New Cloud Providers Challenge Hyperscaler Dominance
New cloud infrastructure providers like Nebius and CoreWeave are emerging as significant players, challenging established hyperscalers. Nebius reported 400% quarterly revenue growth and plans to spend approximately $20 billion in CapEx this year, partly to support Microsoft's needs. Analysts question the long-term viability of their business models, which currently rely heavily on a small number of large customers.
- CoreWeave was founded in 2017 as Atlantic Crypto, initially focusing on mining cryptocurrencies like Ethereum with its large inventory of GPUs. Following the 2018 crypto crash, the company pivoted in 2019 to leverage its hardware for high-performance cloud computing, specializing in GPU-intensive workloads for AI and visual effects. - The company specifically targets "AI Enterprises" (established firms integrating AI) and "AI Natives" (companies whose business is built on AI), which together accounted for 85% of its revenue in 2024. CoreWeave's key strategic partner and investor is NVIDIA, which gives it early access to the latest GPU hardware, such as the Blackwell platform. - Nebius Group was formed following the 2024 restructuring of Yandex N.V., the Dutch parent company of the Russian technology giant. Led by Yandex co-founder Arkady Volozh, Nebius retained Yandex's non-Russian assets and a team of over 1,000 employees to focus on providing AI infrastructure and services. - Nebius provides a full-stack AI infrastructure platform, offering not just GPU capacity but also software and development tools. The company has secured major contracts, including a deal with Microsoft worth up to $19.4 billion and another with Meta for $3 billion, to provide dedicated AI computing capacity. - For context, the dominant hyperscalers in the fourth quarter of 2025 were Amazon Web Services (AWS) with a 28% market share, Microsoft Azure with 21%, and Google Cloud with 14%. Together, these three companies control about 68% of the global cloud infrastructure market. - The capital expenditure of the top five hyperscalers was projected to grow from approximately $256 billion in 2024 to around $602 billion in 2026, with an estimated 75% of the 2026 spending dedicated to AI infrastructure. This massive spending highlights the capital-intensive nature of competing at scale. - Both CoreWeave and Nebius have faced analyst concerns over heavy spending and profitability. In Q3 2025, CoreWeave reported $310.5 million in net interest expense against $51.9 million in operating income. Similarly, Nebius reported a net loss of $249.6 million in Q4 2025 as its capital expenditures grew to $2.1 billion for the quarter. - CoreWeave's customer backlog, which represents future performance obligations and other committed revenue, was reported at $55.6 billion as of September 30, 2025. Meanwhile, Nebius has stated it is on track to end 2026 with an annualized revenue run-rate of $7 billion to $9 billion.
