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Cerebres reported quarterly earnings for the first time since going public last month. Its sales outlook beat Wall Street estimates but still disappointed investors hoping to see the company carve out a bigger slice of the aident center market. Right now, shares down seventeen point five percent, its biggest drop in its quite short history as a public company. What's behind that?
CEO Andrew Feldman's with us and welcome back to Bloomberg Tech. Andrew, you know, there was a time where we would talk about the merits of top to tail server ownership, how owning all of the content, and now we're going to talk about margin contraction and we're going to talk about the stock being down seventeen percent. That to me is kind of the mismatch that the outlook on the sales
side beat Wall Street estimates. I think a lot of people are trying to understand the sequential margin decline and for me, this is about ramping output for two big customers.
Is that true? Yeah?
I think what we did is we put forward a plan in the start of twenty six, we shared it with investors as we went public.
And we're ahead of plan.
You know, we delivered record revenues of one hundred and ninety one million of ninety two percent year over year, and for our cloud business, you know, it was up one hundred and sixty seven percent year over year. We beat margin consensus substantially, and then we guided for full year the growth margins would be ten percent better than plan.
We also shared the in Q two and Q three we would go back to some of our customers and we would rent back gear that we'd sold them to try and keep up with demand, and then that would have a margin impact on the order ten or fifteen points. We did that to keep our customers close, to be sure we could keep up with their extraordinary demand and for our product for fast inference, and so that was the story.
On every metric we put out, we're ahead of plan.
Have the proceeds from the IPO actually allowed you to move more quickly in ramping up capacity?
Yeah, I think capacity is the largest constraint right now for everyone. Data centers are and we've significantly increased our our ability and our pipeline for data centers which is now very large. You know, we announced a data center partnership with Bell, Canada for one hundred and twenty megawatts that will be delivered in twenty twenty seven. We are pursuing data centers across the US, in Canada, in Europe, in the Middle East.
There are.
The The vast resources that we have now at our disposal give us tremendous advantage in the pursuit of this The limiting factor data centers.
What you're talking about, like matter of factly, is buildings not necessarily the compute, right, It's not what you guys are offering. How difficult right now is it is to get moving in America or other markets, to get planning approval, get the concrete, get the labor, get the thing built.
Now that that's the irony of this market, that the AI market is moving at blistering speed, and we are being constrained by data centers which move with the speed of real estate. And so that is a problem that is being confronted by everybody in the category.
By the hyperscalers, by the neo.
Clouds, by the new generation clouds. Everybody is confronting this similar problem.
Andrew Cerebris does not rely on traditional off chip HBM. Would you just explain that the basics of the technology, but how insulated are you from the memory bottleneck that others are experiencing.
Yeah, that's a really good point.
Because of our innovative architecture, because of our wayfer scale approach, we don't use HBM. HBM is a type of DRAM and it's made by three companies, one of whom is reporting shortly right, that's Micron, Heenex and Samsung. There's a global shortage, it's extremely expensive, lead times are long, and we don't use it, so we have a tremendous advantage there. The other constraints in the supply chain for many are cooths, which is a process inside of TSMC.
Again we don't use it.
And the third is a capacity at the three nanometer node. That's space in TSMC's factory that makes three and nanometer chips. Again we don't use it. We're at the five nanometer node. So our architecture has allowed us to deliver the fastest inference in the world by an order of magnitude while avoiding the main supply supply chain constraints faced by others in the field.
Can you say, hand on heart, not just winning business, but have you actually been able to go to a customer and say we can get this compute online faster than others for those reasons you just outlined and then actually gone and done it.
Oh for sure.
I mean in any case I signed, we signed. For example, we signed our contract with open Ai on December twenty fourth and had them in for production on February first. That's unheard of.
Stay, that's quick.
I went really quickly, Andrew this morning. Open Ai is out with Kalapino intelligence processor. But everyone is compute constrained, right, How do you interpret the Frontier Labs going to custom a six alongside their other compute options.
And one of the things we've been saying all along is that this market is enormous and is going to be met with a heterogeneous collection of architectures for hardware. This market will not be consolidated around GPUs. There will be a six, there will be a six from Hyperscalers, there will be a six from from Labs, and then there'll be companies like Cerebras with pioneering architectures who all of us will will will take big bites of this
enormous market. I think one of the things that's difficult to get your head around is just how big the compute market is right now that One of the things AI does is it makes tractable for compute much of the world around us, and that really wasn't the case prior to AI.
Andrew's if the world is simple and it's money that greases the wheels to get your industry going, can we see you come back to capital markets in some form just so you can move quicker.
We have more than nine billion on the balance sheet, I think, so we're really pleased with our position there. But of course we are always scanning both the capital markets, both equity and debt for ways to accelerate our growth.
Finally, how are you judging success yourself? What is the milestone that you'd pitch to the market to keep closest attention.
To Well, I think I think if my mother's proud of me, I think that's the biggest thing you can you can ask for. I think for markets, I think when you lay out a plan that is aggressive and you crush it, Uh, that's how you feel good about both your ability to execute in your ability to predict your own execution. And so you know, we announced yesterday that we would beat our full year We gave full year guidance that was ten gross margin points above consensus.
You ought to be proud of that, and we got to continue to execute and continue to set extraordinarily high bars and then continue to.
Beat them.
Cerebrasy Andrew Feldman, thank you very much. Indeed,