Cerebras (CBRS) Stock Falls 9% After Beating Earnings — Here’s Why

TLDR

• Q1 revenue hit $193.4M, up 94% year-over-year, beating the $181M estimate
• Q2 revenue guidance of $194M also topped Wall Street’s $178M consensus
• Stock dropped over 9% in after-hours despite the beat, closing at $226.72 before the move
• Gross margins are expected to decline through the year as Cerebras rents equipment back to OpenAI to meet surging demand
• An insider lock-up unlock this Thursday makes roughly 13% of IPO shares eligible to trade

Cerebras Systems (CBRS) posted its first earnings report since going public in May, and the numbers were good. Revenue, guidance, and the operating loss all came in better than expected. The stock still dropped more than 9% after hours.

Cerebras Systems Inc., CBRS

The stock closed Tuesday at $226.72. It priced at $185 in its May IPO.

Q1 revenue came in at $193.4 million, up 94% year-over-year and ahead of the $181 million Wall Street was looking for. Cloud and services revenue jumped 178% from a year ago. The adjusted operating loss was $3.5 million, far better than the $19.3 million loss in the same period last year.

Q2 revenue guidance of $194 million also beat consensus estimates of $178 million, representing 88% year-over-year growth.

Margin Pressure Is the Story

The catch is margins. Full-year gross margin guidance came in at 38-41%, and Q2 guidance narrows further to 36-38%. The reason: Cerebras is renting equipment it originally sold to other customers and redirecting it to OpenAI, whose demand is outpacing new server capacity.

The $20 billion multi-year deal with OpenAI is the engine of Cerebras’ growth, but it’s also squeezing profitability in the near term. The company says it will recognize $3.7 billion of its $24.6 billion backlog as revenue in 2026 and 2027.

There’s another wrinkle. Cerebras granted OpenAI warrants for 33.4 million shares, practically for free. These vest over time and are recorded as contra-revenue, a non-cash charge that reduces reported sales figures. Needham analyst Quinn Bolton has flagged this as a growing headwind as the OpenAI contract scales up.

OpenAI uses Cerebras’ cloud to run Codex-Spark, a coding model. The company also recently launched enterprise trials of Kimi K2.6 and Gemma 4.

Lock-Up Expiry Adds Pressure

Only about 15% of total shares were sold in the IPO. The rest are locked up.

This Thursday, a milestone is hit that makes roughly 13% of IPO shares eligible to sell — insiders and early investors. That could add downward pressure on the stock in the near term.

A second, larger unlock is set for two days after Q2 earnings are reported, freeing up another 17% of shares.

Since its first day of trading, when the stock hit $386, 19 out of 26 trading sessions have seen moves of more than 3%. The volatility isn’t going anywhere.

Eleven analysts have already initiated coverage, with an average price target of $294 and a Buy rating, according to FactSet. Analysts project core revenue rising to $7.2 billion by 2028, with adjusted EPS of $5.53. At Tuesday’s close, the stock trades at 41 times that figure.

Cerebras also closed a revolving credit facility of up to $850 million in April to support data center expansion, on top of the $6.4 billion raised in its IPO and a $1 billion working capital loan from OpenAI.

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