than slow AI because it is more productive.”

Looking forward, the chipmaker said its core gross margin, which is essentially the profit left after accounting for the cost of goods sold, is expected to shrink to between 36% and 38% in the current quarter, down from 46.5% in the first. On the other hand, its revenue forecast was good, with an outlook of $194 million in second-quarter sales, up 88% from a year ago and above the Street’s consensus estimate of $178 million. For the full year, Cerebras said it’s expecting core revenue of between $855.5 million and $865 million, which would represent growth of around 69% at the midpoint of that range.

Cerebras sees itself as a contender to Nvidia in the AI chip industry, and it also offers a service that allows companies to run their models in one of its fully-managed clouds, which are packed with servers powered by its specialized dinner plate-sized chips. The company’s silicon provides a significant performance advantage over Nvidia’s graphics processing units because it packs in many more times the static random-access memory that’s found in its rival’s chips.

During the quarter, Cerebras announced a significant customer win when it said that its chips will soon be launched in Amazon Web Services Inc.’s public cloud data centers, and it also revealed a $20 billion deal to supply OpenAI Group PBC with computing power. However, Cerebras’s revenue picture is somewhat clouded by warrants for 33.4 million shares that were granted to the AI company last year. In January, 4.5 million of those shares vested, with the value of those warrants recorded as a sales discount, or a non-cash charge known as contra-revenue.

During the quarter, contra-revenue was negligible, but it’s expected to grow substantially as the OpenAI contract ramps up. The remaining 29 million shares will be vested when certain milestones are reached, and one of those may be triggered as early as this month, Needham analyst Quinn Bolton told Barron’s.

OpenAI uses Cerabras’ cloud offering to host its software coding model Codex-Spark, and it also plans to bring more advanced models such as GPT-5.5 to the service.

Photo: collision.conf/Flickr