CoreWeave plans chip-backed debt deal as financing costs rise

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CoreWeave chip-backed debt deal

Highlights

CoreWeave prepares a several billion dollar chip-backed loan with 7%-7.5% interest to avoid higher-cost unsecured debt, aiming to finance Nvidia chip and equipment purchases.
Debt and lease liabilities surge to $66.2 billion from $51.6 billion in June, while revenue jumps 168% to $3.7 billion in Q3 and revenue backlog reaches $132.5 billion.
Net loss widens to $709 million from $110 million as Q3 interest expense nearly triples to $846 million, expected to reach up to $1.15 billion in Q4.

Funding shift amid debt market pressure

As reported by Financial Times, CoreWeave is preparing a chip-backed loan worth several billion dollars as it avoids raising more unsecured debt at current yields. Chief executive Michael Intrator told analysts on Tuesday that the company will not use the unsecured debt market to fund its business at prevailing rates and said it does not need to do so.

The loan is expected to fund purchases of Nvidia chips and other computing equipment, with an interest cost of about 7% to 7.5%, less than half the yield on CoreWeave's unsecured debt, the company said. Intrator said chip-backed loans can cover between 70% and 100% of equipment costs, depending on the customer.

CoreWeave also says it expects about $9 billion of customer pre-payments and deposits over the next three months, and plans to seek more of them. It expects to raise less than $5 billion of new capital at the parent company level through 2027, while an at-the-market share sale programme for up to 35 million shares, worth about $1.7 billion at current prices, remains unused.

Growth targets face rising borrowing burden

At the end of the third quarter, CoreWeave has $4.1 billion of cash and $2.3 billion of restricted cash on its balance sheet. Its debt and lease liabilities rise to $66.2 billion from $51.6 billion at the end of June, underscoring the financing demands of its expansion.

Revenue in the three-month period rises 168% from a year earlier to $3.7 billion, ahead of guidance of $3.45 billion to $3.6 billion. CoreWeave raises its full-year revenue forecast to $13 billion to $13.3 billion, while its revenue backlog grows to $132.5 billion from $104 billion at the end of June.

Higher borrowing costs, however, widen net loss to $709 million from $110 million a year earlier. Interest expense nearly triples to $846 million, and the company expects that figure to rise to as much as $1.15 billion in the fourth quarter.

CoreWeave says third-quarter capital expenditure totals $14.5 billion against operating cash flow of $2 billion, and it expects to spend as much as $39 billion on capex this year. Chief financial officer Nitin Agrawal says 2027 capital expenditure could stay in line with this year's level if the company builds only capacity already committed by customers, adding that it has levers to control spending depending on market conditions.

Shares are up about 5% in after-hours trading. With more than 1.7GW of active power at the end of September, CoreWeave says it is the largest of the neocloud groups, matched in AI computing capacity only by SpaceX.

As noted in our earlier article, AI data center financing risks are growing as costs rise and construction delays mount.

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