Episode Details

Cerebras Systems (CBRS) Q2 2026 — Second quarter 2026 (quarter ended June 30; the Item 2.02 8-K cleared EDGAR at 16:09 ET Wednesday August 12, nine minutes AFTER the close - so the reaction is Thursday August 13, down 11.9 pct to USD231.01, then USD218.98 on August 14.) The release led with core revenue of USD209.9M, up 103 pct, and a core net loss of only USD6.9M. The 10-Q income statement says revenue was USD180.1M and the net loss was USD450.5M, or USD2.98 a share. Both are correct. The largest item between them is USD44.3M of stock Cerebras granted to its own customers, which GAAP charges AGAINST revenue and core adds back. We rate CBRS AVOID, 3/5, fair value USD91. THE CALL: AVOID (3/5, MEDIUM - A REAL BUSINESS, AT A PRICE THAT NEEDS A DECADE TO GO RIGHT) — base-case value ~$91.00 vs ~$218.98 today. KEY METRICS: - CALL: AVOID, 3/5. Fair value USD91 against the USD218.98 close, -58 pct. A probability-weighted scenario DCF at a 12.5 pct cost of capital: bear USD29 at 30 pct, base USD70 at 45 pct, bull USD204 at 25 pct. The close is 1.07x our BULL case. - THE ANGLE - THE ADD-BACK IS THE GROWTH: GAAP revenue USD180.1M, core revenue USD209.9M. The largest item in the bridge is USD44.3M of customer-warrant amortisation, stock granted to Cerebras customers, which GAAP charges AGAINST revenue and core adds back. - BEAT OR MISS - BOTH WERE PUBLISHED: one vendor showed USD209.9M against a USD190.6M estimate, a 10 pct BEAT. Benzinga showed USD180.1M against USD194.2M, a 7.3 pct MISS. The bar was core: at the Q1 print Cerebras guided Q2 core revenue to about USD194.0M. - THE SIGN FLIP: GAAP hardware revenue FELL 23 pct to USD54.1M from USD70.3M. Core hardware revenue ROSE 17 pct to USD82.1M, because USD28.0M of the warrant charge sits there. GAAP hardware gross profit was USD978 THOUSAND, a 1.8 pct margin against 33.6 pct. - SEQUENTIAL: GAAP revenue went BACKWARDS, USD193.4M in Q1 to USD180.1M in Q2, -6.9 pct, while core went USD191.3M to USD209.9M, +9.7 pct. GAAP gross margin fell from 45 pct to 14.2 pct. GAAP net loss USD450.5M, minus USD2.98 a share; core net loss USD6.9M. - STILL TO COME: USD1.13B of customer-warrant assets are charged against reported revenue through October 2031, which is 128 pct of the whole FY2026 core revenue guide. Three customers were 34, 32 and 10 pct of Q2 revenue, and two are 76 pct of receivables. - CASH AND BACKLOG: first-half operating cash flow minus USD47.5M and capex USD548.9M, so free cash flow of minus USD596.4M, a capital spend of 1.47x revenue. Liquidity USD8.6B. RPO USD25.4B, 29x the FY2026 guide, but only 22 pct converts inside 24 months. - VALUATION: market cap USD52.0B on 237.6M shares in three classes; most feeds quote USD49.6B and miss a class. EV USD44.3B is 50.1x the FY2026 core guide and 61.5x annualised GAAP revenue. A reverse DCF needs about USD55B of revenue by 2036, 51 pct a year. - THE STREET: 7 buy, 0 hold, 0 sell, average target USD300.50 in a USD279 to USD330 range. All four dated targets post-date the print - Morgan Stanley USD279, Wedbush USD290, Mizuho USD300 cut from USD310, UBS USD330, every one on August 13. We differ. What to watch: UP: GAAP gross margin recovers toward the 45 pct printed in the March quarter, capital spending falls below one dollar per dollar of revenue, or any single customer drops below 20 pct of the top line. DOWN: core gross margin lands at the bottom of the 38 to 40 pct guided for Q3 while the capacity build holds, which moves the base case toward the bear case at USD29. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision. Learn investing free in the Charged Alpha app: https://chargedalpha.com/app?source=youtube&ref=video Educational only. Not financial advice.