Nebius & Meta: A Most Curious Deal

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Now, listen closely. There’s this enormous fellow, a proper giant of a company called Meta Platforms (META 1.46%), you see. They’re one of those ‘hyperscalers’ – a terribly grand name for a company that simply needs an awful lot of computing power. They’re essentially the chaps funding the whole shebang, the engine room for all this artificial intelligence nonsense. And they’re doing it by building data centers, or buying space in them – enormous, humming boxes filled with blinking lights and the dreams of robots.

Recently, Meta has delivered a rather scrumptious bit of news to a little company called Nebius Group (NBIS +2.56%). A deal, you see, a proper, whopping, five-year deal.

A Deal of Five Years and a Mountain of Money

Nebius, you understand, builds these data centers – rather like enormous Lego creations, but filled with something far more complicated than plastic bricks. They’re stuffing them full of the latest gadgets from Nvidia, called Vera Rubin – a name that sounds suspiciously like a villain from an old spy film. Meta will be renting space, a staggering $12 billion worth, and has promised to buy even more capacity in future centers – up to $15 billion over the next five years! It’s enough to make a grown man whistle.

Nebius intends to sell some of this capacity to other cloud customers, of course, but Meta gets first dibs on the best bits. The whole arrangement, if you add it all up, could be worth a colossal $27 billion! They’re building these centers, filling them with shiny new tech, and then renting them out to anyone with deep pockets. Mostly these are the hyperscalers, naturally.

They had a smaller agreement before, a mere $3 billion over five years. This new deal, appearing just four months later, suggests a rather cozy relationship. One might even say they’re becoming quite chummy.

A River of Revenue for Nebius

This Meta deal is shaping up to be bigger than Nebius’s previous arrangement with Microsoft, which was already a rather hefty $19.4 billion. It’s like comparing a bucketful of pennies to a chest full of gold sovereigns.

Nebius, you see, was expecting around $1.2 billion in annual recurring revenue by the end of last year, though they only managed a paltry $530 million. They’re forecasting between $3 and $3.4 billion for next year, with an annual run rate of $7 to $9 billion. But with this Meta deal kicking in from 2027, that $12 billion over five years adds another $2.4 billion to the annual pot. That should push them comfortably past the $10 billion mark, even conservatively.

The analysts at Visible Alpha were expecting Nebius to earn around $9 billion in 2027, and $14 billion the year after. With this Meta deal, those estimates seem… well, rather timid. They’re practically begging to be revised upwards.

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Now, Nebius is currently valued at around $33 billion. If you look at it on revenue, it’s not outrageously expensive. They haven’t quite managed to turn a proper profit yet, but they did achieve positive adjusted EBITDA last year. Though, one must be wary of ‘adjusted’ anything. Companies have a knack for fiddling the numbers to make themselves look better than they are.

Much of those adjustments came from stock-based compensation and depreciation. There’s a debate, you see, about how long these GPUs and other AI hardware actually last. It’s a bit like arguing over the lifespan of a particularly greedy goldfish.

I don’t think it’s a bad idea to have a little bit of exposure to data centers. There’s potential upside with all this AI nonsense, and I rather like Nebius – not just for its data centers, but for the other AI businesses it owns. However, buying data center stocks is still a bit speculative, especially since many, like Nebius, have already seen their stock prices surge. I wouldn’t go throwing all your money at it, you understand. A small nibble, perhaps, but nothing more.

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2026-03-19 23:04