CoreWeave (CRWV) Shows Minimal Short-Term Downside Risk Due to Its Small Float and High Borrowing Costs

This is not investment advice. The author has no position in any of the stocks mentioned.

CoreWeave’s Initial Earnings Report: A Mixed Bag

CoreWeave (CRWV), a cloud-centric provider of GPU-as-a-Service, has faced a lukewarm response from investors following its inaugural earnings announcement as a public entity on Wednesday. Despite this lukewarm reception, some market analysts anticipate that the negative fallout may be limited, particularly due to recent distortions associated with the company’s IPO.

Understanding CoreWeave’s Role in the AI Landscape

For those unfamiliar, CoreWeave is dedicated to optimizing cloud infrastructure for demanding AI tasks, specifically those that require extensive GPU processing. Over recent years, the company has successfully differentiated itself through a pivotal partnership with NVIDIA. This alliance enables CoreWeave to provide early and expansive access to NVIDIA’s cutting-edge GPUs, packaged within an agile infrastructure capable of supporting AI workloads, featuring impressive “sub-microsecond” latency and efficient GPU lifecycle management. Essentially, CoreWeave offers a platform where AI startups can rent NVIDIA’s advanced GPUs alongside an array of services tailored to enhance operational efficiency.

$CRWV TTN Summary Earnings Call: Customer demand is accelerating despite the macro uncertainty; Inference demand also accelerated, as enterprises shift from training to revenue-generating inference workloads (CoreWeave)

– Q2 revenue guidance of $1.06–1.10 B, with adjusted… pic.twitter.com/zmdj0iDD1P

— TradeTheNews.com (@Trade_The_News) May 15, 2025

The Earnings Breakdown

CoreWeave released its first quarter results for 2025, reporting a revenue of $981.632 million, surpassing analysts’ expectations by 14%.Notably, the company has secured Google as a new hyperscaler client, contributing to a robust order backlog valued at $25.9 billion, which includes a significant $11.2 billion in orders from OpenAI alone.

However, the company’s projections for the coming quarter were less encouraging. CoreWeave projected second-quarter capital expenditures (CapEx) to fall between $3 billion and $3.5 billion, alongside revenue expectations of $1.06 billion to $1.1 billion. Additionally, EPs fell short of expectations, primarily impacted by $177 million in expenses linked to stock-based compensation arising from its IPO.

Future Guidance and Financial Health

Looking ahead, CoreWeave’s full-year guidance for 2025 estimates revenue to be between $4.9 billion and $5.1 billion, with operating income projected between $800 million and $830 million, and CapEx expected to range from $20 billion to $23 billion. It’s crucial to note that while CoreWeave’s CapEx remains unconventional—lumpy rather than consistently aligned—this gap is currently being managed through self-amortizing debt and a new $1.5 billion revolving credit facility.

DA Davidson DOWNGRADES $CRWV to Underperform from Neutral, Says Business Not Worth Scaling, Maintains PT at $36

Analyst comments: “We are downgrading to Underperform from Neutral and maintain a $36 price target based on 3x CY26 revenue. Investors regretted scaling WeWork, and… https://t.co/TTpwEEIgj7

— Wall St Engine (@wallstengine) May 15, 2025

Market Reactions and Analyst Insights

In light of these outcomes, Gil Luria from DA Davidson has downgraded CoreWeave to an ‘Underperform’ rating, establishing a price target of $36 per share. Current pre-market trading reflects the stock around $68, signaling a significant disparity. Luria draws comparisons between CoreWeave and WeWork, noting both companies’ attempts to scale in a volatile market.

“We realize shares may have limited short-term downside given the very small float and very high cost to borrow, but that may change upon the expiration of the lockup and likely need for secondaries.”

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