CoreWeave is shifting how it pays for expansion by relying on customer prepayments and shorter agreements, according to TechCrunch reporting on Tuesday. The neocloud provider announced the change during its third-quarter earnings call, aiming to fund its infrastructure without using the unsecured debt market.
Key takeaways
- CoreWeave posted $3.66 billion in revenue alongside a $709 million net loss and $846 million in quarterly interest expense.
- The company expects about $9 billion in customer prepayments and deposits over the next three months.
- Competitors like Nebius and IREN have also relied on hefty Microsoft prepayments to fund computing capacity.
- CEO Michael Intrator stated the firm will not use the unsecured debt market at current yields.
What is the CoreWeave financing strategy?
The new CoreWeave financing strategy involves asking clients to pay up front, borrowing against specific contracts, and pursuing short-term deals. TechCrunch reports that the company expects around $9 billion in customer prepayments and deposits over the next three months. This figure includes over $3 billion tied to signing new customer contracts for capacity that is already built, requiring no additional hardware spending.
Instead of relying on unsecured debt, the firm plans to use loans backed by specific customer contracts. These funds will be drawn as needed to build out the rest of its infrastructure and deliver on a $132.5 billion backlog. CEO Michael Intrator noted on Tuesday that the company does not need to tap the unsecured debt market at current yields.
Why shorter-term contracts and higher prices matter
CoreWeave is also allocating more capacity to short-term opportunities that command much higher prices. Prices rose by about 25% in July and another 10% later in the quarter, with increases continuing to offset costs. Short-term deals sell capacity at more than $40 million per megawatt annually, compared to $20 million to $25 million for four and five-year contracts. In August, the company closed a $2.6 billion loan known as DDTL 5.5 to support these shorter deals.
What happens next?
These new financial bets rely entirely on whether current demand and pricing power hold up over time. While upfront payments reduce immediate borrowing needs, they commit the company to providing services at fixed prices that might become less attractive if compute demand surges further. Bond investors remain concerned about the debt needed for data center buildouts, with some bond yields hitting above 15% last month as they worry about returns on these massive investments.
Frequently asked questions
CoreWeave reported $3.66 billion in revenue, which was up 168% from the year prior, alongside a $709 million net loss.
CoreWeave expects about $9 billion in customer prepayments and deposits over the next three months.
Shorter-term contracts allow CoreWeave to charge much higher prices, selling capacity at more than $40 million per megawatt annually.
Dotted 5.5 is a $2.6 billion loan closed in August that is designed specifically for shorter-term customer contracts, letting CoreWeave borrow in installments.
Bond investors are concerned about the debt needed to fund data center buildouts before those investments see a return, with some bond yields hitting above 15%.
Based on reporting by TechCrunch. Read the original article
