Cerebras shares drop on earnings debut, with margins below AI chip rivals

By Stephen Nellis and Juby ‌Babu

June 23 (Reuters) - Cerebras ​Systems in ​its debut report as a public company forecast full-year profit margins would drop below the first-quarter figures and lag levels of chip companies including Nvidia , sending ‌shares down 10% in extended trading on Tuesday.

The chip designer, which raised $5.55 ⁠billion in its IPO last month, is focused on inference, the process by which AI systems respond to user queries, ‌and has tied much of ‌its growth to OpenAI, including a $20 billion multi-year deal under which the ChatGPT creator will deploy 750 megawatts of Cerebras chips.

Cerebras forecast adjusted gross margins of 38% to 41% ​for full-year 2026, down from the 47% it reported for the first quarter. While the projection is above analyst estimates of 29.58%, it is far below those of rivals ⁠such as Nvidia, whose gross margins are in the mid-70% area, and Advanced Micro Devices, whose gross margins are in the ​mid-50% range.

It expects second quarter adjusted gross margin in the range of 36% to 38%, also below the 47% posted in the first quarter.

Ben ​Bajarin, CEO of technology consulting firm Creative Strategies, said ‌Cerebras' approach, which involves making some of the world's largest chips, is likely pressuring its gross margins because such large chips are difficult ⁠to manufacture.

Cerebras also is temporarily renting back its own systems from an existing client to meet short-term demand while it builds out more data center capacity, Chief Financial Officer Bob Komin said on a post-earnings ⁠call.

"The additional cost of renting third-party capacity will depress core cloud and other services margin temporarily from current ​levels," Komin said, adding Cerebras aims to achieve gross margins of 60% over the long term.

Cerebras is in early discussions for data centers in Israel, the UAE, Australia, Singapore, India and Indonesia, CEO Andrew Feldman ‌said.

It reported revenue of $193.4 million for the first quarter, compared with $99.5 million in the same period a year ago. Cerebras said its adjusted ‌net loss for the quarter was $2.5 million, narrower than analyst estimates of an adjusted loss of $36.75 ⁠million.

For the second quarter, Cerebras forecast adjusted ‌sales of $194 million, above estimates ​of $174.34 million, according to LSEG data.

(Reporting by Juby Babu in Mexico City and Stephen Nellis in San Francisco; Editing by Sahal Muhammed, Matthew Lewis and ‌Chris Reese)

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