The start-up of the Coreweave data center soon becomes public in an agreement worth around 2.5 billion dollars.
For many people, investing in the stock market is the most effective way to build wealth. Unless you are a Accredited investorAccessing opportunities in private companies is rare. That said, from time to time, a private company becomes large enough for investors to consider the potential of an initial public offer (IPO).
Private companies that have overshadowed an evaluation of $ 1 billion or more are often called unicorns in the financial world. Corean artificial intelligence start-up (AI) with the financial support of any other than Nvidia (Nvda -0.75%)) recently deposited his S-1 With an expected evaluation of around $ 24 billion.
While the combination of the AI, the support of Nvidia and a highly anticipated IPO may look like a recipe for making a fortune, here are two reasons why I won’t Chaan the IPO of Coreweave.
1. Customer concentration
The table below breaks down Corewave’s income in recent years. Although these figures are undoubtedly impressive, there is more than what meets the eye here.
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Income | $ 15.8 million | $ 228.9 million | $ 1.9 billion |
| Income growth (yoy) | Not available | 1,349% | 737% |
Data source: Coreweave S-1 has. Yoy = annual.
During the analysis of the financial statements, investors can sometimes become in love with the growth of a business to the point that they ignore certain important underlying details. Of course, Growing income of more than 700% And eclipse $ 1 billion in annual sales are great milestones, but where does this growth come from?
According to Coreweave S-1 tickets, 41% and 73% of income in 2022 and 2023, respectively, were concentrated in three customers. In addition, 77% of income in 2024 only came from two customers.
Coreweave continues to reveal that his biggest customer (Microsoft) represented 16%, 35% and 62% of sales between 2022 and 2024. These trends suggest not only certain extreme levels of client concentration, but the largest Corewave client actually stimulates control of its growth. In other words, if Microsoft is transformed as a customer or decides to demot his contract, Corewave growth would make a significant proceeding.
2. The outbreak of income has a cost
Another important part of the financial analysis is to look at past income and study the rest of the income. The three main financial statements – income statement, assessment and the state of cash flow – are linked. Below, I described some key details that have been held in the financial profile of Coreweave.
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Operating expenses (per income statement) | $ 38.7 million | $ 243.4 million | $ 1.59 billion |
| Compensation in stock | 1.5 million dollars | $ 15.1 million | $ 31.5 million |
| Standardized operating expenses (excludes remuneration for shares) | $ 37.2 million | $ 228.2 million | $ 1.56 billion |
| Operating expenditure growth (Yoy) | N / A | 513% | 583% |
| Interests | $ 9.4 million | $ 28.4 million | $ 360.8 million |
| Net income / (loss) | ($ 31.0 million) | ($ 593.7 million) | ($ 863.4 million) |
Data source: Coreweave S-1 has.
When a company deposits its finances with the Securities and Exchange Commission (SEC), it does so under the generally accepted accounting principles (Paving). But GAAP financial can sometimes benefit from adjustments.
For example, many companies (especially start-ups) Compensation in stock (SBC) to their employees. Increasing the salary of an employee with SBC is a good sweetener because he gives them a chance to participate in the increase in a liquidity event such as an acquisition or an IPO. The catch is that SBC is nestled operating expenses In the income statement, and this can make the expenditure profile of a company more inflated than it really is. The reason is that SBC is not a real cash expenditure as a contract with a supplier or a salary.
In the table above, I standardized Coreweave operating expenses to exclude SBC. As you can see, the company’s expenditure profile increases more than 500% per year (and up). And down the income statement, you will see interests Deput, Coreweave transports its assessment. Although the debt is not necessarily a bad thing, I am a little wary in the case of Coreweave.
At the end of 2023, Coreweave brought $ 1.5 billion in debt. But at the end of last year, the debt had increased to $ 7.9 billion – hence the notable increase in interest illustrated above.
According to the disclosure required, Coreweave will have about $ 8.0 billion in main payments on its debt between 2025 and 2029, and $ 5.6 billion in this amount are due in the next two years. Since the company has only $ 1.4 billion in cash and equivalent and continues to burn money at a high rate, I am not delighted with the company’s current liquidity profile.
Final verdict
The IPO Coreweave arouses a lot of media beaten supported by a story of the Haussier AI. But the company’s underlying financial profile could be stronger. In addition, given the coreweave assembly losses and the questionable path to profitability, I would not continue any high valuation target that Wall Street could try to sell.
My last step is that the IPO Coreweave is a pass.
Adam Spatacco has positions in Microsoft and Nvidia. The Motley Fool has positions and recommends Microsoft and Nvidia. The Motley Fool recommends the following options: Long January 2026 Calls $ 395 on Microsoft and Court January 2026 405 $ calls Microsoft. The Word’s madman has a Disclosure policy.