Market attention is intensifying on AI chip newcomer Cerebras Systems (CBRS.US) as it approaches its second quarter earnings report, with the glaring contradiction between its soaring revenue and suddenly pressured profit margins taking center stage. Whether the company can demonstrate a path to scalable profitability to investors after securing major clients like OpenAI will be a key factor swaying its stock price. On Wednesday, August 12, after the U.S. market closes, Cerebras Systems, which went public in May this year, will deliver its second financial report as a listed company. According to the company's previous guidance, its core revenue for the second fiscal quarter is expected to be approximately $194 million, a massive 88% surge compared to the same period last year.
However, this strong year-over-year growth only represents a modest increase from the $191.3 million core revenue recorded in the first fiscal quarter, indicating a short-term slowdown in momentum. Core revenue is a non-GAAP metric used by Cerebras that excludes items such as customer warrant amortization and data center pass-through revenue. Wall Street's current consensus estimate is close to the company's guidance, with projected revenue of around $191 million. Looking back at the first quarter, Cerebras total revenue grew 94% year-over-year to $193.4 million, with cloud and other service revenue soaring 178% to $82.8 million and hardware revenue increasing 59% to $110.6 million.
Profit margins are emerging as the biggest concern: Lagging in-house capacity is driving up costs. Compared to revenue, investors will scrutinize Cerebras earnings quality more harshly this time. Wall Street currently expects Cerebras to report a net loss of $0.17 per share, a stark contrast to the earnings per share of $1.44 from the same period last year. Additionally, the company warned in its previous report that the core gross margin for the second fiscal quarter would drop sharply to 36% to 38%, a significant decline from the 46.5% level in the first quarter. The core operating margin is also expected to be negative 30% to 32%. The primary reason for the sharp margin decline is that to meet the current surge in AI inference demand, the company is forced to temporarily lease and rely on customer-owned systems (such as expensive computing power from G42) for delivery, before its own self-built data centers are fully operational, severely eating into profits. Wedbush analyst Matt Bryson explicitly pointed out that data center space, not wafer supply, is currently Cerebras biggest operational constraint. To date, Cerebras has secured approximately 215 megawatts of computing capacity for 2026. Analysts believe that the faster the company's own data centers come online, the sooner it can break free from reliance on high-cost external computing power, and any signals of margin improvement or inflection points could become significant catalysts for the stock price.
Major partnerships and new product expectations: The OpenAI deal provides support, while the WSE-4 is on the horizon. Despite short-term profit pressure, Cerebras business landscape is still expanding rapidly. The company previously announced a multi-year computing contract with OpenAI valued at over $20 billion, with a capacity of 750 megawatts. Additionally, Cerebras has established a multi-year partnership with Amazon (AMZN.US) AWS to bring its high-speed AI inference technology to the cloud. Furthermore, the company has recently inked deals with CrowdStrike (CRWD.US) and AMD (AMD.US), with the latter involving the integration of its Helios architecture, planned to be offered through Cerebras Cloud later this year. Wedbush believes that the partnerships with CrowdStrike and AMD were likely not included in management's initial performance guidance, suggesting these two projects will provide further upside to results in the coming quarters. On the hardware iteration front, Cerebras will hold its annual Supernova conference on August 18. Wedbush expects this could be a prime window for the company to launch its next-generation WSE-4 processor (though management might also pre-announce related product updates during the earnings call). The WSE-4 is anticipated to deliver a performance leap over the WSE-3, offering Cerebras opportunities for price increases and margin improvement, and its potential benefits are also not fully factored into current expectations.
Institutions remain bullish: Unique architecture avoids industry bottlenecks. Facing fierce competition from giants like Nvidia (NVDA.US), AMD, and Broadcom (AVGO.US), Cerebras stock price has fallen approximately 30% since its IPO. However, ahead of the earnings report, Wedbush still firmly maintains its "Outperform" rating and a $280 price target. Analyst Bryson emphasized that Cerebras long-term logic remains unchanged: its Wafer-Scale Engine (WSE) uses SRAM instead of the industry's widely scarce and increasingly expensive HBM memory, bypasses CoWoS advanced packaging constraints, and continues to use the 5nm process rather than the more constrained 3nm node. As the second half of 2026 progresses into 2027, with the industry-wide memory supply and pricing environment continuing to deteriorate, Cerebras distinctly different architectural positioning will become increasingly valuable. The market is waiting for management to provide clearer signals in this earnings report: when new capacity will come online at scale, when contracts with OpenAI and AWS will begin contributing meaningful revenue, and whether the full-year outlook can be maintained or upgraded. These answers will determine whether this AI chip challenger can regain market confidence.
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