CoreWeave projected 6.3x gross leverage as debt climbs
Faces questions about its balance sheet as analysts project gross leverage of nearly 6.3x by the end of 2026. The company is borrowing heavily to expand data…
Heavy borrowing to build AI data centers has put CoreWeave’s balance sheet under pressure as investors reassess the cost of funding the sector. Analysts project CoreWeave projected 6.3x gross leverage by the end of 2026, while the company says its contracted revenue backlog supports its debt obligations.
CoreWeave shares fell nearly 15.5% on Oct. 14, according to Yahoo Finance, amid concerns about highly valued artificial intelligence stocks and the possibility that funding could become harder to secure. The company’s spending plans make that concern especially relevant: its business depends on raising substantial capital to bring data center capacity online.
At the end of the second quarter, CoreWeave had $27.6 billion in total debt and roughly $5 billion in shareholder equity. It had generated nearly $2.7 billion in adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, during that quarter.
Visible Alpha estimates cited by Yahoo Finance put CoreWeave’s debt at $47.6 billion by the end of 2026, with adjusted EBITDA expected to reach about $7.6 billion. Those projections imply a gross leverage ratio of nearly 6.3x.
Debt and data center expansion
CoreWeave has brought 51 active data centers online, with the facilities collectively able to provide 1.5 gigawatts of computing capacity. The company added eight data centers this year and had contracted roughly 4.2 GW of total power as of Aug. 11, according to the report.
The build-out is capital-intensive. Higher bond yields have also raised borrowing costs, prompting concern among investors that capital markets could become less willing to fund AI infrastructure companies or demand tougher terms from issuers.
Bond investors have already shown signs of caution. CoreWeave’s 9.625% senior unsecured notes due in 2032 fell below $80 as of Oct. 14, Yahoo Finance reported, citing Barron’s. The notes are typically priced at par, or $100, and bond prices move inversely to yields.
“The era of easy money, which we experienced in the first nine months of the year, is starting to disappear and dissipate,” Luis Alvarado, co-head of global fixed income strategy at the Wells Fargo Investment Institute, said, according to CNBC. He added that investors would scrutinize the concessions issuers offer to attract funding.
Backlog offers support, but customers matter
CoreWeave reported a revenue backlog of more than $104 billion at the end of the second quarter. The company expects 40% of that backlog to materialize within 24 months. Chief Executive Mike Intrator wrote in a memo, “We are confident in our backlog, which more than supports all of our debt obligations.”
The business serves major AI and technology customers, including Microsoft, OpenAI, Meta Platforms, Nvidia and Anthropic. But reliance on a small number of clients remains a concern. Fitch Ratings noted in June that 65% of CoreWeave’s first-quarter revenue came from its top two customers; the company has since added more customers, the report said.
Analysts cited by Yahoo Finance expect adjusted EBITDA to rise to nearly $16.9 billion in 2027 and more than $27.6 billion in 2028. Those estimates depend on the company meeting its commitments with AI customers, while the debt projections underscore how much financing the expansion requires.
For investors and lenders, the immediate question is whether contracted demand can translate into cash flows fast enough to support a sharply larger debt load. The cited analyst projections put CoreWeave’s debt at $47.6 billion by the end of 2026.
Source: finance.yahoo.com
