Cerebras Systems (CBRS) has seen its shares tumble by over 14% in premarket trading following its first financial report as a publicly traded entity. The chip designer, which raised $5.55 billion during its IPO last month, has projected that its profit margins would decline throughout the year, underperforming compared to established competitors like Nvidia.
In its earnings release, Cerebras outlined a forecast for adjusted gross margins ranging from 38% to 41% for the full year of 2026. This is a stark decrease from the 47% reported in the first quarter and, while it exceeds analyst expectations of 29.58%, it pales in comparison to Nvidia’s gross margins, which sit in the mid-70% range, and Advanced Micro Devices (AMD), which are around the mid-50% mark. For the upcoming second quarter, Cerebras anticipates an adjusted gross margin of 36% to 38%, also down from the first quarter’s figures.
Industry experts have speculated that the company’s strategy of developing some of the largest chips in the world may be pressuring its profit margins due to the complexities involved in manufacturing such sizable components. Ben Bajarin, CEO of Creative Strategies, noted that the challenges inherent in creating these large chips could be a significant factor in the margin decline.
Adding to its challenges, Cerebras is temporarily leasing back its own systems from existing clients to address short-term demand while expanding its data center capacity, according to Chief Financial Officer Bob Komin. He cautioned that this additional cost is likely to depress margins for cloud and other services in the near term. However, he assured investors that the company aims for a long-term gross margin target of 60%.
Cerebras has also begun preliminary discussions for data centers in various international locations, including Israel, the UAE, Australia, Singapore, India, and Indonesia, highlighting its plans for expansion.
In terms of performance, Cerebras reported a revenue of $193.4 million for the first quarter, a significant increase from $99.5 million during the same period last year. The company reported an adjusted net loss of $2.5 million, which is narrower than the estimated adjusted loss of $36.75 million reported by analysts.
For the second quarter, Cerebras forecasts adjusted sales of $194 million, surpassing analyst estimates of $174.34 million, indicating potential growth despite the challenges it faces with margin pressures.
