CoreWeave Turns to Customer Prepayments to Fund Its Growth
CoreWeave laid out how it will pay for its data center build-out. It will ask customers to pay early, borrow against signed contracts and sell more capacity on short terms.
Quarter in numbers
The cloud company, which rents out computing power for AI work, reported third-quarter revenue of $3.66 billion on Tuesday. That is up 168% from a year earlier. It also posted a net loss of $709 million and $846 million in interest expense for the quarter.
Its backlog of signed work stands at $132.5 billion. Much of the infrastructure needed to deliver on it is not yet built.
Loans tied to contracts, not bonds
"We will not use the unsecured debt market to fund our business at current yields, nor do we need to," CEO Michael Intrator said on the earnings call. Last month, yields on some CoreWeave bonds rose above 15%. Bond investors were less upbeat than the stock market, which reacted well to the results.
Instead, the company will draw on loans backed by specific customer contracts, taking money as it needs it. In August it closed a $2.6 billion loan of this kind, its first built for shorter customer contracts. It is known as DDTL 5.5.
Prepayments from customers
Over the next three months, CoreWeave expects roughly $9 billion to arrive early as prepayments and deposits. More than $3 billion of it is tied to new contracts on capacity that is already built, which needs no new hardware.
Rivals Nebius and IREN have taken big prepayments from Microsoft as well, so customers increasingly fund the building of capacity.
Shorter deals, higher prices
CoreWeave raised prices by about 25% in July and by another 10% later in the quarter. Intrator said prices keep rising this quarter, and that this "more than offset[s] cost increases."
The company is giving more capacity to short-term deals where pricing justifies it. Those sell at more than $40 million per megawatt a year. New capacity on four- and five-year contracts is moving to $20 million to $25 million.
The trade-off sits with lenders. A loan is repaid from predictable cash flow, so lenders favor long contracts even at lower prices.
Source: TechCrunch