RETO

Nebius Group (NASDAQ:NBIS) stock has sold off this month, and the trend continued last week after Democrats won in the midterm elections. It dropped to a low of $113.7 on Thursday, its lowest level since April and 62% below the year-to-date high. This sell-off will be put to the test as it publishes its financial results later this week.

Nebius Group to Publish Earnings Amid Customer Risks

Nebius, one of the world’s leading neocloud companies, faces some potential risks. One is that Meta Platforms (NASDAQ:META), one of its biggest clients, is considering leasing out its spare computing capacity, a move that would turn it into a neocloud competitor.

Microsoft (NASDAQ:MSFT), another large client, is reassessing its relationships with neoclouds, citing higher costs and project delays. The company is stepping away from deals it deems risky and deliberating whether to sign new deals.

Such a move means that, one of the biggest clients for data center companies is walking away from an industry it helped create. It may also fail to renew some of its contracts with these companies.

Against this backdrop, Nebius will publish its financial results on Thursday. On the positive side, analysts expect third-quarter revenue to have surged as the company began delivering capacity to clients. The consensus estimate is $905 million, up 520% from a year earlier. For the full year, analysts see revenue soaring to $3.35 billion, up from $529 million last year.

The challenge, however, will be on its profitability and balance sheet. It raised over $2 billion by selling shares in the second quarter, and likely did the same in Q3. As a result, its outstanding shares have jumped to 238 million from 202 million last year.

Nebius Stock to Have a Big Move After Earnings

Nebius is likely to make a big move after earnings. After its last report, the stock jumped more than 34% when management said demand was so strong that it could sell out its 2027 capacity today.

The options market shows implied volatility has jumped to 188%, well above the historical volatility of 102.32%. Most call open interest sits at the $135 strike, while puts are concentrated at $130, close to where the stock trades today. Based on its past performance, the shares could move above or below these levels.

The daily chart shows that the NBIS stock has fallen sharply this year and has settled along the 61.8% Fibonacci Retracement level. It has also slumped below the 50-day and 100-day moving averages and the key support level of $145.3, its lowest level on July 29.

The downward trend may continue, possibly to the psychological level of $100. On the other hand, the stock may rebound towards the resistance of $145.