CoreWeave – Lifeline or Break-through?

CoreWeave is a cloud infrastructure operator and software distributor, both focused on artificial intelligence. It is not a brand as large or prestigious as the leaders of the AI revolution, yet it still appears regularly in discussions and news related to financial markets and the AI boom. Today is another day when CoreWeave is in the spotlight, its shares are up more than 10% on a wave of positive news.

• Meta has signed a deal with CoreWeave to expand infrastructure worth $21 billion. This increases the total value of contracts between Meta and CoreWeave to $35 billion.
• On the same day, Anthropic is also expected to begin cooperating with CoreWeave. Anthropic is one of the leaders among AI model developers and is worth mentioning, as it has been gradually moving into the lead in light of a series of missteps by OpenAI and Anthropic’s own claimed successes.

But is this the beginning of another stage of rapid growth for a promising company, one where the market is witnessing something it does not yet fully understand? Or does it have nothing to do with genuine growth?
The answer should start with CoreWeave’s financial statements and regulatory filings.: 

1. CoreWeave increased revenue to $5.131 billion from $1.915 billion a year earlier, a rise of 168%. That is an impressive increase, but the picture is spoiled by the fact that the entire surplus was effectively burned through by technology, infrastructure, and administrative costs, causing operating profit to ultimately fall to -$46 million. Net interest expense rose to $1.229 billion from $361 million a year earlier, and the net loss reached $1.167 billion.
2. The company reports $3.093 billion in adjusted EBITDA, but the gap between EBITDA and accounting profit results from very high depreciation and amortization, $2.454 billion, as well as stock-based compensation costs of $630 million. These points are particularly important given that CoreWeave disclosed a number of “weaknesses in internal control over financial reporting” in its SEC filings.
3. With all of this in mind, the 5-year CDS spread has fallen in recent months, but it is still above 600 bps versus around 300 bps just a few months ago. This implies roughly a 10% annual probability of default and a 30–40% probability of default over a 5-year horizon.

In summary, at the moment CoreWeave:

1. Allocates more than 30% of revenue to interest on debt alone, while continuing to take on new loans;
2. Sees interest expense growing at a pace similar to revenue growth;
3. Shows positive adjusted EBITDA largely due to depreciation of assets on which CoreWeave is paying the above-mentioned interest, with depreciation running at close to half of the company’s revenue;
4. Relies for its growth scenario on cooperation with Anthropic and OpenAI—companies which, despite one “breakthrough” after another, lose more money year after year.

Healthy skepticism suggests that massive contracts, among them those from Anthropic, may resemble an attempt to manage sentiment and support a company whose finances and business model show significant weaknesses. If CoreWeave were to go bankrupt, it could become the “canary in the coal mine” of the AI revolution, frightening away capital providers to companies like Anthropic and OpenAI, capital these companies increasingly need.

This is one of many possible market scenarios. However, regardless of management’s statements and market sentiment, the hard data leaves more questions than answers.

CRWV.US (D1)

The stock chart shows a sudden and decisive improvement in sentiment after a prolonged decline. Source: xStation5.

Kamil Szczepański 

Financial Market Analyst at XTB

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