What changed
CoreWeave, a neocloud provider that rents out computing power for AI, announced during its third-quarter earnings report that it is increasingly relying on customer prepayments, borrowing against specific contracts, and pursuing short-term deals to fund its growth. The company reported $3.66 billion in revenue, up 168% year-over-year, but also posted a $709 million net loss and $846 million in quarterly interest expense. CEO Michael Intrator stated that the company will not use the unsecured debt market at current yields and instead plans to rely on loans backed by specific customer contracts.
What this means in practice
CoreWeave expects about $9 billion in customer prepayments and deposits over the next three months, including more than $3 billion tied to new customer contracts for capacity already built. The company also raised prices across its offerings by about 25% in July and another 10% later in the quarter, with prices still climbing. Short-term contracts allow CoreWeave to charge higher prices, with capacity sold at more than $40 million per megawatt annually, compared to $20 million to $25 million per megawatt for longer-term contracts. The company closed a $2.6 billion loan in August, designed for shorter-term customer contracts, known as DDTL 5.5.
Limitations and availability
While short-term deals offer higher pricing flexibility, lenders prioritize longer-term contracts for predictable cash flow. CoreWeave’s strategy could boost profits but carries greater risk around contract renewals and pricing. Bond investors remain concerned about the debt needed to fund data center buildouts before returns are realized, with some yields on the company’s bonds hitting above 15% last month. The company’s financing strategy now revolves around these opportunities, though it remains dependent on sustained AI demand.
