Chad Smith
Cerebras Systems posted its first earnings report as a public company this week, and the headline numbers told a complicated story. The AI chip designer forecast full year gross margins well below first quarter levels and far behind rivals like Nvidia, pushing shares down more than 14% in premarket trading Wednesday.
At a Glance
- Full year 2026 adjusted gross margin guidance: 38% to 41%, down from 47% in Q1
- Q1 revenue came in at $193.4 million, nearly double the $99.5 million from a year earlier
- Adjusted net loss for Q1 narrowed to $2.5 million, well below analyst estimates of $36.75 million
- Q2 revenue guidance of $194 million beats the $174.34 million consensus estimate
- Long term gross margin target: 60%
Margin Pressure Overshadows a Strong Revenue Beat
Cerebras raised $5.55 billion in its IPO last month, and Tuesday's after hours release was its first chance to prove the valuation. Revenue for the first quarter reached $193.4 million, nearly doubling the $99.5 million it recorded in the same quarter a year ago. The adjusted net loss shrank to $2.5 million, a much better result than the $36.75 million loss analysts had penciled in.
But the margin outlook is what rattled investors. The company guided for full year 2026 adjusted gross margins of 38% to 41%, stepping back from the 47% it delivered in Q1. Second quarter adjusted gross margin guidance of 36% to 38% points to an even steeper near term dip before any recovery.
Those numbers sit well above analyst estimates of roughly 29.6%, but they look thin against the competition. Nvidia's gross margins run in the mid 70% range. Advanced Micro Devices operates in the mid 50% range. Cerebras is nowhere close to either benchmark right now.
Why the Margins Are Sliding
Two factors are conspiring to squeeze profitability. The first is structural. Ben Bajarin, CEO of technology consulting firm Creative Strategies, points to the sheer size of Cerebras chips as a manufacturing challenge. Building some of the world's largest chips is inherently difficult, and that difficulty shows up in the cost structure.
The second factor is temporary but real. CFO Bob Komin said on the post earnings call that Cerebras is currently renting its own systems back from an existing client to cover short term demand while it expands data center capacity. That arrangement carries extra cost. "The additional cost of renting third party capacity will depress core cloud and other services margin temporarily from current levels," Komin said. He added that the company aims to reach 60% gross margins over the long term.
OpenAI Ties and Global Expansion Plans
Cerebras has built much of its growth story around inference, the process by which AI systems answer user queries. Its biggest bet is a $20 billion multiyear deal with OpenAI, under which the ChatGPT maker will deploy 750 megawatts worth of Cerebras chips. That concentration in a single customer is worth watching as the company matures.
CEO Andrew Feldman said Cerebras is in early discussions for data centers in Israel, the UAE, Australia, Singapore, India and Indonesia. Geographic diversification would reduce customer concentration risk and, over time, support the margin recovery the company is projecting.
How Cerebras Compares to Key Rivals
| Company | Adjusted Gross Margin (Approx.) |
|---|---|
| Nvidia | Mid 70% |
| Advanced Micro Devices | Mid 50% |
| Cerebras (Q1 2026 actual) | 47% |
| Cerebras (Full year 2026 guidance) | 38% to 41% |
| Cerebras (Long term target) | 60% |
Frequently Asked Questions
What does Cerebras Systems actually make?
Cerebras designs AI chips optimized for inference, the stage where AI models process and respond to queries. The company is known for producing some of the largest chips in the industry.
Why did Cerebras shares fall after earnings?
Shares dropped more than 14% in premarket trading Wednesday after the company's full year gross margin guidance came in far below levels posted by rivals like Nvidia and Advanced Micro Devices, even though revenue and loss figures beat analyst estimates.
What is Cerebras' relationship with OpenAI?
Cerebras has a $20 billion multiyear agreement with OpenAI under which the company will deploy 750 megawatts of Cerebras chips for AI inference workloads.
When did Cerebras go public?
Cerebras completed its IPO the month before this earnings report, raising $5.55 billion in the offering.
What to Watch Going Forward
The core question for Cerebras is whether its margin recovery story holds. Management has a 60% long term gross margin target, but getting there requires both the data center buildout to come online and the rental arrangement to wind down. Revenue growth is clearly strong. The path to competitive profitability is a longer road.
