CoreWeave Q3 Earnings Preview: Huge Backlog Orders Ahead, Sky-High Capital Expenditures Behind, Market Awaits Turning Signal

As the investment frenzy in artificial intelligence undergoes rational scrutiny from the market, AI cloud computing company CoreWeave's third-quarter earnings report, set to be released after U.S. market hours on November 10th, is drawing significant attention. The company faces the challenge of balancing revenue growth with soaring capital expenditures, and investors are closely watching whether it can achieve profitability while maintaining rapid growth.

CoreWeave's stock price plummeted 22% last week, making it one of the hardest-hit companies in the AI sector sell-off. The underlying concern in the market is the structural risks present in CoreWeave's business: its revenue heavily relies on a few tech giants like Meta and Microsoft, and the high customer concentration poses challenges to the robustness and sustainability of its growth foundation.

Investors will focus on the growth of the company's backlog and recurring purchase orders, which will directly impact revenue expectations for the coming quarters. Jefferies analysts expect that this quarter's transactions will double the year-over-year recurring purchase orders to $60 billion.

Profit Pressure Behind High Growth

CoreWeave is facing investor skepticism regarding the sustainable growth of AI spending. According to media reports, the company expects third-quarter revenue of approximately $1.3 billion, more than double the same period last year, but an adjusted loss of $0.36 per share, which, while narrower than the $0.53 loss in the second quarter, still indicates that the company is far from profitability.

More concerning is the decline in operating profit margins. This metric is expected to be around 14.3%, significantly lower than over 21% in the same period last year, primarily due to the substantial increase in capital expenditures to meet customer demand.

Dave Mazza, CEO of Roundhill Financial, stated:

"Investors are becoming more sensitive to the balance between growth and spending. Doubling revenue is great, but if capital expenditures are growing faster, this model cannot be sustained forever."

Customer Concentration Raises Concerns

CoreWeave's business heavily relies on a few large tech companies. Most of the company's sales revenue comes from three clients: Meta, Microsoft, and Alphabet. This customer concentration provides a stable revenue source during periods of high AI demand but also brings potential risks. Additionally, the recent recurring trading model centered around OpenAI has further intensified market concerns about the sustainability of its business.

However, Anurag Rana, a technology analyst at Bloomberg Intelligence, stated in an interview that the enormous market demand alleviates concerns about excessive customer concentration. He remarked:

"Even if one top client leaves, another client could quickly come in to work with the company. They (CoreWeave) are the number one new cloud service provider."

Surge in Capital Expenditures Tests Cash Flow

One of the biggest challenges facing CoreWeave is how to balance rapid expansion with cash flow management. According to Anurag Rana, a technology analyst at Bloomberg Industry Research, two-thirds of CoreWeave's approximately $14 billion capital expenditure this year may be realized in the fourth quarter, with the expectation of accelerating sales growth by 2026 as more computing resources come online.

However, analysts point out that revenue growth will still be constrained by supply capacity, which may force the company to further increase capital expenditures next year. The ongoing high investment model poses a severe test for its cash flow management.

Mazza from Roundhill stated:

"The market is starting to focus on whether CoreWeave can expand profitably, rather than just building capacity. If they demonstrate a path to positive cash flow in the next year or two, the market will recognize them."

Backlog Orders as a Key Indicator

Wall Street analysts will closely monitor CoreWeave's backlog orders and growth in recurring purchase orders, which will directly impact revenue expectations for the coming quarters. Jefferies analyst Brent Thill expects that recurring purchase orders this quarter are likely to double year-over-year, driving performance beyond market consensus expectations.

In his latest research report, Thill wrote:

"While it is still unclear whether we will receive guidance for fiscal year 2026 this quarter or next, we still expect performance to exceed consensus expectations driven by growth in recurring purchase orders."

Investors will also be watching to see if the company provides guidance for fiscal year 2026, which will provide important reference for assessing its long-term growth prospects