CoreWeave Turns to Customer Prepayments and Shorter Contracts to Fund AI Growth

CoreWeave is changing how it funds AI growth, using customer prepayments, contract-backed loans, and shorter-term deals, according to its third-quarter earnings reported Tuesday. The neocloud, which rents computing power for AI, posted $3.66 billion in revenue, up 168% from a year earlier, alongside a $709 million net loss and $846 million in quarterly interest expense. CEO Michael Intrator said the company will not use the unsecured debt market at current yields and does not need to.

Customer-backed financing

CoreWeave plans to rely on loans backed by specific customer contracts, drawing funds as needed to finance most of the infrastructure still required to deliver its $132.5 billion backlog. It expects about $9 billion in customer prepayments and deposits over the next three months, including more than $3 billion tied to new customer contracts for capacity it has already built, which requires no additional hardware spending. Rivals Nebius and IREN have also relied on hefty Microsoft prepayments to pay for computing capacity, signaling that the industry is moving toward asking Big Tech to pay up for buildouts.

Pricing and contract strategy

CoreWeave is also signing more shorter-term contracts that can command much higher prices. It raised prices across its offerings by about 25% in July and by another 10% later in the quarter, and Intrator said prices are still climbing this quarter in a way that more than offsets cost increases. The company is allocating more capacity to short-term opportunities where pricing justifies it, selling capacity at more than $40 million per megawatt annually, while pricing for new infrastructure on four- and five-year contracts is moving to $20 million to $25 million per megawatt.

Investor reaction and risks

In August, CoreWeave closed a $2.6 billion loan known as DDTL 5.5, its first designed specifically for shorter-term customer contracts, letting it borrow in installments as needed. While short-term deals let it charge higher prices and change them more frequently, lenders give more weight to longer-term contracts because they value predictable cash flow and consistency to repay the loan. Wall Street reacted positively to the earnings, but bond investors are less sanguine; last month, yields on some company bonds hit above 15%, highlighting concerns about debt needed to fund data center buildouts before those investments see a return.

Sources: TechCrunch