Financial Trends -- 3/10

Revenue growth is massive in absolute terms but decelerating rapidly off a small IPO-era base -- with only ~5 quarters of public data. YoY growth rates have compressed from +420% in Q1 2025 to +110% by Q4 2025. This is natural base-effect math, but the deceleration trajectory matters: by FY2027 the company will be lapping quarters that themselves were already large. The $66.8B contracted backlog provides revenue visibility, but backlog conversion depends on successful infrastructure buildout at unprecedented scale. Revenue quality is further clouded by the extremely short public track record -- fewer than two years of audited results.

Gross margin is compressing as the company scales -- the opposite direction from what a maturing cloud business should show. Rapid GPU fleet expansion brings rising depreciation and power costs that outpace revenue growth on a per-unit basis. Mix shift toward larger hyperscaler contracts may carry lower margins than the initial customer base. Management targets ~70% EBITDA margins on "seasoned" contracts, but gross margin compression at this stage raises questions about whether that target is achievable across the full revenue base rather than just cherry-picked cohorts.

FCF is deeply negative and getting worse each quarter -- capex was 2.9x revenue in FY2025 and guides to $30-35B in FY2026. This is not a company that is about to inflect to positive FCF. The capex plan requires the company to raise enormous amounts of debt and equity capital continuously. FY2025 capex of $14.9B against $5.1B revenue produced massively negative FCF. FY2026 capex guidance of $30-35B against $12-13B revenue means FCF gets more negative in absolute terms even as revenue more than doubles. The company is funding growth entirely through external capital -- debt issuance and equity dilution.

Share count is exploding -- massive dilution from IPO, follow-on offerings, SBC, and equity-funded capital raises. The company IPO-ed in March 2025 and has already conducted multiple capital raises. Stock-based compensation is substantial relative to revenue. The NVIDIA $2B equity investment in January 2026 added further dilution. For existing shareholders, per-share economics are deteriorating even as aggregate revenue grows. Diluted share count is expanding at a rate that materially erodes the per-share value of any future profitability.

D/E of 8.94x and current ratio of 0.46 -- among the most leveraged companies in the public cloud space. Total debt exceeds $14.6B and is growing rapidly to fund the $30-35B capex plan. Current ratio below 1.0 means current liabilities exceed current assets. Mitigating factor: no debt maturities until 2029 removes near-term refinancing risk. But the balance sheet is fundamentally a bet that contracted revenue will convert to cash flow before debt becomes unserviceable. Interest expense of $1.22B annually already consumes ~24% of revenue.