Cerebras Shares Fall 14% After Quarterly Sales Disappoint While Outlook Improves

A Revenue Miss Overshadows a Raised Forecast

It sounds backwards, but it happens all the time: a company raises its forecast, then watches its stock sink.

That is what happened to Cerebras Systems on Wednesday night. The AI chip maker reported its second quarterly results since its May stock market debut, and shares slid about 14% in after-hours trading.

The trouble was revenue. Cerebras brought in $180 million for the quarter.

Analysts had expected $194 million, according to LSEG. When sales miss the mark, investors often ignore everything else.

The quarter was not all bad, though. Cerebras posted an adjusted loss of 5 cents per share.

That beat the 17-cent loss analysts had predicted. Adjusted numbers strip out one-time costs, so they show how the day-to-day business is doing.

The full income statement still looks rough. Cerebras lost $450.5 million in the quarter.

A year earlier, it earned $309.5 million. That worked out to $1.91 per share.

Stock-based compensation - the cost of paying employees in company shares - accounted for $386.6 million of that loss.

Core Revenue, Cloud, and a Bigger Forecast

Cerebras also tracks a broader sales figure it calls core revenue, which includes costs the company passes along to customers. That came to $210 million in the quarter.

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Cloud revenue, from customers who pay to use its chips over the internet, totaled $126 million in the quarter.

The guidance moved higher. For the current quarter, Cerebras expects core revenue of $214 million to $216 million.

For the full year, it lifted its core revenue target to $880 million to $890 million. That compares with an earlier forecast of $855 million to $865 million.

Margins Expected to Expand as Demand Stays Strong

Cerebras also tried to settle a worry that has followed it since the debut: gross margin, or the share of sales left after making the chips. The company expects core gross margin to expand to 38% to 40% in the current quarter.

CEO Andrew Feldman has a simple explanation. "Gross margins are in a good spot, and growing, because fast inference is priced at a premium," he said.

Inference is the moment when a trained AI model actually answers a question. Cerebras says customers will pay more for that speed.

Feldman says demand is not the problem. AI demand is "through the roof," he said, and remaining performance obligations - a measure of future contracted work - stand at $25.4 billion.

Cerebras forecasts that revenue will triple in the upcoming fiscal year.

Feldman said scale will change the cost picture: "We will manufacture more efficiently. We'll get better pricing on componentry. We'll amortize our manufacturing organization over more units."

"All of those point up and to the right," he added.

What It Means for Investors

The stock's history helps explain the 14% drop. Cerebras went public on Nasdaq in May.

Shares sold for $185 in the offering.

The offering raised $6.4 billion.

The stock closed Wednesday at $262.06.

That is up 42% from its debut price, though it has pulled back from its May peak.

When a stock has already climbed that much, investors have built a lot of good news into the price. A revenue miss, even when other numbers improve, stands out.

For your portfolio, the takeaway is about expectations. Cerebras showed a narrower adjusted loss, a higher full-year target, and stronger demand across the business - and the stock still fell 14%.

That is the whiplash that comes with young, fast-moving companies. A stock can fall on good news, and that does not make the good news any less real.

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