Truist Initiates Nebius With 'Buy' Rating, Citing Undervalued AI Cloud Potential

Truist Securities has initiated coverage on AI infrastructure provider Nebius (NBIS) with a “Buy” rating and a $355 price target, asserting that the market is significantly underestimating the company's future revenue from its AI cloud services.

Revenue Potential Underestimated

In a note to investors on Wednesday, Truist analyst Arvind Ramnani positioned Nebius as an opportunity to invest in an "AI-native hyperscale cloud vendor that is still in the infrastructure build-out and expansion phase." The firm believes consensus estimates for the company's 2027 annual recurring revenue (ARR) are too conservative.

This optimistic forecast is based on strong contract pricing, which Truist reports as:

• $20 million to $25 million per megawatt for one- to three-year contracts.
• $40 million to $50 million per megawatt for short-term contracts.

"We believe scarcity and contract economics will support pricing and revenue upside," Ramnani wrote, adding that the firm sees a path for Nebius to achieve 20-30% adjusted EBIT margins in the medium term.

Competitive Edge and Growth Path

Ad

Truist anticipates that Nebius is well-positioned to take market share from both emerging cloud providers and established hyperscalers. The report highlighted the company's significant engineering talent, with over 850 engineers, as a key competitive advantage that enables it to move up the technology stack.

The firm also sees Nebius as poised to capture the growing market for AI inference workloads, which Ramnani expects "to be the vast majority of AI workloads in the coming years." The total addressable market for cloud services is projected to reach $2.1 trillion annually by 2030, according to the note.

Wall Street Outlook and Stock Performance

Nebius was formed by founder Arkady Volozh, who also founded Yandex, by restructuring the international assets of Yandex after the sale of its Russian business. Despite the new bullish rating from Truist, shares of Nebius closed down 1.45% at $240.35 on Wednesday.

The stock has had a remarkable run, soaring 187% year-to-date. According to data from TipRanks, the broader Wall Street consensus for Nebius is a “Strong Buy,” with an average price target of $306.38, representing a potential 27% upside from its current level.