Q4 2025 Earnings Call Transcript

Welcome to Nebius Group N.V.'s Q4 2025 Earnings Conference Call. The presentation will be followed by a Q&A session. If you would like to ask a question, you can click the Ask a Question tab in the top right of the live stream player. Then just type in your question and click submit.

You can submit questions at any time during the presentation, and the Nebius Group N.V. management team will try and answer as many questions as they can during the Q&A portion of the call. I will now hand over to Neil Doshi, VP, Head of Investor Relations, to start the call.

Thank you, and welcome to Nebius Group N.V.'s fourth quarter 2025 earnings conference call. My name is Neil Doshi, Vice President of Investor Relations. Joining me today are Arkady Volozh, Founder and CEO, and our broader management team. Our remarks today will include forward-looking statements, which are based on assumptions as of today.

Actual results may differ materially as a result of various factors, including those set in today's earnings press release and in our Annual Report on Form 20-F filed with the SEC. We undertake no obligation to update any forward-looking statements. During this call, we will present both GAAP and certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release.

The earnings press release and shareholder letter are available on our website at nebius.com. I will now turn the call over to Arkady Volozh. Thanks, Neil, and thanks to everyone for joining this call. Well, 2025 was a very strong year for us.

Our team did an outstanding job scaling capacity and delivering it to customers with speed and reliability. We also made great progress in developing our own hyperscale AI cloud. But, before going into more detail around our 2025 results, I want to take a step back. It is hard to believe we only launched this company a year and a half ago.

At that time, we had built the foundation of a global AI cloud business growing at exponential scale. And we have been operating with very high intensity, building and scaling at extraordinary speed. Today, we are already one of the world's leading and most reliable AI cloud compute providers. We have attracted a diverse pool of clients who value the quality, performance, and flexibility of the platform we built from the ground up.

And we have an amazing team who every day seem to do the impossible. And I know they will continue to do so. With this foundation, we are proud of what we have achieved and confident about what we will be delivering. Now back to 2025. As I said, it was an excellent year.

We exceeded our financial targets, and we significantly exceeded our capacity plans, setting the stage for the next phase of scale. Demand remains robust, and our pipeline continues to grow substantially. We sold out of capacity in Q3 and Q4 last year, and we are already now in 2026 also sold out. Even before we bring capacity online, it is often sold out.

As a result, the average contract duration of new cloud customers grew by 50%, and the prices of GPUs did not fall even on previous generations of GPUs, as the industry may have expected. Customers are demanding more compute and increasingly sophisticated solutions to run their AI workloads. AI startups are quickly evolving to real customers with revenues from their products resonating with real customers. Their demand quickly grows from hundreds of GPUs to tens of thousands.

This is already a range the market saw from the biggest customers last year. We are seeing the same trends in the enterprise, who are utilizing AI for more and more vital business processes. Meanwhile, access to compute remains constrained. This imbalance creates a favorable environment for us as we secure and deploy more capacity into a robust demand environment.

To capture this opportunity, we are accelerating our capacity plans. Just today, we announced nine new data centers across the globe. Last quarter, we said we would secure 2.5 gigawatts of power by the end of the year. We are already at more than 2 gigawatts now in February, which is why we are raising our forecast for 2026 to more than 3 gigawatts.

And we are well on track to deliver 800 megawatts to 1 gigawatt of those as available data center capacity. Just like we spoke about last quarter. Capacity is one of two dimensions of our growth. The other is product.

Our main strategic focus is to scale our core AI cloud business, which is our multi-tenant AI cloud. We will expand our platform both organically and through targeted acquisitions that can enhance and accelerate the development of this platform. We recently launched Token Factory, and this is an example, a testament, actually, to our in-house capabilities. And we are also very excited about our recent acquisition of Tavily, which adds agentic search capabilities to our customers and also brings almost 700,000 developers to our platform.

Based on the strength in demand, we are reiterating our strong execution; we remain confident in our plans for the year ahead: our annualized run-rate revenue of $7 to $9 billion by 2026. When we announced this target three months ago, there were questions about our ability to get to this range. Over the last few months, our conviction in this range has become stronger. Why? Because we exceeded the high end of our 2025 ARR guidance and showed more than $1,200,000,000 ARR.

Because we already contracted more than 2 gigawatts of capacity, and are on track to exceed 3 gigawatts this year. Because we have already delivered all of our capacity for the Meta contract. Because we are on track to deliver the capacity for Microsoft through the course of 2026 exactly as planned. And lastly, the demand for our AI cloud continues to be strong.

Pricing is strong. We are seeing more and more customers coming into the platform and committing larger and longer contracts. Everything we build, we sell. We are in the very early days of one of the biggest industrial and technological revolutions in history.

That is what we believe. And Nebius Group N.V. is quickly becoming the AI cloud provider of choice. I want to thank again all of our employees for their dedication and hard work, as well as our shareholders for your trust and support. And we will continue to deliver.

I will now turn the call over to our CFO, Dado Alonso. Dado, please.

Thank you, Arkady. Indeed, 2025 really was a fantastic year, with great execution and delivery,

We exceeded the targets we set, outperforming our ARR guidance and achieved positive EBITDA at the group level. We also raised significant capital to fund our growth during the year. Now, let me provide some color on the results, discuss our financing plans, and then I will conclude with 2026 guidance. In Q4, we delivered group revenue of $228,000,000, representing year-over-year growth of 547%.

Revenue grew 56% from Q3 to Q4. Annualized run-rate revenue for the core business stood at $1,200,000,000 at December, exceeding the high end of our Q3 guidance range of $1,100,000,000. The results of our core AI cloud business were even more impressive. Revenue grew 830% year over year, and 63% quarter over quarter. This was driven by high utilization, strong pricing, and strong execution. As Arkady noted, we sold out our capacity once again in Q4, as demand continued to significantly exceed available capacity.

Even as we delivered such strong growth, operating leverage and spending discipline enabled us to achieve notable progress on the bottom line. Group adjusted EBITDA inflected positively in Q4, consistent with our guidance, driven by the strength in our core AI cloud business, where adjusted EBITDA margin expanded from 19% in Q3 to 24%. Turning to the balance sheet, we ended the year with $3,000,000,000 in cash and cash equivalents and generated $834,000,000 in operating cash flow in Q4, which was primarily comprised of upfront payments from our long-term agreements. These early cash flows will continue over the course of the year as we execute against these commitments, providing us with significant visibility into future cash flow.

Our cash on hand, projected operating cash flow, and strong balance sheet position us very well to fund our capacity build-out plans for 2026. I will share more detail about our capital plans in just a moment. Now I will turn to 2026 guidance. As Arkady mentioned, we remain confident in our ability to generate annualized run-rate revenue of between $7,000,000,000 and $9,000,000,000 by 2026. For the full year, we expect to achieve between $3,000,000,000 and $3,400,000,000 in revenue. Starting in Q2, we expect to begin bringing online some of the new sites we announced today, with the majority of the planned capacity to be deployed in the second half of the year.

As of early February, Meta’s capacity was fully deployed and we are now fully servicing their contract. After delivering the first tranche of our Microsoft commitment on time, we expect to continue to deliver the remaining tranches throughout the year, with the majority expected in the second half. We expect Microsoft to begin contributing to revenue at the full annual run rate in 2027 once we have deployed all of these tranches. On adjusted EBITDA, we expect group adjusted EBITDA margin to be approximately 40% for 2026. We expect EBIT to remain at a loss in 2026 as we progress against our capacity expansion plans, deploy GPUs, and invest in R&D that will significantly enhance our technology stack and our future AI product.

We believe the return on these investments are attractive and we remain committed to our medium-term EBIT target of 20% to 30%, with the potential to go higher. Starting in Q1 2026, we are updating our depreciation schedule from four years to five years, to reflect what we are seeing in the market and in our current utilization commitments. This approach is aligned with accounting best practices, and we continue to be conservative on this front.

Now,

turning to CapEx. In order to capture the large and growing opportunity that we see for the future, we plan to invest in CapEx in the range of $16,000,000,000 to $20,000,000,000 in 2026. We already have about 60% of the capital needed for this range from our balance sheet, existing operations, and commitments. We evaluate several funding options available to us on a consistent basis, and will deploy two guardrails when we look at capital alternatives. First, we will focus on raising debt relative to our business needs and will be prudent with respect to the cost of capital.

Second, we will be mindful about the shareholder dilution if we choose to issue equity. Given our balance sheet and minimal debt, we are fortunate to have many additional options to finance our growing business. For example, we are currently exploring adding corporate debt and asset-backed financing to our balance sheet. Our at-the-market equity program, which we have not used at all to date, remains an additional alternative for opportunistic capital.

In addition, our equity stakes in ClickHouse and other businesses such as AV Wright can also be future sources of capital. We are excited about these holdings, especially as the market recognizes their significant value. As an example, it was recently reported that ClickHouse’s valuation was approximately $15,000,000,000 in the most recent funding round. So the wide array of funding options available to us allows us to fund growth in a way that is balanced, disciplined, and aligned with returns rather than committing to a single path.

In conclusion, 2025 was a year of strategic progress for Nebius Group N.V., and we executed with focus and discipline across our business, generating strong momentum as we enter 2026. In the year ahead, we will continue to scale rapidly to capture the meaningful market opportunity in this once-in-a-generation moment in our space. And with that, I will turn the call back over to Arkady Volozh.

Before we turn the call over to Q&A, I want to provide one more update. After this earnings call, Neil Doshi, our VP of Investor Relations, is moving into a new strategy function role. And we would like to thank Neil for all his great work in building out our IR function to date. And I am also extremely pleased to welcome Gili Ostolovich, who will be our new VP of Investor Relations.

Gili brings with her deep research and strategic finance experience from Goldman Sachs, UBS, and Minda.com. And we are very excited to have her onboard. With that, let us go to Q&A.

Great.

Right. We are just collecting some questions from the portal. And we will begin Q&A in just a moment. Alright.

The first question from our investors on the portal is: Nebius Group N.V. is moving quickly to both bring demand online and to build a strong foundation for future capacity. What are you seeing in the market that gives you conviction that the demand for AI will continue to justify these investments? Let us give that to Arkady.

Well, first of all, we all look around and see what is going on practically everywhere. How we change our habits in everyday private lives, what happens in our corporations, in our company, for example. How much of

now and

utilizing AI capabilities in coding. And, actually, we now see the whole industries are actually changing. Look at the recent example again, coding, or look at the movie industry, or look at the research. Whatever you do now, you do it with AI.

But, again, these are just general notions, but our conviction is mostly based on what we are seeing directly in our business. We see directly signals in all sectors of our business. First of all, in the large accounts, all large clients are talking to us, and not only to us, but the whole market about expanding, renting more capacity and more GPUs, because their AI businesses are growing. There is this ongoing, ongoing organization that actually will lead to more contracts everywhere.

But we are, as you know, much more focused on our AI cloud business. And in AI cloud, we have these two major sectors, AI startups and enterprise. And look at AI-native customers. What happened to them in 2025?

Some startups disappeared, but some of them are becoming real companies, real enterprises of the future. And they started getting traction. Their products became more and more used by their customers, and they are scaling quickly, scaling with real revenues, real demand. And we see such customers, such companies who were used to order hundreds of GPUs, thousands of GPUs.

Now they are ordering tens of thousands of GPUs. And this is actually a magnitude of what we saw in the largest consumers last year. Frontier models were ordering tens of thousands of GPUs just a year, two years ago. Now it is yesterday's startups at this level.

Again, this is real business. These are real customers of them paying real revenues. So AI traction is visible. There are a lot of customers from the sector starting with Cooco, Coosa, or Odo, Hicksville, Fodorov, Genes, Molecular, different sectors, and they all have the first structure, and they are becoming, as we speak, real companies.

Actually, it is the future enterprise. And on the other hand, there are enterprise clients who involve more, who are actually switching most of their everyday business processes to AI and generate new profits through those AI implementations. We see the growing number of such customers, growing contracts from each of such a customer, the number of GPUs is growing, the duration of the contracts is growing. As I said, the average duration for new customers grew 50% last year.

So from the signals we see from all the sectors of the market, from big clients, hyperscale labs, from AI startups becoming enterprise clients, for enterprise going AI everywhere, we see positive signals, and we just need to build more for them, more data centers, more tools. And if we could build faster and even more than we have today, we would do it. So we are building because it is three-year growth.

Right. Thank you, Arkady. Next question is from Josh Baer from Morgan Stanley who asks about our CapEx financing plans, especially now that we have $16 to $20,000,000,000 of CapEx guidance out there. How are we thinking through to meet these expectations for CapEx? Ophir?

Alright. I am Ophir Nadav, the COO and Board Member of Nebius Group N.V. Usually, I am not participating in these calls, but given the importance

of this question, most for our business and as well as to the investor community, I will take this one.

Basically,

this question has two parts. First, what is the optimal capital expenditure for our business in 2026? Second, how is this CapEx going to be financed? And, obviously, these questions are connected or related.

So let us start actually with the second question, or the second part. How are we going to finance the CapEx? So obviously, we will first finance it from our cash flows. We have our cash on hand.

We have cash that is generated from our core business. But most importantly, I would say, we have a significant amount of cash that we received and will continue to receive in 2026 from the favorable terms of our long-term agreements. We are talking about a significant amount, and these cash flows will actually finance the majority, actually around 60%, maybe even more, of all of our CapEx needs in 2026. So how are we going to finance the remaining amount? The rest

So

we all know we have a very healthy balance sheet. By the way, not by coincidence, because we are working very hard to have a very prudent, disciplined, healthy balance sheet. And as of today, we do not have any corporate-level debt. We do not have any asset-backed financing, even though we have multibillion-dollar revenues from long-term contracts.

We do not have any bank report. And we did not have it to date by choice.

But

moving into 2026, and as we all know, an optimal capital structure in our business should include also debt. This should obviously be changed. And we plan during 2026 to use some of the tools that I mentioned in order to move toward a more optimal capital structure.

So

having said all that, from the financing point of view, we believe that the $16 to $20,000,000,000 CapEx makes a ton of sense, and we will be able to finance it while keeping a very healthy, disciplined balance sheet. But moving to the first part, the first question, what should be our optimal CapEx for 2026? I mentioned, actually, Arkady said it time and again. Given that we are a fully vertically integrated company, our CapEx is basically divided into three parts.

Less than 10% is used for securing power. And given the importance of power to our business and given the importance of securing power for our future hyperscales, we are moving full force ahead in order to secure as much power as possible given the relatively low cost of it. And I think that on this call, it was mentioned that we already secured a significant amount of power and we will continue to do so. The second part of the CapEx: building the data center.

This is approximately 20% of the total CapEx. And we invested in building data centers. We invested this amount, and it turned out as we expected: that it became one of the best investments that we made. Why?

Because when we have data centers ready, almost ready, where we can deploy GPUs in a very short period of time, we can serve this capacity on very attractive and favorable terms. We have done so to date and we plan to do it also in the future. We see the demand. We see the interest.

We have a clear visibility on the demand for 2026 and for 2027, both from our cloud clients as well as from AI labs and hyperscalers. And we are positive that these investments, with the interest that we are getting from all these players, will play out again very beneficially for our company, as it did so in 2025. The remaining part of the CapEx is to deploy the GPUs. Again, this is a significant part of the CapEx. The beauty is that we deploy the GPUs in a short time period when we have great visibility about the demand and about the prices and about our margins.

And we are very confident. We do not view it as a very risky place to be. So having said all that, we believe that $16 to $20,000,000,000 CapEx for 2026 makes the most sense for us. First of all, it is based on our visibility on the demand for 2027. It is based on the interest that we are getting from various buyers, both in our cloud platform and the AI labs and the hyperscalers.

It will enable us to meet our $7 to $9,000,000,000 ARR in 2026. But more importantly, it will also put the foundation for our hypergrowth 2027 and beyond. But speaking about CapEx and investments, I think that it is worthwhile also to address two additional points. One is ATM. As you all know, we launched our ATM program last November.

As of today, we did not use it at all. Actually, we do not have any concrete plans to use it also in the near future. However, it is another tool in our toolbox that will enable us to use it when it will make the most sense for our business as well as our shareholders. And this is another tool that will enable us to keep a prudent, balanced, disciplined balance sheet.

And another point that I think was mentioned is obviously with non-core businesses. We are fortunate enough to have over a 25% stake in ClickHouse and our ownership in AV Wright. These non-core businesses, these stakes, are worth many billions of dollars as of today. This is great, but it is less interesting by itself.

Most importantly, we truly believe that these stakes will significantly increase in the midterm. And when they do, they will enable us to continue growing our business in a hyper-paced mode, 2027 and beyond, while using this capital and continuing to keep a very disciplined balance sheet. We are really happy with these potential capital injections for the future. There you go.

I think that gives the right overview of the CapEx needs and the ways to finance it. That was very helpful, Ophir. Thank you.

Alright. Next question comes from Alex Platt, D.A. Davidson. Can you help us bridge to not only the 800 megawatts to 1 gigawatt of connected power guidance, but now to the 3 gigawatts of contracted power guidance by year end. Andrey?

Yeah.

Thanks, Neil. For everyone. So what we can see now is we are accelerating the build-out deployment of the capacity in 2026 greatly. And we expect that the acceleration will continue in 2027 and beyond that.

So what we are doing is we are, as Arkady mentioned, doing the investments in building the foundation for 2027 and for the years beyond. We are well on track of achieving our goals that we mentioned about 2026 of this 800 megawatts to 1 gigawatt goal around year end. And we do that by launching a lot of sites with a mix of smaller and larger projects, and some of our bigger projects starting to come online in the end of this year. And in addition to that, in addition to the sites that we mentioned today, we have multiple ongoing projects, and we expect that some of these additional sites may materialize this year.

So basically, expect that the colocations will help us grow faster starting in Q2 this year and ramping throughout the year. Our own projects, which are substantial in size, will really start to ramp up in 2027 and beyond. And that relates directly to the contracted power. Great.

Thank you, Andrey.

Andrey, maybe just staying with you. Andrew Beal from ArrayTech is asking about an update on the New Jersey data center site.

Yeah. With New Jersey, we are very pleased with the progress there. We delivered the first tranche to Microsoft on time, and we are well on track to deliver the remaining commitments on time as well. We believe that our partners secured the components in the supply chain, and they are working extremely hard to get everything online.

We also have some safety margin buffer times in our projects. And while all projects can have some fluctuation, we have built our plans with a large margin of safety. And we have high confidence of executing this. Great.

Thanks, Andrey.

Alright. Looks like we have a question from Alex DeVal from Goldman Sachs. Looks like Nebius Group N.V. came in light on revenue versus consensus for Q4, but ARR was ahead of expectations. So which is the more meaningful metric and are there any timing considerations?

And then just more broadly, lumping this with the ARR question, can you help us understand the difference between ARR guidance of $7,000,000,000 to $9,000,000,000 and the revenue guide for 2026. So, Dado, maybe you can take this.

Thanks. Let me take it one by one. On the first question, of course, we were very pleased with our ARR of $1,200,000,000, which exceeded our ARR guide. Our revenue came in the middle of our guidance, which actually was what we anticipated.

Look, as we are in hypergrowth phase, ARR is the north star metric. Now, on the next question around the difference between ARR and revenue guidance, let me say that first and foremost, at Nebius Group N.V. we are really taking a prudent approach to our revenue guidance. As we communicated, for 2026, our guidance is $3,000,000,000 to $3,400,000,000 in revenue. The difference between ARR and revenue is logical.

Our revenues and ARR reflect the deployment schedule of our capacity throughout the year, with the majority of this capacity being installed in the second half of the year, as Andrey mentioned. We need also to consider that our largest enterprise partnerships are also still ramping. So the revenue guide simply reflects the ramp-up in capacity coming online.

Great.

Thank you, Dado.

Question from Alex Platt from D.A. Davidson. How should we think about your progress against the $7,000,000,000 to $9,000,000,000 of ARR guide? And are you really dependent on the large hyperscalers to get to that range? Marc, why do you not take this? Thank you, Alex. First of all, let me clarify. Our 2026 ARR target is not dependent on any new mega deals.

As we bring on our planned additional capacity, combined with the already strong pipeline and our go-to-market plans, we are very confident in our ability to deliver our 2026 ARR target. Our continued success with AI natives and the early progress we have seen with ISVs and enterprises set the foundation for capturing the market this year. Based on the traction we are experiencing and our extensive research on our total market opportunity, we are leaning into the verticals we have already laid out: healthcare and life sciences, media and entertainment, physical AI, and retail, which give us ample runway to capture share and grow our business.

While we are happy to service large strategic customers like hyperscalers, we will remain opportunistic with such large deals as we look to balance the opportunity with the long-term positioning we plan to achieve with our AI cloud.

Great. Thank you, Marc. Now let us take a question from the portal. Can you provide an update on where you stand as it pertains to the delivery schedule with Microsoft and Meta? And remind us again about how those two contracts layer in throughout the year. Maybe on the first part, we will have Andrey, and then, Dado, you can take the second part on the contract layering.

Yeah. Thanks, Neil. As I mentioned earlier, the first tranche to Microsoft was delivered according to the plan in November. And the remaining capacity is on schedule, ongoing.

All of the remaining tranches will be delivered throughout the whole 2026, and more than half of them will land during the second half of the year. About Meta, early in this month, we delivered both contracted tranches to Meta on time, and we are now fully in servicing stage. And, Dado, can you comment on the financials?

Of course. Thank you, Andrey. The deployments in Meta, as Andrey just mentioned, went live early February. As such, we expect to recognize 12 months of revenue for the first tranche and roughly 11 months for our second tranche.

As for the Microsoft deal, we expect revenue to ramp over the course of the year in line with our plans to deliver the capacity tranches, which, as Andrey mentioned also, will happen throughout the year with the majority expected in the second half. So, Microsoft will begin to deliver a full-year revenue starting in 2027. And as we execute on these commitments, we expect them to contribute positively to our medium-term EBIT margin target of 20% to 30%.

Great.

Thanks, Dado.

Another question from the portal. What drove the upside in the December 2025 ARR? And as you look into Q1, what are the demand trends that you are seeing in the market today? Marc, why do you not take this?

Certainly. The upside in December ARR came from solid execution and strong pricing and utilization. We continue to make great progress in adding new logos and expanding with existing customers. On the second point, we are seeing very strong pricing across all families of GPUs, and we are at full utilization as we continue to sell out all available capacity.

On Q1 demand, it remains extremely robust, and we are seeing the same trends that we shared in 2025 carrying into 2026. Three things that give me tremendous confidence and excitement as we enter 2026 are continued pipeline growth, positive deal trends, and the progress we are making with our vertical strategy. The pipeline creation trajectory in Q1 is on track to exceed $4,000,000,000, and as we expand our available capacity and add sales coverage, we expect it to continue to increase. In terms of deal trends, they are all moving in the right direction. Deal terms are getting longer, and average deal sizes are increasing.

In Q4, we saw nearly twice as many transactions completed for over 12 months in duration over what we succeeded with in Q3, while average selling prices increased by more than 50%. As an example, we are sold out of Hoppers, and those that are coming up for renewal, often off of short reserve agreements, are getting renewed at 12 months or longer,

while we are

actually seeing pricing nudging up. Lastly, we are focusing on customers with premium workloads and use cases, which is resulting in superior terms, including increasing those who are willing to prepay for securing future capacity.

Great. Thanks, Marc. We had another question from the portal. There are headlines of data center equipment shortages in the market. How is Nebius Group N.V. handling this situation, ensuring access to these products? And do you expect it to have any impact on your deployment? I think, Andrey, this would be for you.

Yeah. Thanks, Neil.

On

the data center delays, well, generally, building the data centers is quite a complex task. And no one can get away from all the risks. But I think we are in quite good shape of managing this risk. And as you saw today, we are well ahead on our contracted power, and we are developing nine contracted sites we announced today.

And the main idea and the main strategy is to have a portfolio of sites, so we are not dependent on any specific single data center project to achieve our guidances and deliver our plan. And it is pretty important to understand our differentiation: we are a full stack

cloud.

Allowing us to enjoy the flexibility that it provides, that we are not dependent on any site. We can move the loads in between, we can provide it from different locations. We iterate to ensure that we have enough capacity. And the second one is we already contracted the majority of our long-lead items around our own sites to ensure the capacity deployment beyond 2026 as well.

And the second part of the shortages is the memory and storage. The first important point is our largest deals with Microsoft and Meta. We were able to secure the necessary components last year for the full scope of those contracts, and we secured it in 2025, before any price increase. And for the remaining, we are confident in our supply chain to get the parts we need to continue to deliver the capacity.

Maybe sticking with you. A few of our analysts are asking, with the announced nine new sites for data centers that are going to be a mix of owned and colocations, how do you evaluate when you want to buy versus lease, and how do you expect this mix to shift longer term?

I think we discussed it quite a few times. Generally, we are focused on bringing most of our largest projects as self-developed projects. There are three main reasons. First, we get much better total cost of ownership with this.

We have much more control over the execution of the project because we have expertise and experience of building our own sites. We also can achieve greater efficiency at scale because, generally, we tailor the design specifically for what we need and for our technical requirements. But this takes time, and we use leases and partnerships to fill the gaps before we are at full speed with our own ones. So just to sum up, the preference is to develop the infrastructure ourselves.

But, again, we still need partners and leases occasionally to support the growth. Great. Thank you, Andrey.

Next question from Josh Baer at Morgan Stanley. It is really around the software stack. What are the most common software tools that your broader customer base—startups and large enterprises—are using and paying for from your AI cloud, and what proportion of your customers utilize your software and services in addition to your compute capacity? And then any color on just how much ARR comes from the software stack today?

Marc, why do you not take this?

Certainly. Thanks, Josh, for the question. As I think you know, our AI cloud is purpose-built for AI and is battle-tested with our AI customer base. At this stage, 100% of our AI cloud customers are utilizing our AI cloud software, obviously.

So we have a 100% attach rate. We are very excited, by the way, about the new products that we have launched, like Token Factory and the Aether releases, which have opened up TAM and give us an opportunity to expand into enterprise. Our new acquisition of Tavily also extends our platform capabilities by providing agentic search for AI developers, creating more routes into accounts. I should also mention that we continue to see demand for embedded storage from customers across key verticals, including physical AI, media and entertainment, and healthcare and life sciences.

As a result, we are creating solutions that are vertically specific to meet the demands of these customers. We are really in the early stages of our monetization journey, but our software and services make our platform sticky, which enables us to charge more on a relative per GPU-hour. We are exploring other monetization models including consumption-based, such as per-token pricing with Token Factory, so Josh, stay tuned for more monetization in the future.

Great. Thanks, Marc. Another question from Alex DeVal from Goldman Sachs. It is really on the 40% EBITDA margin target that we gave. What gives us confidence in that? Dado, can you take this one?

Nebius Group N.V. is scaling, and as we do, so will our margins. Sure. Thanks for the question, Alex. Let me bring the bigger picture.

Now, let us come to adjusted EBITDA margin guidance. In Q4, the group achieved adjusted EBITDA margin of 7%. And for 2026 we are expecting to reach 40%. We see a tremendous demand for our AI cloud business, and we are investing appropriately to serve this demand.

As we reported, the margin of the core AI cloud business is actually significantly higher than the group. And as we scale the AI business, most of our revenue and margin will continue to be driven by the core AI business. So we expect, of course, the other businesses to still operate at EBITDA loss in 2026, but their contribution to EBITDA will be smaller and smaller. So, the guidance of 40% adjusted EBITDA margin reflects the current expansion stage of the business.

Great.

Thank you, Dado. We have a few of our analysts, including James Kisner from WaterTower Research, asking about Tavily. What is the strategic rationale behind Tavily? How is this complementary to your existing offering? And really, is there a lot of demand for this product from your cloud customers? Roman, why do you not take this?

Yeah. Thank you for the question. I was afraid we would not come to it. It is quite an exciting event.

For us, and we are super excited to announce our first M&A deal with the acquisition of Tavily and welcome the Tavily team and Tavily customers into the Nebius Group N.V. family. Tavily is an agentic search company. They connect AI agents to the web.

And

it very much fits in our strategy to become and to be the platform where all the AI developers from startups and enterprises are building their AI applications and agents. Tavily got quite a significant progress. They already serve many Fortune 500 customers. And they have great adoption in the developer community and are loved by developers.

We will continue to evaluate potential acquisitions of companies that can deepen customer engagement, stickiness, and increase our lifetime value and strengthen our positions as a full-stack AI cloud provider. And this game is so large that we obviously will not build everything ourselves. We will be in the strategic opportunities and we will be in the strategic partnerships, moving forward looking for the companies and partners that have a great product, great developer experience, and similar to our DNA, to build a platform that will be loved by AI developers long term.

Great.

Thank you, Roman.

We have another question just on capital allocation and M&A. In terms of build versus buy, like, Nehal Chokshi is asking this from Northland. Arkady, when you are thinking about capital allocation, especially whether it is investing in capacity,

Yeah.

or doing M&A, how do you think about this?

What we are building here, we are building one of the largest platforms for AI developers to build their applications. The largest platform means two dimensions: the scale and functionality, product. And we could allocate capital between these two dimensions. We need to build scale.

That is why we need to build all these data centers and buy all those hundreds of thousands of GPUs. And we need to build the product, and we build this product both organically, internally, by our own developers. But we do not cover everything, so we go into acquisitions. And we spend some capital on acquisitions as well, to enhance our product, to get more talent, and ultimately to develop more, even faster.

And Tavily is a perfect example of such an increase. Hopefully, not the last one.

Great. Thank you, Arkady. I think we are at the top of the hour. So thank you, everyone, for joining our fourth quarter 2025 earnings call. And next quarter, Gili will be leading the earnings process. Thank you, everyone.