Shares of AI chipmaker Cerebras Systems tumbled nearly 20% on Wednesday, despite the company posting stronger-than-expected first-quarter earnings in its first financial report since going public.
The sharp decline came after investors reacted negatively to the company’s outlook for lower profit margins, overshadowing its impressive revenue growth and improving financial performance.
Cerebras told investors it expects its full-year gross margin from its core business to fall between 38% and 41%, down from the 47% margin it reported in the first quarter.
The weaker margin guidance sent the stock to a new post-IPO low, bringing it close to its initial public offering price.
Following the market reaction, Cerebras CEO Andrew Feldman said investors had misunderstood the company’s guidance.
According to Feldman, the lower-margin forecast is linked to a temporary business decision rather than to weakening demand.
He explained that Cerebras plans to rent back some of its AI computing equipment from one of its largest customers while expanding its own data centre infrastructure.
During the company’s earnings call, executives said the strategy would allow Cerebras to increase computing capacity more quickly as demand for its AI services continues to grow.
However, the arrangement is expected to reduce profit margins in the short term.
The company noted that this temporary measure would help accelerate customer deployments while it continues to build and expand its own data centre network.
Despite investor concerns, Cerebras reported strong financial results for the quarter.
Revenue rose to $193 million, representing a 94% increase compared with the same period last year.
The company’s losses also narrowed significantly, with net loss improving to $14 million, down from $23.9 million a year earlier.
The results highlight continued demand for Cerebras’ artificial intelligence hardware, even as the company invests heavily in expanding its infrastructure.
Cerebras has positioned itself as one of the leading challengers to established AI chipmakers by developing processors specifically designed for large-scale artificial intelligence workloads.
The company has attracted growing attention amid the global AI boom, competing in a market dominated by firms supplying advanced computing power for generative AI applications.
While Wednesday’s sell-off reflected investor concerns over near-term profitability, company executives maintain that the temporary impact on margins is part of a broader strategy to support long-term growth and expand computing capacity to meet future AI demand.
