CoreWeave turns to customer prepayments, shorter contracts to fund AI growth
CoreWeave is increasingly asking customers to pay upfront, borrowing against specific contracts, and even looking to short-term deals that could lead to higher prices, according to the company’s third-quarter earnings.
TL;DR
- CoreWeave is adopting new strategies to finance its growth, including upfront customer payments and borrowing against specific contracts.
- The company reported $3.66 billion in revenue for Q3, a 168% increase year-over-year, but also posted a $709 million net loss and $846 million in quarterly interest expense.
- CoreWeave CEO Michael Intrator stated the company will not use the unsecured debt market at current yields.
- The plan involves relying on loans backed by specific customer contracts to finance infrastructure needed for a $132.5 billion backlog.
- CoreWeave anticipates approximately $9 billion in customer prepayments and deposits in the next three months.
- Rivals Nebius and IREN have also used hefty Microsoft prepayments for computing capacity.
- CoreWeave is pursuing shorter-term contracts which command higher prices, with annual pricing over $40 million per megawatt compared to $20-25 million for longer-term contracts.
- The company raised prices by approximately 25% in July and another 10% later in the quarter.
- In August, CoreWeave closed a $2.6 billion loan specifically for shorter-term contracts.
- While short-term contracts offer higher prices, lenders typically prefer longer-term contracts for predictable cash flow.
- Bond investors are reportedly concerned about the debt required for data center buildouts, with yields on some CoreWeave bonds exceeding 15%.