THE CRUNCH
CoreWeave is changing how it pays for its expansion, leaning on customer prepayments and loans backed by specific contracts rather than unsecured debt. On its third-quarter earnings call, chief executive Michael Intrator said the company will not tap the unsecured debt market at current yields. The AI computing rental firm reported $3.66 billion in revenue, up 168% year on year, alongside a $709 million net loss and $846 million in quarterly interest expense.
The company expects about $9 billion in customer prepayments and deposits over the next three months, including more than $3 billion tied to signing new contracts for capacity it has already built, which requires no additional hardware spending. Those upfront payments ease immediate borrowing needs but lock CoreWeave into prices that could look unattractive if compute demand keeps surging.
CoreWeave is also chasing shorter-term deals that command higher prices. It raised prices by about 25% in July and another 10% later in the quarter, and says it is now selling short-term capacity at more than $40 million per megawatt annually, against $20 million to $25 million per megawatt on four and five-year contracts. In August it closed a $2.6 billion loan, its first designed for shorter-term contracts, which it can draw down in instalments. The tradeoff: lenders favour longer contracts for their predictable cash flow.
The approach reflects a broader industry shift, with rivals Nebius and IREN also relying on hefty Microsoft prepayments to fund computing capacity. Wall Street welcomed the earnings, but bond investors are warier: yields on some CoreWeave bonds topped 15% last month, a sign of concern about debt taken on before data centre investments pay off. The strategy hinges on demand and pricing power holding up.