CoreWeave Stock: 60% Drop Is a Buying Opportunity
💡 Key Takeaway
CoreWeave's aggressive spending is fueling massive growth, making its 60% decline a potential entry point for long-term investors.
What Happened to CoreWeave?
CoreWeave released its Q4 2025 results on February 26, and the market reacted harshly. The stock fell sharply after the company reported a larger-than-expected loss and provided revenue guidance for the current quarter that fell short of expectations. This sell-off pushed the stock down 60% from its 52-week high reached in June 2024.
The negative reaction was driven by concerns over the company's massive capital expenditures. In 2025, CoreWeave spent $14.9 billion on capex, far exceeding its $5.1 billion in revenue. This spending accelerated in Q4, with capex jumping 242% year-over-year to $8.2 billion, leading to an adjusted net loss that surged nearly tenfold to $606 million for the year.
Despite the headline losses, the company's underlying growth remains explosive. Revenue for 2025 jumped 168% year-over-year to $5.1 billion. More importantly, CoreWeave's revenue backlog exploded to $67 billion, a more than fourfold increase from the $15.1 billion backlog at the end of 2024.
The company's outlook is exceptionally ambitious. CoreWeave plans to spend $30-$35 billion in capex in 2026 and expects to exit 2026 with an annualized revenue run rate of $17-$19 billion. It forecasts exiting 2027 with over $30 billion in ARR, implying a sixfold revenue increase from 2025 levels by 2028.
Why This Pullback Matters for Investors
For investors, the key question is whether the current spending is wasteful or a necessary investment in future dominance. The evidence strongly suggests the latter. CoreWeave is building capacity to meet an unprecedented shortage in AI data center power. Goldman Sachs research indicates a 9-gigawatt U.S. data center power shortfall in 2026, growing to 10 GW in each of the following two years.
CoreWeave's massive $67 billion backlog provides immense revenue visibility. The company needs to fulfill $28 billion of this backlog within the next two years, justifying its aggressive expansion. This isn't speculative building; it's construction to fulfill signed contracts with major hyperscalers and AI companies.
The path to profitability is becoming clearer. Management projects long-term adjusted operating margins of 25-30%, a significant improvement from the 13% margin achieved in 2025. The company has also already made progress on reducing its cost of capital, cutting its weighted average interest rate by 300 basis points last quarter for $700 million in annualized interest savings.
Bobby Insight
The 60% drop represents a compelling buying opportunity for investors with a long-term horizon.
CoreWeave's spending is strategic, not reckless, aimed at capturing a massive AI infrastructure opportunity validated by a $67 billion backlog. The company has a credible path to high-margin profitability by 2028, and the current valuation fails to reflect this potential.
What This Means for Me
