Cerebras Systems shares CBRS surged nearly 13% in premarket trading on Friday after the AI chipmaker raised its annual revenue forecast, reported a surprise profit and announced Microsoft as a new customer, signalling growing momentum in its challenge to Nvidia’s dominance of the AI computing market.
The rally could add nearly $4 billion to Cerebras’ market value if the gains hold, offering investors some reassurance amid concerns about the sustainability of massive AI infrastructure spending.
The company’s latest results also come as the AI sector faces heightened uncertainty following Nvidia CEO Jensen Huang’s resignation amid controversies surrounding his personal life.
Cerebras raises revenue outlook after strong third quarter
Cerebras now expects full-year core revenue of between $940 million and $960 million, up from its previous guidance of $880 million to $890 million.
It also raised its core gross margin forecast by one percentage point to a range of 42% to 44%.
Analysts polled by FactSet had expected full-year core revenue of $887.5 million and a gross margin of 42%.
The company reported adjusted earnings of 12 cents per share for the third quarter, compared with analysts’ expectations of a loss of 14 cents.
Core revenue came in at $230.9 million, beating estimates of $214.7 million.
Revenue increased 70% from $135.7 million a year earlier, although growth slowed from 103% in the second quarter.
Cerebras, which sells both AI chips and cloud computing capacity, also expects revenue to triple in 2027, reflecting continued demand for computing power used to run AI models.
“The demand for fast inference, which is what we specialize in, is enormous,” Chief Executive Andrew Feldman said in an interview, referring to the process of AI models generating outputs.
“The business is cooking with gas,” he added.
Microsoft deal adds to Cerebras’ customer base
The company said on Thursday that Microsoft had signed a deal to become a new customer, adding to its existing partnerships with Oracle and OpenAI.
Financial terms of the agreement were not disclosed.
However, Feldman said Microsoft signed the deal in October and that revenue contributions were expected to begin in the first quarter of 2027.
“We believe revenue begins to show up in Q1 ’27,” Feldman said in an interview with CNBC.
The agreement represents another step in Cerebras’ efforts to expand its customer base as technology companies compete to secure computing capacity for increasingly demanding AI workloads.
Analyst price targets reflect contrasting views
Despite the strong results, analysts have offered mixed assessments of Cerebras’ valuation and growth prospects.
Needham lowered its price target to $200 from $300 while maintaining a Buy rating, citing multiple compression across the AI sector.
Its revised target is based on an enterprise value of approximately eight times its calendar 2028 revenue estimate.
Mizuho also cut its target to $240 from $300, while retaining an Outperform rating.
Wedbush took a more positive view, raising its price target to $205 following the company’s third-quarter performance and upbeat fourth-quarter outlook.
Morgan Stanley reiterated its Overweight rating and $178 price target, pointing to improved gross margins and stronger fourth-quarter revenue guidance driven by hardware shipments.
Despite Friday’s potential gains, Cerebras shares remained under pressure following their market debut.
As of Thursday’s close, the stock was down 47.2% from its May IPO price of $185 per share.
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