Cerebras (CBRS) Stock Plunges 9% Despite Strong Q1 Earnings Beat — What Happened?

Key Takeaways

• First-quarter revenue reached $193.4M, surging 94% from the prior year and exceeding the $181M analyst forecast
• Second-quarter revenue outlook of $194M surpassed Wall Street’s $178M projection
• Shares plummeted more than 9% in extended trading despite strong results, following a $226.72 regular session close
• Profit margins face downward pressure throughout 2025 as the company leases hardware to OpenAI amid capacity constraints
• Insider selling restrictions lift this Thursday, releasing approximately 13% of IPO shares into the market

Cerebras Systems (CBRS) delivered its inaugural quarterly report as a publicly traded company since its May debut, showcasing impressive financial metrics. The AI chipmaker exceeded expectations on revenue projections, forward guidance, and operational losses. Yet investors responded with a sharp selloff, sending shares down over 9% in after-hours trading.

Cerebras Systems Inc., CBRS

Shares finished Tuesday’s regular session at $226.72, representing a solid gain from the $185 initial public offering price in May.

First-quarter revenue totaled $193.4 million, marking a 94% increase from the year-ago period and comfortably beating analyst consensus of $181 million. Cloud and services revenue demonstrated particularly strong momentum, soaring 178% compared to the previous year. The adjusted operating loss narrowed dramatically to $3.5 million, a substantial improvement from the $19.3 million deficit recorded in the comparable quarter last year.

Management’s second-quarter revenue forecast of $194 million also exceeded the Street’s $178 million expectation, signaling 88% growth compared to the same period last year.

Profitability Concerns Take Center Stage

The primary concern weighing on investor sentiment centers around profit margins. Management issued full-year gross margin guidance ranging from 38-41%, with second-quarter expectations narrowing to 36-38%. The culprit: Cerebras is leasing infrastructure previously sold to existing customers and reallocating it to OpenAI, whose appetite for computing resources exceeds available new server capacity.

The massive $20 billion multi-year agreement with OpenAI serves as the primary catalyst behind Cerebras’ explosive revenue expansion, but it simultaneously pressures profitability margins in the immediate future. Management indicated it expects to convert $3.7 billion of its substantial $24.6 billion order backlog into recognized revenue during 2026 and 2027.

Another complication exists. Cerebras issued OpenAI warrants covering 33.4 million shares at essentially no cost. These instruments vest gradually and are accounted for as contra-revenue, a non-cash accounting entry that diminishes reported sales. Needham analyst Quinn Bolton has identified this as an escalating challenge as the OpenAI partnership expands.

OpenAI leverages Cerebras’ cloud infrastructure to operate Codex-Spark, a specialized coding model. The platform recently initiated enterprise testing for Kimi K2.6 and Gemma 4.

Share Lock-Up Release Creates Additional Headwinds

Merely 15% of outstanding shares were made available during the initial public offering. The remainder face selling restrictions.

This Thursday marks a significant milestone when approximately 13% of IPO shares become eligible for sale — primarily held by company insiders and early-stage investors. This development could generate additional downward momentum on share price in the coming weeks.

A subsequent, more substantial unlock event is scheduled for two days following the second-quarter earnings announcement, releasing another 17% of shares into circulation.

Since the company’s trading debut, when shares peaked at $386, the stock has experienced price swings exceeding 3% in 19 of 26 trading sessions. Elevated volatility appears likely to persist.

Eleven Wall Street analysts have already published research coverage, establishing an average price objective of $294 with a consensus Buy recommendation, per FactSet data. Analysts forecast core revenue climbing to $7.2 billion by 2028, accompanied by adjusted earnings per share of $5.53. Based on Tuesday’s closing price, the stock commands a valuation of 41 times that projected earnings figure.

Cerebras also secured a revolving credit arrangement totaling up to $850 million in April to fund data center infrastructure expansion, supplementing the $6.4 billion generated through its IPO and a $1 billion working capital loan facility from OpenAI.

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