For many individuals, investing within the stock market is essentially the most effective method to construct wealth. Unless you are an accredited investor, accessing opportunities in private firms is rare. That said, every once in a while, a personal company becomes large enough that investors consider the potential of an initial public offering (IPO).
Private firms which have eclipsed a valuation of $1 billion or more are sometimes called unicorns within the financial world. CoreWeave, a man-made intelligence (AI) start-up with the financial backing of none aside from Nvidia (NASDAQ: NVDA) , recently filed its S-1 with an expected valuation of roughly $24 billion.
While the mixture of AI, support from Nvidia, and a highly anticipated IPO might sound like a recipe for making a fortune, listed here are two the reason why I won’t be chasing CoreWeave’s IPO.
The table below breaks down CoreWeave’s revenue over the previous few years. While these figures are undoubtedly impressive, there’s greater than meets the attention here.
Metric
2022
2023
2024
Revenue
$15.8 million
$228.9 million
$1.9 billion
Revenue growth (YOY)
Not available
1,349%
737%
Data source: CoreWeave S-1 Filing. YOY = 12 months over 12 months.
When analyzing financial statements, investors can sometimes grow to be enamored by an organization’s revenue growth to the purpose that they ignore some necessary underlying details. Sure, growing revenue over 700% and eclipsing $1 billion in annual sales are terrific milestones, but where is that this growth actually coming from?
In response to notes in CoreWeave’s S-1, 41% and 73% of revenue in 2022 and 2023, respectively, was concentrated in three customers. Moreover, 77% of revenue in 2024 got here from only two customers.
CoreWeave goes on to reveal that its largest customer (Microsoft) accounted for 16%, 35%, and 62% of sales between 2022 and 2024. These trends not only suggest some extreme levels of customer concentration, but CoreWeave’s largest client is effectively driving the majority its growth. In other words, if Microsoft churns as a customer or decides to downgrade its contract, then CoreWeave’s growth would protract in a meaningful way.
One other necessary part of monetary evaluation is looking past revenue and studying the remainder of the income statement. The three major financial statements — income statement, balance sheet, and statement of money flows — are intertwined. Below, I’ve outlined some key details that stuck out to me in CoreWeave’s financial profile.
When an organization files its financials with the Securities and Exchange Commission (SEC), it does so under generally accepted accounting principles (GAAP). But GAAP financials can profit from adjustments at times.
For instance, many firms (especially start-ups) issue stock-based compensation (SBC) to their employees. Augmenting an worker’s salary with SBC is a pleasant sweetener because it gives them a likelihood to take part in the upside of a liquidity event similar to an acquisition or IPO. The catch is that SBC is tucked into operating expenses on the income statement, and it could make an organization’s expense profile look more inflated than it truly is. The rationale for that’s SBC is not a real money expense like a contract with a vendor or a salary.
Within the table above, I normalized CoreWeave’s operating expenses to exclude SBC. As you’ll be able to see, the corporate’s expense profile is growing over 500% annually (and rising). And toward the underside of the income statement, you will see interest expense from the debt CoreWeave carries on its balance sheet. While debt is not necessarily a foul thing, I’m just a little wary in CoreWeave’s case.
At the tip of 2023, CoreWeave carried $1.5 billion of debt. But by the tip of last 12 months, debt had ballooned to $7.9 billion — hence the notable rise in interest expense shown above.
In response to required disclosures, CoreWeave could have roughly $8.0 billion of principal payments on its debt between 2025 and 2029, and $5.6 billion of that quantity is due in the following two years. Considering the corporate holds only $1.4 billion of money and equivalents and continues to burn money at a high rate, I’m not thrilled in regards to the company’s current liquidity profile.
The CoreWeave IPO is garnering loads of hype supported by a bullish AI narrative. However the underlying financial profile of the corporate may very well be stronger. Furthermore, given CoreWeave’s mounting losses and questionable path to profitability, I would not chase any lofty valuation targets that Wall Street is likely to be attempting to sell.
My final take is that the CoreWeave IPO is a pass.
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Adam Spatacco has positions in Microsoft and Nvidia. The Motley Idiot has positions in and recommends Microsoft and Nvidia. The Motley Idiot recommends the next options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.