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2026-06-30

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2026

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________

Commission file number 001-43284

Cerebras Systems Inc.
(Exact name of registrant as specified in its charter)

Delaware
81-2256092

(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)

1237 E. Arques Avenue
Sunnyvale , California
94085

(Address of principal executive offices) (Zip Code)
( 650 ) 933-4980

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A common stock, $0.00001 par value per share
CBRS
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐
Accelerated filer ☐

Non-accelerated filer
☒
Smaller reporting company ☐

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 17, 2026, the registrant had outstanding 92,130,188 shares of Class A common stock, 130,720,379 shares of Class B common stock, and 3,682,000 shares of Class N common stock, each with a par value of $0.00001 per share.
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TABLE OF CONTENTS

Page

Note Regarding Forward-Looking Statements
3

Part I—Financial Information
5

Item 1. Financial Statements (Unaudited)
5

Condensed Consolidated Balance Sheets
5

Condensed Consolidated Statements of Operations
6

Condensed Consolidated Statements of Comprehensive Loss
7

Condensed Consolidated Statements of Redeemable Con vertible Preferred Stock and Stockholders’ Equity
8

Condensed Consolidated Statements of Cash Flows
9

Notes to the Condensed Consolidated Financial Statements
11

Item 2. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations
26

Item 3. Quantitative and Qualitative Disclosures About Market Risk
38

Item 4. Controls and Procedures
39

Part II—Other Information
41

Item 1. Legal Proceedings
41

Item 1A. Risk Factors
41

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
89

Item 3. Defaults Upon Senior Securities
90

Item 4. Mine Safety Disclosures
90

Item 5. Other Information
90

Item 6. Exhibits
92

Signatures
93

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NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth, and our objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “goal,” “objective,” “seeks,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
• our future financial performance, including our expectations regarding our revenue, cash flows, expenses, gross margins, and other results of operations;
• our ability to acquire new customers and grow our customer base;
• our ability to successfully retain existing customers, including OpenAI OpCo, LLC (“OpenAI”), Group 42 Holding Ltd (together with its affiliates, “G42”), Mohamed bin Zayed University of Artificial Intelligence (“MBZUAI”), Amazon Web Services (“AWS”), and other significant customers, and expand sales within our existing customer base;
• our expectations with respect to the performance of our offerings;
• our ability to procure and finance data center capacity in geographies and on the timelines we desire on commercially reasonable terms;
• our ability to successfully maintain our relationships with our third-party suppliers and manufacturers;
• launching new offerings, adding new product capabilities, and our technology and product roadmap;
• future investments in developing and enhancing our business;
• our expectations regarding our ability to expand;
• design, manufacturing, or product defects;
• our ability to effectively manage our growth;
• investments in our business, our anticipated capital expenditures, and our estimates regarding our capital requirements;
• economic and industry trends, projected growth, or trend analysis, particularly as it relates to artificial intelligence (“AI”) compute;
• investments in our sales and marketing efforts;
• our ability to compete effectively with existing competitors and new market entrants;
• our reliance on our senior management team and our ability to identify, recruit, and retain skilled personnel;
• our ability to obtain, maintain, protect, and enforce our intellectual property rights and any costs associated therewith;
• our ability to comply with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;
• economic trends and other macroeconomic factors, such as tariffs, the cost of power, fluctuating interest rates and rising inflation;
• the impact of geopolitical changes or tensions, political conflicts, and other global financial, economic, and political events and wars on our industry, customers, business, financial condition, results of operations, and prospects and any global pandemics or health crises;
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• our expected use of net proceeds from our initial public offering (“IPO”); and
• other risks and uncertainties described in this Quarterly Report on Form 10-Q, including those under the section titled “Risk Factors.”
We caution you that the foregoing list does not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations, estimates, forecasts, and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.
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PART I — FINANCIAL INFORMATION

Item 1.        Financial Statements (Unaudited)

CEREBRAS SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except per share and share amounts)

March 31, 2026 December 31, 2025
ASSETS
Current assets:
Cash and cash equivalents
$ 1,716,016   $ 701,706  
Restricted cash
1,029,098   228,672  
Investments
515,605   406,531  
Accounts receivable, net
62,631   50,423  
Inventories
89,040   63,626  

Customer warrants 90,701   60,906  
Prepaid expenses and other current assets
77,870   31,782  
Total current assets
3,580,961   1,543,646  
Property and equipment, net
572,439   437,396  
Customer warrants, net of current portion 425,355   91,447  
Operating lease right-of-use assets
353,303   248,950  
Other non-current assets
16,320   4,598  
Total assets
$ 4,948,378   $ 2,326,037  

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT

Current liabilities:
Accounts payable
$ 50,336   $ 48,630  
Deferred revenue
149,918   131,049  
Operating lease liability 66,218   45,865  
Customer deposits
368,426   354,460  

Working capital loan
621,306   —  
Accrued and other current liabilities
171,042   139,536  
Total current liabilities
1,427,246   719,540  
Deferred revenue, net of current portion 94,344   35,847  
Operating lease liability, net of current portion
312,474   215,957  

Working capital loan, net of current portion 361,617   —  

Total liabilities
2,195,681   971,344  

Commitments and contingencies (Note 16)

Redeemable convertible preferred stock, $ 0.00001 par value per share: 124,652,775 shares and 113,258,719 shares authorized, at March 31, 2026 and December 31, 2025, respectively; 124,652,775 and 113,258,716 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively
2,947,379   1,933,348  

Stockholders’ deficit
Class A common stock, $ 0.00001 par value; 287,000,000 and 271,800,000 shares authorized at March 31, 2026 and December 31, 2025, respectively; 58,991,587 and 57,907,093 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively
1 1

Class N common stock, $ 0.00001 par value; 40,000,000 and 37,100,000 shares authorized at March 31, 2026 and December 31, 2025, respectively; 2,026,025 and nil shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively
—   —  
Treasury stock, at cost, 889,890 shares as of March 31, 2026 and December 31, 2025
( 21,456 ) ( 21,456 )
Additional paid-in capital
742,713   346,829  
Accumulated other comprehensive income
3,396   1,301  
Accumulated deficit
( 919,336 ) ( 905,330 )
Total stockholders’ deficit
( 194,682 ) ( 578,655 )
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit
$ 4,948,378   $ 2,326,037  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CEREBRAS SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)

Three Months Ended March 31,
2026 2025
Revenue
Hardware
$ 110,593   $ 69,674  
Cloud and other services
82,813   29,838  
Total revenue
193,406   99,512  
Cost of revenue

Hardware
64,931   48,410  
Cloud and other services
42,299   9,498  
Total cost of revenue
107,230   57,908  
Gross profit
86,176   41,604  
Operating expenses
Research and development
75,495   52,751  
Sales and marketing
14,701   10,326  
General and administrative
11,017   6,997  
Total operating expenses
101,213   70,074  
Loss from operations
( 15,037 ) ( 28,470 )
Other income, net
2,528   6,286  
Loss before income taxes
( 12,509 ) ( 22,184 )
Income tax expense
1,497   1,683  
Net loss
$ ( 14,006 ) $ ( 23,867 )

Net loss per share, basic and diluted
$ ( 0.22 ) $ ( 0.46 )

Weighted average shares outstanding, basic and diluted
62,806   52,003  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CEREBRAS SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)
(in thousands)

Three Months Ended March 31,
2026 2025
Net loss
$ ( 14,006 ) $ ( 23,867 )
Change in foreign currency translation adjustments, net of tax
911   180  
Available-for-sale investments:
Change in net unrealized gain (loss) on debt securities, net of tax
1,184   ( 72 )
Comprehensive loss
$ ( 11,911 ) $ ( 23,759 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CEREBRAS SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
(unaudited)
(in thousands)

Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Deficit
Shares Amount Shares Amount Shares Amount
Balance as of December 31, 2025
113,259   $ 1,933,348   57,907   $ 1   $ 346,829   ( 890 ) $ ( 21,456 ) $ 1,301   $ ( 905,330 ) $ ( 578,655 )
Issuance of shares of Series H redeemable convertible preferred stock, net of issuance costs
11,394   1,014,031   —  —  —  —  —  —  —  — 
Customer warrants issued —  —  —  —  365,755   —  —  —  —  365,755  

Issuance of shares of Class N common stock
—  —  2,026   —  15,019   —  —  —  —  15,019  
Class A common shares issued upon exercise of stock options
—  —  1,085   —  5,177   —  —  —  —  5,177  
Tax withholding from tender offer —  —  —  —  ( 623 ) —  —  —  —  ( 623 )
Vesting of early exercised stock options
—  —  —  —  809   —  —  —  —  809  
Stock-based compensation expense
—  —  —  —  9,418   —  —  —  —  9,418  
Conversion of stock-based liability classified awards to stock-based equity classified awards
—  —  —  —  329   —  —  —  —  329  
Foreign currency translation adjustments, net of tax
—  —  —  —  —  —  —  911   —  911  
Change in net unrealized gain on debt securities, net of tax
—  —  —  —  —  —  —  1,184   —  1,184  
Net loss
—  —  —  —  —  —  —  —  ( 14,006 ) ( 14,006 )
Balance as of March 31, 2026
124,653   $ 2,947,379   61,018   $ 1   $ 742,713   $ ( 890 ) $ ( 21,456 ) $ 3,396   $ ( 919,336 ) $ ( 194,682 )

Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Deficit
Shares Amount Shares Amount Shares Amount
Balance as of December 31, 2024
82,899   $ 850,066   53,373   $ 1   $ 176,233   ( 300 ) $ ( 88 ) $ 220   $ ( 1,143,157 ) $ ( 966,791 )
Class A common shares issued upon exercise of stock options
—  —  374   —  1,549   —  —  —  —  1,549  
Vesting of early exercised stock options
—  —  —  —  1,715   —  —  —  —  1,715  
Stock-based compensation expense
—  —  —  —  8,927   —  —  —  —  8,927  
Conversion of stock-based liability classified awards to stock-based equity classified awards
—  —  —  —  150   —  —  —  —  150  
Foreign currency translation adjustments, net of tax
—  —  —  —  —  —  —  180   —  180  
Change in net unrealized loss on debt securities, net of tax
—  —  —  —  —  —  —  ( 72 ) —  ( 72 )
Net loss
—  —  —  —  —  —  —  —  ( 23,867 ) ( 23,867 )
Balance as of March 31, 2025
82,899   $ 850,066   53,747   $ 1   $ 188,574   ( 300 ) $ ( 88 ) $ 328   $ ( 1,167,024 ) $ ( 978,209 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CEREBRAS SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

Three Months Ended March 31,

2026 2025
Cash flows from operating activities:

Net loss
$ ( 14,006 ) $ ( 23,867 )
Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:

Depreciation and amortization
18,175   3,911  
Non-cash interest expense 18,949   —  
Non-cash lease expense
15,775   2,912  
Stock-based compensation
9,593   9,154  

Provision for product warranties
4,590   4,500  
Amortization of customer warrants 2,053   —  
Other
( 959 ) ( 254 )
Changes in operating assets and liabilities:

Accounts receivable
( 12,208 ) 56,787  
Inventories
( 21,684 ) 53,752  
Prepaid expenses and other assets
( 57,603 ) 3,688  
Accounts payable
( 10,070 ) ( 5,650 )
Deferred revenue
36,769   15,055  
Customer deposits
13,966   ( 159,599 )
Other liabilities
8,995   ( 15,326 )
Net cash flows provided by (used in) operating activities
$ 12,335   $ ( 54,937 )
Cash flows from investing activities:

Purchases of property and equipment
$ ( 131,970 ) $ ( 98,244 )
Purchases of investments
( 308,801 ) ( 20,175 )
Maturities and sales of investments
204,155   61,673  
Net cash flows used in investing activities
$ ( 236,616 ) $ ( 56,746 )
Cash flows from financing activities:

Proceeds from sale of shares of Series H redeemable convertible preferred stock $ 1,014,249   $ —  
Costs incurred in connection with the sale of shares of Series H redeemable convertible preferred stock ( 218 ) —  
Proceeds from Working Capital Loan 1,004,571   —  
Proceeds from issuance of shares of Class N common stock
15,019   —  
Proceeds from exercise of stock options
5,315   1,552  

Tax withholding from tender offer
( 623 ) —  
Payments of deferred offering costs
( 207 ) —  
Net cash flows provided by financing activities
$ 2,038,106   $ 1,552  
Effect of exchange rate on cash
911   180  
Increase in cash, cash equivalents, and restricted cash
$ 1,814,736   $ ( 109,951 )
Cash, cash equivalents, and restricted cash beginning of period
930,378   581,965  
Cash, cash equivalents, and restricted cash end of period
$ 2,745,114   $ 472,014  

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Supplemental disclosures of cash flow information:

Income taxes paid (refunded) $ ( 574 ) $ 63  
Non-cash investing and financing activities:

Right-of-use assets obtained in exchange for lease obligations
$ 120,128   $ —  
Billed amounts offsetting Working Capital Loan balance $ 21,648   $ —  
Purchases of property and equipment included in accounts payable and accrued and other current liabilities
$ 36,718   $ 1,120  
Transfer of property and equipment into inventories
$ 8,443   $ —  
Transfer to property and equipment out of inventories
$ —   $ 40,458  
Unpaid deferred offering costs included in accrued and other current liabilities
$ 2,653   $ —  
Vesting of early exercised options
$ 809   $ 1,715  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 – Nature of Operations
Cerebras Systems Inc. (the “Company” or “Cerebras”) was incorporated in Delaware in April 2016. Cerebras is an artificial intelligence (“AI”) infrastructure company that designs and manufactures an AI compute platform comprised of proprietary systems and software that is delivered in standard racks for deployment in our, and our customers’, data centers up to supercomputer scale. The Company’s pioneering Wafer-Scale Engine (“WSE”), a chip encompassing an entire silicon wafer, was specifically designed to enable higher performance and speeds than GPUs for the computational demands of inference, Generative AI (“GenAI”), and other AI applications. Since its inception, Cerebras has dedicated resources to research and development activities that support its current projects and future development efforts. The Company is headquartered in Sunnyvale, California.

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information, but do not include all the information and notes required by GAAP for complete financial statements. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2025 thereto contained in the Company’s final prospectus filed with the SEC on May 14, 2026 (the “Prospectus”), pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”). The condensed consolidated balance sheet at December 31, 2025 has been derived from the audited consolidated financial statements at that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements. The significant accounting policies used in preparation of the unaudited condensed consolidated financial statements for the three months ended March 31, 2026 and 2025, are consistent with those discussed in Note 4 – Significant Accounting Policies to the audited consolidated financial statements in the Prospectus. There have been no significant changes in the Company’s significant accounting policies or critical accounting estimates since December 31, 2025 that have had a material impact on the Company’s unaudited condensed consolidated financial statements and related notes. In the opinion of management, these financial statements include all adjustments, which are of a normal recurring nature, necessary for a fair statement of the financial position, results of operations, cash flows, and the changes in equity for the periods presented. The results of operations for the three months ended March 31, 2026 shown in this report are not necessarily indicative of the results to be expected for the full year ending December 31, 2026 or any other period. Certain prior period amounts reported in the Company’s condensed consolidated financial statements and notes thereto have been reclassified to conform to the current period presentation.
Initial Public Offering
On May 15, 2026, the Company completed its initial public offering (the “IPO”), in which it issued and sold 34,500,000 shares of its Class A common stock at $ 185.00 per share, which includes the exercise in full by the underwriters of their option to purchase from the Company an additional 4,500,000 shares of Class A common stock. The Company received net proceeds of approximately $ 6.2  billion from the IPO, after deducting underwriting discounts and commissions and estimated offering expenses. Immediately prior to the completion of the IPO, all shares of the Company’s outstanding redeemable convertible preferred stock converted into 124,652,775 shares of Class B common stock on a one -for-one basis, and 60,457,570 shares of the Company’s then-outstanding Class A common stock, including shares of Class A common stock issued upon vesting and settlement of certain restricted stock units (“RSUs”) that vested upon completion of the IPO, were reclassified into an aggregate of 185,110,345 shares of Class B common stock on a one -for-one basis. Additionally, certain shares and equity awards were converted into, or amended to provide for issuance or settlement in, shares of Class A common stock instead of shares of Class B common stock.
The shares and proceeds from the IPO, the underwriters’ exercise of their option to purchase additional shares, the conversion of the Company’s redeemable convertible preferred stock, and the reclassification of the Company’s common stock are not reflected in the condensed consolidated financial statements as of and for the three months ended March 31, 2026. Refer to Note 17 – Subsequent Events for further discussion.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
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Areas of significant estimates include, but are not limited to, revenue recognition, including the determination of the standalone selling price (“SSP”) of performance obligations, significant financing components, useful life of property, plant and equipment, product warranty accruals, impairment of long-lived assets, the market value of and demand for inventory, valuation allowance on deferred income tax assets, the fair value of common stock and other assumptions used to measure stock-based compensation. The Company bases its estimates on historical experience, known trends, and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. Actual results could significantly differ from those estimates. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts, and experience. Changes in estimates are recorded prospectively in the period in which they become known.
Supplier Concentration
Certain materials used by the Company in the manufacturing of its products are available from a limited number of suppliers. Shortages could occur in these materials due to an interruption of supply or increased demand in the industry.  Three suppliers accounted for  16 %, 12 %, and 11 % of total purchases for the three months ended March 31, 2026 . Two suppliers accounte d for  11 % and 11 % of total purchases for the three months ended March 31, 2025.

Note 3 – Revenue
Disaggregation of Revenue
The Company recognizes revenue classified in hardware at a point in time, and revenue classified in cloud and other services either at a point in time or over time. Revenue by point in time and over time was as follows (in thousands):

Three Months Ended March 31,
2026 2025
Hardware revenue recognized point in time
$ 110,593   $ 69,674  
Cloud and other services revenue recognized point in time
547   614  
Cloud and other services revenue recognized over time
82,266   29,224  
Total revenue
$ 193,406   $ 99,512  

Revenue recognized during the three months ended March 31, 2026 that was included in deferred revenue as of December 31, 2025 was $ 32.3 million. Revenue recognized during the three months ended March 31, 2025 that was included in deferred revenue as of December 31, 2024 was $ 16.6 million.
During the three months ended March 31, 2026 the Company recognized a $ 2.1 million reduction in revenue related to the amortization of the customer warrant assets in the condensed consolidated statements of operations, in proportion to the amount of related revenues recognized. Refer to Note 12 – Common Stock for further discussion. The remaining balance of the customer warrant assets as of March 31, 2026 will be recorded as a reduction in revenue in the consolidated statement of operations through October 2031.
Significant Customers
Customers that each accounted for 10% or more of our total revenues were as follows:

Percentage of Total Revenues
Three Months Ended March 31,
2026 2025
Customer A (1)
63   % 24   %
Customer B (1)
11   % 64   %

_____________
(1) Customer A and Customer B are considered related parties with respect to each other as defined by ASC 850, Related Party Disclosures .

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Customers that each accounted for 10% or more of accounts receivable balances as of the periods presented are as follows:

March 31, 2026 December 31, 2025
Customer A (1)
41   % 78   %
Customer B (1)
13   % *
Customer C 32   % *

______________
(1) Customer A and Customer B are considered related parties with respect to each other as defined by ASC 850, Related Party Disclosures .
* Percentage was less than 10%
OpenAI Collaboration
In December 2025, the Company entered into a Master Relationship Agreement (the “MRA”) with OpenAI OpCo, LLC (“OpenAI”) to provide 750 MW of AI inference compute capacity that OpenAI is contractually committed to purchase (the “Committed Capacity”) and related services over a multi-year term. The MRA includes (i) a services arrangement pursuant to which the Company will provide the Committed Capacity and related services over a term of three or four years that is extendable by OpenAI to a maximum of five years in total, (ii) a secured promissory note of approximately $ 1.0  billion (the “Working Capital Loan”) funded by OpenAI in January 2026 to support the build-out of infrastructure and related capabilities required to deliver such services, and (iii) a warrant to purchase shares of the Company’s Class N common stock. Refer to Note 10 – Working Capital Loan and Note 12 – Common Stock for further discussion. The Company recognized revenue of $ 16.9 million, net of amortization of the customer warrant asset of $ 0.8 million for this arrangement for the three months ended March 31, 2026. In addition to the Committed Capacity, OpenAI has the option to purchase an additional 1.25 GW of AI inference compute capacity (the “Additional Capacity”) for deployment in tranches by the end of 2030 for up to a total of 2.0 GW.
Remaining Performance Obligation
Revenue allocated to remaining performance obligations that is unsatisfied (or partially unsatisfied), which includes deferred revenue and amounts that are expected to be invoiced and recognized as revenue in future periods, was $ 25.0  billion as of March 31, 2026. A significant amount of the balance was attributable to the Company’s obligations pursuant to the MRA with OpenAI.
The Company expects to recognize approximately 16 % of this revenue over the initial 24 months ending March 31, 2028, 45 % between months 25 and 48 , and the remaining balance recognized thereafter. However, time periods for revenue recognition may vary from the foregoing due to changes in timing of delivery at the customer’s request or otherwise.
The arrangement with OpenAI includes variable consideration related to pass-through costs that are included in the transaction price. These pass-through costs primarily relate to data centers consisting of fixed monthly data center rental costs, leasehold improvements, security and other variable monthly lease costs such as power and other utilities in connection to the delivery of the Committed Capacity. Amounts related to these pass-through costs are included in the transaction price and the remaining performance obligations for the initial 250 MW of Committed Capacity. Pass-through costs associated with Committed Capacity in excess of the initial 250 MW are excluded from remaining performance obligations because the related consideration is subject to factors outside the Company’s control which involves significant amounts that will be determined over the remaining years of the MRA. Revenue related to pass-through costs will be recognized as the underlying Committed Capacity is delivered and is reported on a gross basis.

Note 4 – Segment and Geographical Information
The Company operates as  one  reportable segment. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision maker (“CODM”), which is the Company’s Chief Executive Officer, in deciding how to allocate resources and assess performance. Net income (loss) is the Company’s primary measure of profit or loss, and all costs and expenses categories on the Company’s consolidated statements of operations, as well as stock-based compensation, depreciation and amortization expenses, are significant. The Company’s CODM reviews net income or loss on a quarterly basis to assess overall operating performance, evaluate profitability and determine resource allocation, including capital spending and operating expense priorities. Refer to Note 8 – Balance Sheet Details and Note 13 – Stock-Based Compensation for further discussion. The measure of segment assets is reported on the consolidated balance sheet as total assets.
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Revenue by geographic area is designated based upon the billing location of the customer. Revenue by geographic area was as follows (in thousands):

Three Months Ended March 31,
2026 2025
United States
$ 70,097   $ 74,926  
Europe, Middle East, and Africa
123,166   24,567  
Other
143   19  
Total revenue
$ 193,406   $ 99,512  

Property and equipment, net by geographic areas was as follows (in thousands):

March 31, 2026 December 31, 2025
United States
$ 514,324   $ 376,021  
Other
58,115   61,375  
Total property and equipment, net
$ 572,439   $ 437,396  

Note 5 – Net Loss Per Share
The Company follows the two-class method when computing net loss per ordinary share when shares are issued that meet the definition of participating securities. The two-class method determines net loss per ordinary share for each class of ordinary shares and participating securities according to dividends declared or accumulated participation rights in undistributed earnings. The Company’s participating securities include all series of its redeemable convertible preferred stock and common stock warrants as the holders of these securities are contractually entitled to participate in dividends and other distributions but not contractually required to participate in losses. As such, net loss for the periods presented was not allocated to the Company’s participating securities. The rights, including the liquidation and dividend rights, of the holders of the Company’s Class A common stock and Class N common stock are identical, except with respect to voting. As a result, the basic and diluted net loss per share for all shares of Class A common stock and Class N common stock are the same and therefore presented on a combined basis.
Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of the Company’s common stock outstanding, adjusted for outstanding shares that are subject to repurchase. Shares issuable upon exercise of certain vested warrants for Class N common stock are considered in-substance outstanding for basic net loss per share because the exercise price is nominal and the issuance of shares is considered probable; accordingly, such shares are included in the weighted-average shares outstanding for purposes of basic net loss per share. Diluted net loss per share attributable to common stockholders gives effect to all potential shares of common stock, including common stock issuable upon conversion of the Company’s redeemable convertible preferred stock, stock options, and common stock warrants to the extent these are dilutive. As of March 31, 2026, dilutive securities in the Company’s diluted net loss per share calculation do not include unvested RSUs. Vesting of these RSUs is dependent upon the satisfaction of both a service condition and a liquidity condition. The liquidity condition is satisfied upon the occurrence of a qualifying event, such as the completion of an initial public offering. As of March 31, 2026, such a qualifying event had not occurred and until it occurs, the holders of these RSUs have no rights in the Company’s undistributed earnings.
For the three months ended March 31, 2026 and 2025, the following potential common shares were excluded from the computation of diluted net loss per share because their inclusion would have been anti-dilutive (in thousands):

Three Months Ended March 31,
2026 2025
Redeemable convertible preferred stock
$ 124,653   $ 82,899  
Warrants
28,986   —  
Early exercised shares subject to repurchase
675   1,064  
Options to purchase common stock
27,220   34,595  
Total potential common stock excluded from net loss per share
$ 181,534   $ 118,558  

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Note 6 – Investments
The Company classifies its U.S. Treasury securities, which are accounted for as available-for-sale, and time deposits within Level 2 in the fair value hierarchy because it uses quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value.
The following tables summarize the Company’s investments (in thousands):

March 31, 2026

Fair Value Hierarchy
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Accrued Interest
Fair Value

U.S. Treasury securities Level 2

$ 511,580   $ 3,989   $ —   $ —   $ 515,569  
Time deposits Level 2

36   —   —   —   36  
Total

$ 511,616   $ 3,989   $ —   $ —   $ 515,605  

December 31, 2025
Fair Value Hierarchy
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Accrued Interest 
Fair Value

U.S. Treasury securities Level 2

$ 404,321   $ 2,174   $ —   $ —   $ 406,495  
Time deposits Level 2

36   —   —   —   36  
Total

$ 404,357   $ 2,174   $ —   $ —   $ 406,531  

All of the Company’s investments have a stated contractual maturity date of less than one year.

Note 7 – Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis in accordance with ASC 820, Fair Value Measurement , which establishes a framework for measuring fair value and a fair value hierarchy based on the observability of inputs. The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). As of March 31, 2026 and December 31, 2025, the Company did not hold any securities classified within Level 3 of the fair value hierarchy. The three levels of the fair value hierarchy are described below:
• Level 1 inputs are quoted prices in active markets for identical assets and liabilities;
• Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs that are supported by little or no market activity, which require management judgment or estimation.
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Assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):

Fair Value Measurements

Balance Sheet Captions
March 31, 2026
Level 1
Level 2
Total Gains (1)

Cash and cash equivalents
Money market funds $ 1,716,016   $ 1,716,016   $ —   $ —  

Restricted cash
Money market funds 1,029,098   1,029,098   —   —  

Investments

U.S. Treasury securities
515,569   —   515,569   3,989  
Time deposits
36   —   36   —  
Total Investments
$ 515,605   $ —   $ 515,605   $ 3,989  

_______________
(1) Unrealized gains from remeasurement of U.S. Treasury securities have been recognized in AOCI.

Fair Value Measurements

Balance Sheet Captions
December 31, 2025
Level 1
Level 2
Total Gains (1)

Cash and cash equivalents
Money market funds $ 598,544   $ 598,544   $ —   $ —  
U.S. Treasury securities 101,845 — 101,845 632

Restricted cash
Money market funds 224,006   224,006   —   —  

Investments

U.S. Treasury securities
406,495   —   406,495   2,374  
Time deposits
36   —   36   —  
Total Investments
$ 406,531   $ —   $ 406,531   $ 2,374  

_____________
(1) Unrealized gains from remeasurement of U.S. Treasury securities have been recognized in AOCI. Realized gains have been recognized in Other income (expense).

Note 8 – Balance Sheet Details
Inventories consisted of the following (in thousands):

March 31, 2026 December 31, 2025
Raw materials
$ 10,032   $ 15,939  
Work in progress
9,039   10,968  
Finished goods
69,969   36,719  
Total inventories
$ 89,040   $ 63,626  

As of March 31, 2026 and December 31, 2025, the Company’s inventory reserves were $ 8.4 million and $ 0.9 million, respectively.
During the three months ended March 31, 2026 and 2025, the Company recorded a charge of approximately $ 2.3  million and $ 0.9 million, respectively, to cost of revenue related to provision for excess, obsolete, and scrapped inventory, primarily related to the transition to the next generation of the Company’s product offering.
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Prepaid expenses and other current assets consisted of the following (in thousands):

March 31, 2026 December 31, 2025

Prepaid expenses $ 37,441   $ 8,196  
Unbilled receivables 28,060   16,244  
Taxes receivable
6,148   4,795  
Other receivables and current assets
6,221   2,547  
Total prepaid expenses and other current assets
$ 77,870   $ 31,782  

Property and equipment, net consisted of the following (in thousands):

March 31, 2026 December 31, 2025
Data center and computer equipment $ 292,101   $ 277,421  
Machinery and equipment 30,016   25,370  
Leasehold improvements
22,701   22,348  
Construction in progress
294,664   163,451  
Property and equipment 639,482   488,590  
Less: accumulated depreciation
( 67,043 ) ( 51,194 )
Total property and equipment, net
$ 572,439   $ 437,396  

Depreciation expense included in the consolidated statements of operations was as follows (in thousands):

Three Months Ended March 31,
2026 2025
Cost of revenue
$ 9,871   $ 1,600  
Research and development
6,660   1,141  
Sales and marketing 1,529   1,155  
General and administrative
115   14  
Total depreciation expense
$ 18,175   $ 3,911  

Accrued and other current liabilities consisted of the following (in thousands):

March 31, 2026 December 31, 2025
Accrued purchases and expenses
$ 103,929   $ 59,458  

Accrued compensation
19,057   16,611  
Sales tax payable
11,731   35,577  
Product warranty liability
10,934   9,368  
Liability related to early exercised options
4,515   5,187  
Other
20,876   13,335  
Total accrued and other current liabilities
$ 171,042   $ 139,536  

The following table shows the changes in provision for product warranty during the three months ended March 31, 2026 and 2025 (in thousands):

Three Months Ended March 31,
2026 2025
Balance at beginning of year $ 9,368   $ 17,043  
Additions during the period 4,590   4,500  
Utilization during the period ( 3,024 ) ( 12,830 )
Balance at end of the period $ 10,934   $ 8,713  

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Note 9 – Other Income, Net
Other income, net consisted of the following (in thousands):

Three Months Ended March 31,
2026 2025

Interest and dividend income
$ 22,732   $ 6,496  
Non-cash interest expense (1)
( 18,949 ) —  
Other expense ( 1,255 ) ( 210 )
Total other income, net
$ 2,528   $ 6,286  
_____________
(1) During the three months ended March 31, 2026, the Company recognized approximately $ 18.9 million of non-cash interest expense related to the significant financing component of the OpenAI arrangement. Refer to Note 10 - Working Capital Loan for further discussion.

Note 10 – Working Capital Loan
In January 2026, in connection with the MRA with OpenAI described in Note 3 – Revenue, the Company received cash proceeds of approximately $ 1.0 billion pursuant to the Working Capital Loan with OpenAI. Upon receipt, the proceeds were recorded as restricted cash. Amounts held as restricted cash are subject to contractual use restrictions and are available to fund permitted uses related to the build-out of infrastructure and related capabilities required to deliver services under the MRA.
The Company accounts for the Working Capital Loan as debt under ASC 470. The Working Capital Loan, which is a secured promissory note, bears stated interest at 6 % per annum, unless waived or deemed paid in accordance with the secured promissory note and the MRA, and matures no later than December 31, 2032, unless earlier repaid or accelerated. The Working Capital Loan is secured by a first-priority security interest in the lockbox account and the related amounts held therein.
The Working Capital Loan may be repaid in cash or, subject to the terms of the MRA and the secured promissory note, through service fees, compute capacity, hardware, other services, pass-through monthly recurring charges, applicable asset transfers, or other permitted noncash credits under the MRA. As of March 31, 2026, no cash payments had been made and $ 21.7  million of non-cash billings were credited as an offset to the outstanding loan balance.
The Working Capital Loan includes customary covenants, events of default and remedies. Upon the occurrence of certain events, including termination of the MRA for reasons other than OpenAI’s material uncured breach, outstanding principal and accrued unpaid interest may become immediately due and payable, and OpenAI may exercise remedies with respect to the collateral. As of March 31, 2026, the Company was in compliance with the terms of the secured promissory note, and no event of default had occurred.
The MRA and Working Capital Loan are evaluated together in accounting for the overall OpenAI customer arrangement. The timing of OpenAI’s funding and the expected repayment of the Working Capital Loan through service fees and other permitted noncash credits under the MRA result in a significant financing component in the MRA services arrangement. The Company recognizes interest expense for the significant financing component and records a corresponding increase to deferred revenue. The related deferred revenue, including amounts attributable to the significant financing component, is recognized as revenue as the Company satisfies its performance obligations under the MRA.
During the three months ended March 31, 2026, the Company recognized approximately $ 18.9 million of interest expense related to the significant financing component of the OpenAI arrangement that is included in other income, net line item in the unaudited condensed consolidated statement of operations and recorded a corresponding increase to deferred revenue in the unaudited condensed consolidated balance sheet.
The following table summarizes the outstanding principal balance of the Working Capital Loan as of March 31, 2026 (in thousands):

March 31, 2026
Principal amount received in January 2026 $ 1,004,571  
Less: non-cash repayments through services and other permitted credits ( 21,648 )
Principal balance outstanding as of March 31, 2026
982,923  
Less: current portion of Working Capital Loan ( 621,306 )
Long-term portion of Working Capital Loan $ 361,617  

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Note 11 – Redeemable Convertible Preferred Stock
In January 2026, the Company entered into a Series H redeemable convertible preferred stock purchase agreement with various investors to issue up to 11,394,059 shares of the Company’s Series H redeemable convertible preferred stock. The Company raised $ 1.0 billion, net of issuance costs, through issuance of 11,394,059 shares of Series H redeemable convertible preferred stock at a price of $ 89.02 per share.
As of March 31, 2026, the Company had an aggregate of 124,652,775 shares of the Company’s Series A, Series B, Series C, Series D, Series E, Series F, Series F-1, Series G, and Series H, redeemable convertible preferred stock outstanding. On May 15, 2026, immediately prior to the completion of the IPO, all outstanding shares of redeemable convertible preferred stock were converted into 124,652,775 shares of Class B common stock. Refer to Note 17 – Subsequent Events for further discussion.

Note 12 – Common Stock
Prior to the completion of the IPO and as of March 31, 2026, the Company had two classes of authorized common stock: Class A common stock and Class N common stock. The rights of holders of Class A common stock and Class N common stock were identical, except with respect to voting and conversion rights. Each holder of Class A common stock was entitled to one vote per share, and each holder of Class N common stock was entitled to no votes per share. Each share of Class N common stock automatically converted to one fully paid and nonassessable share of Class A common stock upon the occurrence of a common transfer, meaning any direct or indirect sale, exchange, redemption, assignment, distribution, gift, retirement, transfer, conveyance, or other disposition. Permitted transferees included entities under common control with or controlled by such holder of the Class N common stock or if the holder provided prior written notice to the Company electing for the transfer to not result in a conversion. Once converted into Class A common stock, the Class N common stock would not be reissued.
In March 2026, the Company amended its certificate of incorporation to increase the number of authorized shares of Class A common stock from 271,800,000 shares to 287,000,000 shares and Class N common stock from 37,100,000 shares to 40,000,000 shares, each with a par value of $ 0.00001 per share. In March 2026, the Company entered into a data center lease agreement in Canada that is expected to commence in the second quarter of 2026. Concurrent with the lease, the Company entered into a stock purchase agreement with the lessor pursuant to which the lessor purchased 168,509 shares of the Company’s Class N common stock at a purchase price of $ 89.02 per share, for an aggregate purchase price of $ 15.0  million. For additional information regarding changes to the Company’s capital structure in connection with the completion of the IPO, refer to Note 17 – Subsequent Events for further discussion.
Common Stock Warrants
In December 2025, the Company issued a warrant to G42 (as defined below) to purchase an aggregate of up to 1,857,516 shares of Class N common stock at an exercise price of $ 0.01 per share (the “G42 Warrant”). The warrant was fully vested and immediately exercisable upon issuance. The warrant is classified as an equity instrument, and the grant-date fair value was $ 82.02 per share. The G42 Warrant was exercised in full in January 2026. Refer to Note 17 - Subsequent Events, for additional information on certain warrants issued to G42 subsequent to March 31, 2026.
Concurrent with the MRA, as discussed in Note 3 – Revenue, the Company issued to OpenAI a warrant to purchase an aggregate of up to 33,445,026 shares of the Company’s Class N common stock at an exercise price of $ 0.00001 per share (the “OpenAI Warrant”). The OpenAI Warrant vests in multiple tranches upon achievement of specified milestones associated with the MRA, including funding of the Working Capital Loan, delivery of the Committed Capacity and Additional Capacity in tranches, and certain market capitalization or customer payment thresholds. As of December 31, 2025, the Company concluded that vesting of the tranches related to the Working Capital Loan, the Committed Capacity, and the tranche that vests upon the earlier of achieving specified market capitalization or customer payment thresholds under the MRA were probable of vesting, while the remaining tranches associated with the Additional Capacity were not considered probable of vesting.
Subject to certain terms and conditions, the OpenAI Warrant expires on the earlier of December 24, 2035 and five business days following the first date during which there are no binding capacity purchase commitments or contractually obligated current or future payments under the MRA. The OpenAI Warrant is classified as an equity instrument, and the grant-date fair value was $ 82.02 per share. In January 2026, the vesting condition associated with 4,459,337 shares of Class N common stock was satisfied under the OpenAI Warrant. As of March 31, 2026, none of the vested OpenAI Warrant had been exercised.
The Company has recorded customer warrant assets that total $ 516.1 million and $ 152.4 million as of March 31, 2026 and December 31, 2025, respectively. During the three months ended March 31, 2026, the Company recognized $ 2.1 million as a reduction in revenue in the condensed consolidated statements of operations in proportion to the amount of related revenues. The remaining balance of the customer warrant assets as of March 31, 2026 will be recorded as a reduction in revenue in the consolidated statement of operations through October 2031.
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Note 13 – Stock-Based Compensation
Total stock-based compensation expense for the three months ended March 31, 2026 and 2025 was as follows (in thousands):

Three Months Ended March 31,
2026 2025
Cost of revenue
$ 950   $ 326  
Research and development
5,699   5,712  
Sales and marketing
1,792   1,949  
General and administrative
1,152   1,167  
Total stock-based compensation expense
$ 9,593   $ 9,154  

Approximately $ 3.9 million and $ 1.6 million of the compensation expense recognized for the three months ended March 31, 2026 and 2025, respectively, was attributed to sales of shares of common stock by certain current and former employees of the Company to certain existing equity holders in the Company, through secondary market transactions, where the excess price paid above fair value for shares was recorded as stock-based compensation expense.
Executive Grants
In the first quarter of 2026, the Company’s board of directors approved equity awards to its co-founder executives, the Chief Executive Officer (“CEO”) and the Chief Technology Officer (“CTO”), consisting of RSUs and PRSUs.
The Company granted 743,902 RSUs to the CEO and 495,426 RSUs to the CTO. These RSUs vest subject to both service-based and liquidity-based vesting conditions. The service-based condition is satisfied ratably on a monthly basis beginning January 5, 2026 over periods of 48 to 60 months, subject to continued qualifying service. The liquidity-based vesting condition was satisfied on May 13, 2026 in connection with the IPO. The Company will recognize the aggregate grant date fair value of $ 101.6  million as stock-based compensation expense for these awards using the accelerated attribution method over the requisite service period from the date of completion of the IPO.
The Company also granted 5,700,000 PRSUs to the CEO and 3,300,000 PRSUs to the CTO. Each PRSU represents the right to receive one share of Class B common stock upon vesting. These PRSUs have service-based, market-based, and performance-based vesting conditions. The PRSUs vest in three equal tranches based on the achievement of market capitalization thresholds of $ 75.0  billion, $ 150.0  billion, and $ 250.0  billion, respectively. Vesting may occur beginning six months following the completion of the IPO, subject to continued qualifying service through the applicable vesting date. Market capitalization is determined based on the 90 -trading-day trailing average of the Company’s Class A common stock price multiplied by the number of outstanding shares of Class A common stock. Unvested PRSUs are forfeited upon termination of qualifying service, and any PRSUs that remain unvested as of the ninth anniversary of the completion of the IPO will be forfeited. In the event of a change in control, achievement of the market capitalization thresholds is determined based on the transaction price, with linear interpolation applied, as applicable. The performance-based vesting condition for the PRSUs was satisfied in connection with the IPO on May 13, 2026.
The Company calculated the grant date fair value of the PRSUs based on multiple stock price paths developed through the use of a Monte Carlo simulation. A Monte Carlo simulation also calculates a derived service period for each of the three vesting tranches, which is the measure of the expected time to achieve each market capitalization threshold. A Monte Carlo simulation requires the use of various assumptions, including the underlying stock price, volatility, and the risk-free interest rate as of the valuation date, corresponding to the length of time remaining in the performance period, and expected dividend yield. The grant date fair value of each tranche ranged from $ 45.89 to $ 72.69 per share, with an aggregate grant date fair value of $ 531.2  million. The derived service period of each tranche of the PRSUs ranged from 3.4 years to 5.9 years. The Company will recognize the aggregate stock-based compensation expense of $ 531.2  million over the derived service period of each tranche using the accelerated attribution method as long as the executives satisfy their service-based vesting conditions. If the market capitalization thresholds are met sooner than the derived service period, the Company will adjust its stock-based compensation to reflect the cumulative expense associated with the vested awards. The Company will recognize expense if the requisite service is provided, regardless of whether the market conditions are achieved. For the three months ended March 31, 2026, no stock-based compensation expense was recognized related to the PRSUs due to the performance-based vesting condition not being deemed probable as of March 31, 2026.

Note 14 – Income Taxes
The Company's effective tax rate was ( 12.0 )% and ( 7.6 )% for the three months ended March 31, 2026 and 2025, respectively.
The Company computed its provision for income taxes for the three months ended March 31, 2026 and 2025 based on a year-to-date actual effective tax rate because the forecasted annual effective tax rate was highly sensitive to fluctuations in pre-tax income and
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a reliable estimate of the annual effective tax rate could not be made. Despite experiencing pre-tax losses and maintaining a full valuation allowance on its U.S. deferred tax assets, the Company recorded income tax expense in all periods presented primarily due to the impact of foreign taxes in its international subsidiaries and current state taxes in certain U.S. jurisdictions.
The Company intends to continue maintaining a full valuation allowance on all its U.S. deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances which the Company does not anticipate in the foreseeable future. A release of valuation allowance would result in the recognition of certain deferred tax assets and a possible decrease to income tax expense in the period the release is recorded. The exact timing and amount of the valuation allowance release are subject to the accumulation of positive evidence, for example levels of profitability, that the Company is able to achieve.

Note 15 – Leases
Our lease obligations primarily consist of operating leases for our headquarters’ campus and domestic and international offices and data centers, with lease periods expiring between fiscal years 2027 and 2031.
Lease costs included in measurement of lease obligations and other information related to non-cancelable operating leases were as follows (in thousands):

Three Months Ended March 31,
2026 2025
Operating lease cost $ 23,650   $ 3,926  
Short-term lease costs (1)
17,015   8,258  
Variable lease costs 2,646   —  
Total lease costs
$ 43,311   $ 12,184  

_______________
(1) Short-term lease costs on leases with terms of over one month and less than one year.
The weighted-average remaining lease terms and discount rates were as follows:

Other information
March 31, 2026 December 31, 2025
Weighted-average remaining lease term (in years) 4.8 4.7
Weighted-average discount rate 8.5   % 8.6   %

As of March 31, 2026, future minimum lease payments of the Company’s operating lease liabilities were due as follows (in thousands):

March 31, 2026
Operating Leases
2026 (remaining 9 months)
$ 69,538  
2027
98,975  
2028
89,281  
2029
90,951  
2030
86,204  
Thereafter
25,387  
Total future lease payments
460,336  
Less: Imputed interest
( 81,644 )
Present value of operating lease liabilities
$ 378,692  

Supplemental cash flow information related to leases was as follows (in thousands):

Three Months Ended March 31,
2026 2025
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
$ 11,151   $ 4,163  
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
$ 120,128   $ —  

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Leases Not Yet Commenced
In the three months ended March 31, 2026, the Company executed non-cancelable lease agreements for additional data center capacity with lease commencement dates in 2026. As of March 31, 2026, the leases had not commenced and therefore are not reflected in the consolidated balance sheets. The Company will recognize operating lease right-of-use assets and corresponding lease liabilities at the commencement date based on the present value of lease payments over the respective lease terms. Aggregate undiscounted future minimum lease payments under these agreements total approximately $ 2.3 billion over the lease term. Refer to Note 17 - Subsequent Events, for additional information on lease agreements executed subsequent to March 31, 2026.

Note 16 – Commitments and Contingencies
The Company has entered into certain contracts to receive consulting and other services that represent unconditional purchase obligations to purchase goods or services that are enforceable and legally binding. Purchase commitments exclude agreements that are cancellable without penalty and unconditional purchase commitments with a remaining term of one year or less. As of March 31, 2026, future payments related to non-cancelable commitments under these contracts are due as follows: $ 5.4 million (remaining nine months of 2026), $ 6.2 million (2027), and $ 0.5 million (2028).
In the ordinary course of business, the Company may be subject from time to time to various proceedings, lawsuits, disputes, or claims. Although the Company cannot predict with assurance the outcome of any litigation, it does not believe there are currently any such actions that, if resolved unfavorably, would have a material impact on the Company’s financial condition, results of operations, or cash flows.

Note 17 – Subsequent Events
The Company has evaluated all transactions through June 23, 2026, the date these unaudited condensed consolidated financial statements were available to be issued, and has determined that there are no other events that would require disclosure in or adjustment to these financial statements except as discussed below.
Revolving Credit Agreement
On April 14, 2026, the Company entered into a revolving credit and guaranty agreement (the “Revolving Credit Agreement”) with Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and the lenders and letter of credit issuers party thereto. The agreement provides for an initial revolving credit facility of up to $ 250.0  million, available solely for standby letters of credit to data center landlords and developers.
Following the completion of the IPO and satisfaction of pro forma covenant compliance and other customary closing conditions on June 17, 2026 (such date, the “Phase Two Effective Date”), the facility increased to up to $ 850.0  million and may be used for general corporate purposes. Borrowings bear interest at variable rates based on a base rate or term rate plus applicable margins, and undrawn commitments are subject to commitment fees. The facility matures on April 14, 2031. The agreement includes a $ 150.0  million minimum liquidity covenant, customary covenants and events of default, and collateral terms that were updated upon the Phase Two Effective Date. Additional information regarding the Revolving Credit Agreement can be found in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”
Initial Public Offering and Changes in Capital Structure
On May 15, 2026, the Company completed the IPO and sold an aggregate of 34,500,000 shares of Class A common stock at a price to the public of $ 185.00 per share, which includes the exercise in full by the underwriters of their option to purchase from the Company an additional 4,500,000 shares of Class A common stock. The net proceeds to the Company from the initial public offering were $ 6.2 billion, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company used $ 416.0 million of the proceeds from the IPO to satisfy tax withholding and remittance obligations related to the RSUs that vested in connection with our IPO.
Following the effectiveness of the IPO registration statement, the Company filed an amended and restated certificate of incorporation, which became effective immediately prior to the closing of the IPO (the “Restated Certificate”). The Restated Certificate authorizes a total of 3,500,000,000 shares of Class A common stock, 240,000,000 shares of Class B common stock, 100,000,000 shares of Class N common stock, and 100,000,000 shares of preferred stock. Upon the filing and effectiveness of the Restated Certificate, and immediately prior to the closing of the IPO, each outstanding share of the Company’s Series A, Series B, Series C, Series D, Series E, Series F, Series F-1, Series G, and Series H redeemable convertible preferred stock and Class A common stock converted, on a one -for-one basis, into 185,110,345 shares of the Company’s Class B common stock (the conversion, the “Reclassification”). Following the completion of the IPO, the Company has three classes of outstanding common stock: Class A common stock, Class B common stock and Class N common stock. No shares of the Company’s preferred stock were issued and outstanding following the completion of the IPO.
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Certain rights of the holders of all classes of stock pursuant to the Restated Certificate are as follows:
Common Stock
The rights of the holders of Class A common stock, Class B common stock, and Class N common stock (referred to together as the “common stock”) are identical, except with respect to voting and conversion.
Voting Rights
Each holder of the Company’s Class A common stock is entitled to one vote per share, each holder of the Company’s Class B common stock is entitled to 20 votes per share, and each holder of the Company’s Class N common stock is entitled to no votes per share. The holders of the Company’s Class A common stock and Class B common stock will generally vote as a single class on all matters submitted to a vote of its stockholders, unless otherwise required by Delaware law or the Restated Certificate. Delaware law could require holders of the Company’s Class A common stock or Class B common stock, or Class N common stock to vote separately as a single class in the following circumstances:
• if the Company were to seek to amend its Restated Certificate to increase or decrease the par value of a class of its capital stock, then that class would be required to vote separately to approve the proposed amendment; and
• if the Company were to seek to amend our Restated Certificate in a manner that alters or changes the powers, preferences, or special rights of a class of its capital stock in a manner that affected its holders adversely, then that class would be required to vote separately to approve the proposed amendment.
The Restated Certificate does not provide for cumulative voting for the election of directors. As a result, the holders of a majority of shares of the Company’s Class A common stock and Class B common stock can elect all of the directors then standing for election. The Restated Certificate established a classified board of directors, to be divided into three classes with staggered three-year terms. Only one class of directors will be elected at each annual meeting of the Company’s stockholders, with the other classes continuing for the remainder of their respective three-year terms.
Conversion Rights
Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. Following the completion of the IPO and prior to the Final Conversion Date (as defined below), each share of Class B common stock will convert automatically into one share of Class A common stock upon sale or transfer, except for certain permitted transfers, as set forth in the Restated Certificate, including estate planning or other transfers among the Founders (as defined below) and their permitted entities and permitted transferees. In addition, each share of Class B common stock held by a Founder will convert automatically into one share of the Company’s Class A common stock on the earlier of (i) the death or incapacity of such Founder or (ii) the date that is six months following the date on which such Founder is no longer an employee or director of the Company (unless such Founder has rejoined the Company during such six-month period). In addition, all outstanding shares of Class B common stock will convert automatically into one share of Class A common stock on the date that is six months following the date on which no Founder is an employee or director of the Company (unless a Founder has rejoined the Company during such six-month period). We refer to the date on which such final conversion of all outstanding shares of Class B common stock pursuant to the terms of the Restated Certificate occurs as the “Final Conversion Date,” and we refer to each of Andrew D. Feldman, Sean Lie, Jean-Philippe Fricker, and Michael James as the “Founders.” Once converted into Class A common stock, the Class B common stock will not be reissued.
Each share of Class N common stock will convert automatically into one share of Class A common stock upon any transfer, whether or not for value, except for certain permitted transfers, as set forth in the Restated Certificate. Permitted transferees include entities under common control with or controlled by such holder of Class N common stock or if the holder provides prior written notice to us electing for the transfer to not result in a conversion. Once converted into Class A common stock, the Class N common stock will not be reissued.
Dividend Rights
Subject to preferences that may apply to any outstanding preferred stock, holders of the Company’s common stock are entitled to receive dividends out of legally available funds if, when, and in the amounts declared by the Company’s board of directors. However, if a dividend is paid in the form of common stock, rights to acquire common stock, or securities convertible into or exchangeable for common stock, holders of Class A, Class B, and Class N common stock will generally receive securities of their respective class, unless different treatment is approved by a majority of the outstanding shares of each class voting separately.
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Preferred Stock
The Restated Certificate also authorizes the issuance of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by the Company’s board of directors.
2026 Incentive Award Plan
In connection with the IPO, the Company’s board of directors adopted, and its stockholders approved, the 2026 Incentive Award Plan (the “2026 Plan”), which became effective on May 12, 2026.
The 2026 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), performance awards, and other stock-based awards to employees, directors, and consultants. An aggregate of 42,650,268 shares of the Company's Class A common stock were initially reserved for issuance under the 2026 Plan. The number of shares available for issuance under the 2026 Plan is subject to adjustment pursuant to the terms of the plan, including annual automatic increases beginning January 1, 2027.
Upon effectiveness of the 2026 Plan, no further awards may be granted under the Company’s 2016 Equity Incentive Plan (as amended, the “2016 Plan”), although awards previously granted under the 2016 Plan remain outstanding and continue to be governed by their existing terms.
2026 G42 Warrants
In April 2026, the Company issued a warrant to G42 to purchase an aggregate of up to 1,655,975 shares of Class N common stock at an exercise price of $ 0.01 per share (the “2026 G42 Warrant”). The warrant was fully vested and immediately exercisable upon issuance, and expired on April 15, 2026. The warrant is classified as an equity instrument, and the grant-date fair value was $ 90.23 per share. The 2026 G42 Warrant was exercised in full in April 2026.
The Company recorded a customer warrant asset of $ 149.4 million in the second quarter of 2026, all of which will be recognized as a reduction in revenue in the consolidated statement of operations in proportion to the amount of related revenues, which could occur until October 2031.
ESPP
In connection with the IPO, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2026 Employee Stock Purchase Plan (the “ESPP”), which became effective on May 12, 2026.
The option purchase price will be the lower of 85 % of the closing trading price per share of the Company’s Class A common stock as of the first date of an offering period in which a participant is enrolled or 85 % of the closing trading price per share as of the purchase date, which will occur on the last day of each purchase period within an offering period.
The maximum number of shares of the Company’s Class A common stock that will be authorized for sale under the ESPP is equal to the sum of (i) 3,554,189 shares of Class A common stock and (ii) an annual increase on the first day of each fiscal year beginning in 2027 and ending in 2036, equal to the lesser of (A) 1 % of the sum of (1) all shares of all classes of the Company’s common stock, and (2) the number of shares issuable upon the exercise of warrants to purchase shares of the Company’s common stock with an exercise price per share of $ 0.01 or less, in each case, outstanding on the last day of the immediately preceding fiscal year and (B) such smaller number of shares of Class A common stock as determined by the Company’s board of directors; provided, however, that no more than 48,870,099 shares of the Company’s Class A common stock may be issued under the ESPP. The shares reserved for issuance under the ESPP may be authorized but unissued shares, treasury shares, or reacquired shares.
Leases
In the second quarter of 2026, the Company executed non-cancelable lease agreements for additional data center capacity with lease commencement dates in 2026. The Company will recognize operating lease right-of-use assets and corresponding lease liabilities at the commencement date based on the present value of lease payments over the respective lease terms. Aggregate undiscounted future minimum lease payments under these agreements total approximately $ 1.6 billion over the lease term.
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2026 AWS Warrant
In June 2026, the Company issued a warrant to AWS Warrantholder (as defined below) to acquire up to 2,696,678 shares of Class N common stock (the “AWS Warrant Shares”) at an exercise price of $ 100.00 per AWS Warrant Share. Of these AWS Warrant Shares, 269,668 AWS Warrant Shares vested immediately upon issuance of the AWS Warrant (as defined below), and the remaining 2,427,010 AWS Warrant Shares vest in tranches upon the attainment of specified payment thresholds prior to the fifth anniversary of issuance, based on aggregate payments by Amazon (as defined below) to us pursuant to certain commercial arrangements between the parties. The AWS Warrant expires on June 19, 2033.
The Company is in the process of determining the grant-date fair value of these awards. The Company will record a customer warrant asset in the second quarter of 2026. The amortization of the customer warrant asset will be recognized as a reduction in revenue in the consolidated statements of operations in proportion to the amount of related revenues.
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Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes, and other financial information, included elsewhere in this Quarterly Report on Form 10-Q and our final prospectus (the “Prospectus”) filed with the Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the “Securities Act”), on May 14, 2026 in connection with our initial public offering (the “IPO”). In addition to our historical results of operations and financial position, this discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results to be expected for any period in the future, and results for any interim period should not be construed as an inference of what our results would be for any full year or future period.

Overview
We are building the fastest AI infrastructure in the world.
In AI, speed is critical to win. Speed improves user engagement, expands product capabilities, can lower operating costs, and opens new markets. It shortens iteration cycles for engineers, researchers, and professionals across industries, allowing them to be more productive. Speed unlocks new applications and new industries.
Our solutions are built for speed. Cerebras Inference delivers answers substantially faster than GPU-based solutions. These performance breakthroughs are the result of our core innovation: the world’s first and only commercialized wafer-scale processor.
Our customers include hyperscalers, foundation model labs, AI-native and digital native businesses, enterprises, and sovereign AI initiatives. Our customers use Cerebras solutions to run applications that demand speed, scale, and intelligence. This work includes training and serving large frontier models with near-instant responses, processing massive datasets in real time, and generating full-stack applications in a single step.
Once customers adopt fast inference, user expectations for interactivity rise, and engineering teams shift from latency optimizations to other work, making it difficult to return to slower inference.
We deliver our solutions to customers in several different ways. Organizations that require full data and infrastructure control can purchase Cerebras AI supercomputers for on-premises deployments. Customers seeking cloud flexibility can access Cerebras compute through consumption-based models on Cerebras Cloud or through partner clouds. For example, our high-speed inference services are available through partners, including AWS Marketplace, Microsoft Marketplace, IBM watsonx Model Gateway, Vercel AI Gateway, OpenRouter, and Hugging Face, enabling seamless adoption within existing workflows. Beyond providing compute infrastructure, we provide AI services to our customers to co-develop solutions to address their most complex challenges, from training state-of-the-art models to optimizing deployments for each application’s needs, and maintaining and operating their on-premises hardware.

Recent Developments
OpenAI Collaboration
In December 2025, we entered into a master relationship agreement (the “MRA”) with OpenAI OpCo, LLC (“OpenAI”), under which OpenAI committed to purchase 750MW of AI inference compute capacity and related services, with deployment expected in tranches during 2026 through 2028. OpenAI also has the option to purchase an additional 1.25GW of capacity for deployment by the end of 2030. During the three months ended March 31, 2026, we began recognizing revenue from the arrangement, and the initial tranche of the warrant issued to OpenAI vested upon the funding of a working capital loan of approximately $1.0 billion (the “Working Capital Loan”) in January 2026. Refer to Note 3 – Revenue, Note 10 – Working Capital Loan, and Note 12 – Common Stock to our unaudited condensed consolidated financial statements for additional information regarding the OpenAI collaboration, including the revenue arrangement, Working Capital Loan, and warrant, respectively. The Company has to date repaid, and expects to continue to repay, the balance using non-cash service credits.
Initial Public Offering
On May 13, 2026, our registration statement on Form S-1 (File No. 333-295145) related to the IPO was declared effective by the SEC, and our Class A common stock began trading on the Nasdaq Global Select Market on May 14, 2026. The IPO was completed on May 15, 2026. As a result, our unaudited condensed consolidated financial statements as of March 31, 2026 do not reflect the impact of the IPO. For additional information, see Note 17 – Subsequent Events to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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Components of Results of Operations
Revenue
We generate revenue primarily from hardware solutions and cloud and other services. Hardware solutions consist of sales of our AI systems and related equipment for on-premises use. Cloud and other services include our Dedicated Capacity and On-Demand cloud offerings, support and management services, and AI modeling services. Cloud and other services revenue also includes pass-through amounts for data center set-up and operation costs that we incur and bill to certain specific customers under custom arrangements with those customers. These pass-through revenues are not part of our core technology or service offerings.
Hardware Solutions
Hardware revenue consists of sales of our AI systems and other equipment that can be used for both training and inference on-premise. We recognize revenue from sales of AI systems when control of the goods transfers to the customer, which generally occurs upon shipment or delivery, depending on shipping terms or upon meeting the contractual acceptance terms. Beginning in the first quarter of 2026, we began recognizing amortization of customer warrant assets as a reduction in revenue. Refer to Note 12 - Common Stock, for additional information on common stock warrants issued to customers. This non-cash reduction in revenue negatively impacts sequential revenue growth trends in the near term.
Cloud and Other Services
Customers procure cloud capacity from us through two primary models: Dedicated Capacity and On-Demand. Dedicated Capacity contracts are generally structured as take-or-pay commitments, under which customers pay for dedicated compute capacity irrespective of utilization. We recognize revenue from sales of these cloud-based computing services, including hosted inference, over the service term, as the customer benefits from our services throughout the contract period. Beginning in the first quarter of 2026, we began recognizing revenue for pass-through data center costs due to a customer agreement. Also beginning in the first quarter of 2026, we began amortization of customer warrant assets as a reduction in revenue. Refer to Note 12 - Common Stock, for additional information on warrants issued to customers. This non-cash reduction in revenue negatively impacts sequential revenue growth trends in the near term.
Our On-Demand model includes a consumption-based “pay-as-you-go” approach for inference, allowing customers to either pay for tokens as they consume them or pre-purchase token bundles for fixed amounts that are drawn down over time as the tokens are consumed, as well as for training workloads that run for contracted periods of time. The On-Demand model allows customers to scale elastically and many customers have begun with on-demand usage and transitioned to dedicated capacity as their workloads expand.
We generate services and support revenue primarily through software support agreements that range from one to five years, as well as offering a comprehensive suite of services to manage and operate Cerebras supercomputer clusters located in our customers’ data centers. Such revenue is recognized ratably over time as the services are provided.
We also generate revenue from custom AI modeling services over time as services are provided or at a point-in-time upon completion and acceptance by the customer of contract deliverables, depending on the terms of the agreement.
As a result of the MRA with OpenAI for the delivery of the Committed Capacity, we expect our cloud and other services revenue to comprise a significantly higher percentage of total revenue in future periods. The mix of hardware and cloud and other services revenue may vary from period to period based on OpenAI’s deployment options and the manner in which they elect to have the Committed Capacity, and any Additional Capacity, delivered by us. In the near term, we expect pass-through revenue to also increase significantly as initial Committed Capacity will be deployed in our cloud. This may vary over the longer term based on the deployment options elected for future Committed Capacity.
Hardware Cost of Revenue
Cost of revenue for hardware consists primarily of the cost of materials, such as wafers processed by third-party foundries, costs associated with packaging, assembly, shipping, logistics, quality assurance, warranty cost, cost of personnel, including salaries, stock-based compensation, and employee benefits, write-down of inventories, and facilities expenses.
Cloud and Other Services Cost of Revenue
Cost of revenue for cloud-based and other support services revenue primarily consists of data center costs, depreciation or rental of equipment, cost of personnel, including salaries, stock-based compensation, and employee benefits, and facilities expenses. We expect to incur other start-up costs related to expediting the availability of cloud capacity to fulfill the significant increase in near-term demand. We also began recognizing pass-through data center costs due to our MRA with OpenAI and expect these costs to grow as we deliver more cloud capacity under the agreement.
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Gross Profit and Gross Margin
Gross profit represents revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross profit has been, and we expect will continue to be, influenced by several factors, including sales volume and pricing of our products and services, mix of revenue between hardware and cloud and other services, changes in inventory costs, including wafer yield, contract manufacturing and supplier pricing, data center costs, repair and warranty costs, cost of logistics, and personnel costs.
We expect overall gross profit will decrease in absolute dollars in the near term, driven by start-up costs related to expediting the availability of cloud capacity to fulfill the significant increase in near-term demand.

We expect gross margin to be significantly lower in the near term compared to recent prior periods and to fluctuate from period to period. These fluctuations are primarily driven by the amortization of customer warrant assets, which will reduce reported revenue in future periods. Gross margin is also expected to be adversely impacted by pass-through data center costs recorded in both revenue and cost of revenue, as well as start-up costs incurred to expedite cloud capacity to meet increased near-term demand. Because we began amortization of customer warrant assets in the first quarter of 2026, future quarterly revenue growth rates may decline from historical trends.
Operating Expenses
Research and Development Expenses
Research and development expenses primarily consist of costs incurred in performing research and development activities and include salaries, stock-based compensation, employee benefits, tape-out costs, which include layout services, mask sets, prototype components, system qualification and testing incurred before releasing new system designs into production, shipping, data center costs, depreciation and amortization, professional services fees, cloud computing, and facilities expenses. We expense research and development costs as incurred.
We also expense software development costs, including costs to develop the software component of hardware to be sold, leased, or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products.
We expect research and development expenses to increase in absolute dollar terms as we continue to build new innovations with our wafer-scale technology and to remain competitive in the dynamic AI market. We expect to have significantly higher stock-based compensation expense related to equity awards, including the Executive Grants for our CTO discussed in Note 13 - Stock-Based Compensation, for which the liquidity-based vesting condition was satisfied in connection with the IPO on May 13, 2026. The Company will begin recognizing the stock-based compensation expense for these awards in the second quarter of 2026.
Sales and Marketing Expenses
Sales and marketing expenses primarily consist of personnel costs, including salaries, commissions, stock-based compensation, employee benefits, public relations costs, tradeshow and other sales event costs, advertising, travel and entertainment costs, costs to provide prospective customers with demonstrations or trials of Cerebras Cloud, and facilities expenses.
We expect sales and marketing expenses to increase in absolute dollar terms as we grow our customer base and brand. We expect to have higher stock-based compensation expense related to equity awards for which the liquidity-based vesting condition was satisfied in connection with the IPO.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs, including salaries, stock-based compensation, employee benefits and bonuses related to corporate, finance, legal, information technology and human resource functions, professional services fees, audit and compliance expenses, software subscription costs, travel and related costs, insurance costs, depreciation and amortization, allocation of facilities and other general corporate expenses. We expect to incur additional expenses as a result of operating as a public company, including expenses to comply with the rules and regulations applicable to companies listed on a national securities exchange, expenses related to auditing, compliance, and reporting obligations pursuant to the rules and regulations of the SEC, as well as higher expenses for general and director and officer insurance, investor relations, and professional services.
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We expect general and administrative expenses to increase in absolute dollar terms as we grow the business and have more employees around the world, and incur additional expenses to operate as a public company, including expenses to comply with rules and regulations applicable to companies listed on a securities exchange, expenses related to compliance and reporting obligations in various jurisdictions, and professional services. We expect to have significantly higher stock-based compensation expense related to equity awards, including the Executive Grants for our CEO as discussed in Note 13 - Stock-Based Compensation, for which the liquidity-based vesting condition was satisfied in connection with the IPO on May 13, 2026. The Company will begin recognizing the stock-based compensation expense for these awards in the second quarter of 2026.
Other Income, Net
Other income, net consists primarily of interest income, dividend income, and interest expense on the Working Capital Loan.
Income Tax Expense
Income tax expense consists of U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred tax assets will not be realized. Our effective tax rate is affected by tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as non-deductible expenses, such as stock-based compensation, and changes in our valuation allowance.

Results of Operations
The following tables set forth selected consolidated statements of operations data for each of the periods indicated:

Three Months Ended March 31,
2026 2025
(in thousands)
Revenue:
Hardware
$ 110,593  $ 69,674 
Cloud and other services
82,813  29,838 
Total revenue
193,406  99,512 
Cost of revenue (1) :

Hardware
64,931  48,410 
Cloud and other services
42,299  9,498 
Total cost of revenue
107,230  57,908 
Gross profit
86,176  41,604 
Operating expenses:
Research and development (1)
75,495  52,751 
Sales and marketing (1)
14,701  10,326 
General and administrative (1)
11,017  6,997 
Total operating expenses
101,213  70,074 
Loss from operations
(15,037) (28,470)
Other income, net
2,528  6,286 
Loss before income tax
(12,509) (22,184)
Income tax expense
1,497  1,683 
Net loss
$ (14,006) $ (23,867)

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_______________
(1) Includes stock-based compensation expense as follows:

Three Months Ended March 31,
2026 2025
(in thousands)
Cost of revenue
$ 950  $ 326 
Research and development
5,699  5,712 
Sales and marketing
1,792  1,949 
General and administrative
1,152  1,167 
Total stock-based compensation expense
$ 9,593  $ 9,154 

Stock-based compensation expense included $3.9 million and $1.6 million for the three months ended March 31, 2026 and 2025, respectively, related to secondary transactions in each period. Refer to Note 13 – Stock-Based Compensation to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further discussion.
Pursuant to our 2016 Equity Incentive Plan (as amended, the “2016 Plan”), our restricted stock units (“RSUs”) vest upon the satisfaction of both service- and liquidity-based vesting conditions. The service-based vesting condition for these awards is generally satisfied by rendering continuous service through the applicable vesting period which is generally four years. The liquidity-based vesting condition was satisfied in connection with the IPO. Since the liquidity-based vesting condition had not been satisfied as of March 31, 2026, we had not recorded any stock-based compensation expense for our RSUs at that date.
For such RSUs, we recognize stock-based compensation expense using the accelerated attribution method over the requisite service period if it is probable that the performance conditions will be achieved. For the three months ended March 31, 2026 and 2025, no stock-based compensation expense has been recognized for RSUs as the liquidity events, as described above, were deemed not probable. As of March 31, 2026, 3,921,423 RSUs had met the service-based vesting condition but not the liquidity-based vesting condition. If a liquidity event had occurred as of March 31, 2026, we would have recognized stock-based compensation expense of $222.1 million, and unrecognized stock-based compensation expense related to RSUs for which the service-based vesting condition had not been satisfied as of March 31, 2026 would have been $769.3 million, which would have been recognized over a weighted-average requisite service period of 2.8 years. In the three months ending June 30, 2026, we expect to record a cumulative stock-based compensation expense of $366.8 million, determined using the grant date fair values of the RSUs, for which we expect the service-based vesting condition will be satisfied as of June 30, 2026 and for which the liquidity-based vesting condition was satisfied in connection with the IPO. We will record the remaining stock-based compensation expense related to RSUs using the accelerated attribution method over the remaining requisite service period now that the liquidity-based vesting condition is satisfied.
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The following table sets forth selected consolidated statements of operations data expressed as a percentage of revenue for each of the periods indicated:

Three Months Ended March 31,
2026 2025
(as a percentage of revenue)
Revenue:
Hardware
57.2  % 70.0  %
Cloud and other services
42.8  30.0 
Total revenue
100.0  100.0 
Cost of revenue:
Hardware
33.6  48.6 
Cloud and other services
21.9  9.5 
Total cost of revenue
55.4  58.2 
Gross profit
44.6  41.8 
Operating expenses:
Research and development
39.0  53.0 
Sales and marketing
7.6  10.4 
General and administrative
5.7  7.0 
Total operating expenses
52.3  70.4 
Loss from operations
(7.8) (28.6)
Other income, net
1.3  6.3 
Loss before income tax
(6.5) (22.3)
Income tax expense
0.8  1.7 
Net loss
(7.2) % (24.0) %

Comparison of the Three Months Ended March 31, 2026 and 2025
Revenue

Three Months Ended March 31,
2026 2025 $ Change % Change
(in thousands, except percentages)
Hardware
$ 110,593  $ 69,674  $ 40,919  59  %
Cloud and other services
82,813  29,838 52,975  178  %
Total revenue
$ 193,406  $ 99,512  $ 93,894  94  %

Total revenue for the three months ended March 31, 2026 increased by $93.9 million, or 94%, compared to the same period in 2025.
Hardware revenue increased by $40.9 million for the three months ended March 31, 2026 compared to the same period in 2025. The increase in hardware revenue was driven by demand for on-premises hardware solutions. This was net of $1.0 million in amortization of customer warrant assets.
Cloud and other services revenue increased by $53.0 million for the three months ended March 31, 2026 compared to the same period in 2025. The increase was primarily due to an increase of $49.9 million in non-pass-through related cloud and other services revenue due to increased demand for our cloud inference services, higher support and other services revenue primarily due to our growing installed base of customer hardware, and $4.1 million in pass-through data center revenues. These were partially offset by $1.1 million in amortization of customer warrant assets.
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Cost of Revenue and Gross Profit

Three Months Ended March 31,
2026 2025 $ Change % Change
(in thousands, except percentages)
Hardware
$ 64,931  $ 48,410  $ 16,521  34  %
Cloud and other services
42,299  9,498  32,801  345  %
Total cost of revenue
$ 107,230  $ 57,908  $ 49,322  85  %

Three Months Ended March 31,
2026 2025 $ Change % Change
(in thousands, except percentages)
Gross profit
$ 86,176  $ 41,604  $ 44,572  107  %
Gross margin
44.6  % 41.8  %

Cost of revenue for the three months ended March 31, 2026 increased by $49.3 million, or 85%, compared to the same period in 2025.
Cost of revenue for hardware increased by $16.5 million for the three months ended March 31, 2026 compared to the same period in 2025. The increase was in line with higher hardware sales during the period, which resulted in higher materials costs, partially offset by lower return-related rework costs.
Cost of revenue for cloud and other services increased by $32.8 million for the three months ended March 31, 2026 compared to the same period in 2025. The increase was primarily due to a $28.8 million increase in data center costs (including depreciation) associated with additional capacity being deployed to deliver our cloud inference service, and a $4.0 million increase in pass-through data center costs driven by the deployment of new data centers.
Gross profit for the three months ended March 31, 2026 was $86.2 million, an increase of $44.6 million compared to $41.6 million in the same period in 2025. Gross margin for the three months ended March 31, 2026 increased to 44.6% from 41.8% compared to the same period in 2025. The increase was primarily driven by higher hardware gross margin, resulting from lower material costs and improved manufacturing efficiency. In addition, gross margin from cloud and other services was higher due to higher pricing and improved capacity utilization. These increases were partially offset by the impacts of amortization of customer warrant assets, and lower-margin pass-through data center revenues.
Operating Expenses
Research and Development

Three Months Ended March 31,
2026 2025 $ Change % Change
(in thousands, except percentages)
Research and development
$ 75,495  $ 52,751  $ 22,744  43  %
Percentage of revenue
39  % 53  %

Research and development expenses for the three months ended March 31, 2026 increased by $22.7 million, or 43%, compared to the same period in 2025. The increase in research and development expenses was primarily due to a $8.7 million increase in new product development and related research expenses that includes prototype and shipping costs, a $6.2 million increase in data center rent costs, a $6.1 million increase in depreciation and amortization expenses, a $5.3 million increase in headcount-related costs, a $1.5 million increase in shipping costs, and a $1.4 million increase in other one-time expenses. These were partially offset by a $5.3 million decrease in equipment and software purchases.
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Sales and Marketing

Three Months Ended March 31,
2026 2025 $ Change % Change
(in thousands, except percentages)
Sales and marketing
$ 14,701  $ 10,326  $ 4,375  42  %
Percentage of revenue
8  % 10  %

Sales and marketing expenses for the three months ended March 31, 2026 increased by $4.4 million, or 42%, compared to the same period in 2025. The increase in sales and marketing expenses was primarily due to a $4.1 million increase in headcount-related costs including commissions and an increase in other go-to-market activities.
General and Administrative

Three Months Ended March 31,
2026 2025 $ Change % Change
(in thousands, except percentages)
General and administrative
$ 11,017  $ 6,997  $ 4,020  57  %
Percentage of revenue
6  % 7  %

General and administrative expenses for the three months ended March 31, 2026 increased by $4.0 million, or 57%, compared to the same period in 2025. The increase in general and administrative expenses was primarily due to a $1.7 million increase in headcount-related costs and a $2.0 million in increase in consulting and software subscription costs associated with the Company’s preparation to operate as a public company.
Other Income, Net

Three Months Ended March 31,
2026 2025 $ Change % Change
(in thousands, except percentages)
Other income, net
$ 2,528  $ 6,286  $ (3,758) (60) %

Other income, net for the three months ended March 31, 2026 decreased by $3.8 million, or 60%, compared to the same period in 2025. The decrease in other income, net was primarily due to $18.9 million in non-cash interest expense on the Working Capital Loan under the agreement with OpenAI, and a $1.4 million loss due to foreign currency transaction adjustments. The decrease was partially offset by $16.2 million in higher interest and dividend income due to higher balances of cash, cash equivalents, and investments.
Income Tax Expense

Three Months Ended March 31,
2026 2025 $ Change % Change
(in thousands, except percentages)
Income tax expense
$ 1,497  $ 1,683  $ (186) (11) %

Income tax expense for the three months ended March 31, 2026 decreased compared to the same period in 2025. The decrease was primarily due to a decrease in current state tax expense of $0.7 million offset by an increase in non-U.S. current and deferred tax expense of $0.5 million.
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Non-GAAP Financial Measures
We use certain non-GAAP financial measures to supplement the performance measures in our unaudited condensed consolidated financial statements, which are presented in accordance with GAAP. These non-GAAP financial measures include Core gross profit, Core operating loss, and Core net loss. We use these non-GAAP financial measures for financial and operational decision-making and as a means to assist us in evaluating period-to-period comparisons. By excluding certain items that may not be indicative of our recurring core operating results, we believe that Core gross profit, Core operating loss, and Core net loss provide meaningful supplemental information regarding our performance. Accordingly, we believe these non-GAAP financial measures are useful to investors and others because they allow for additional information with respect to financial measures used by management in its financial and operational decision-making and they may be used by our institutional investors and the analyst community to help them analyze the health of our business. However, there are a number of limitations related to the use of non-GAAP financial measures, and these non-GAAP measures should be considered in addition to, not as a substitute for or in isolation from, our financial results prepared in accordance with GAAP. Other companies, including companies in our industry, may calculate these non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.
Core Gross Profit
We define Core gross profit as gross profit presented in accordance with GAAP, adjusted to exclude pass-through revenue and related data center costs as these are not part of our core technology or service offerings. In addition, we exclude non-cash amortization of customer warrant assets, and stock-based compensation expense. We present Core gross profit because it provides investors and other users of our financial information with additional information to evaluate the value of our hardware delivery to customers, whether through direct hardware sales or cloud services. This measure also provides an additional basis for comparing business performance across companies and periods by excluding the effects of items that may vary for reasons unrelated to core technology and service offerings and did not occur in prior periods.

A reconciliation of our GAAP gross profit, the most directly comparable GAAP financial measure, to core gross profit is presented below (in thousands):

Three Months Ended March 31,
2026 2025
GAAP gross profit
$ 86,176  $ 41,604 
Less: Pass-through revenue (1)
(4,111) — 
Add: Pass-through costs (1)
3,991  — 
Add: Amortization of customer warrant assets (1)
2,053  — 
Add: Stock-based compensation expense (1)
950  326 
Core gross profit $ 89,059  $ 41,930 

_______________
(1) Core gross profit does not include the tax effects of the non-GAAP adjustments because such tax effects were not material during the periods presented.
Core Operating Loss
We define Core operating loss as loss from operations presented in accordance with GAAP, adjusted to exclude pass-through revenue and data center costs, amortization of customer warrant assets, and stock-based compensation expense. We have presented core operating loss because we consider core operating loss to be a useful metric for investors and other users of our financial information in evaluating our overall operating performance. This metric also provides investors and other users of our financial information with an additional tool to compare business performance across companies and periods, while eliminating the effects of items that may vary for different companies for reasons unrelated to core operating performance.
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A reconciliation of our GAAP loss from operations, the most directly comparable GAAP financial measure, to core operating loss is presented below (in thousands):

Three Months Ended March 31,
2026 2025
GAAP loss from operations
$ (15,037) $ (28,470)
Less: Pass-through revenue (1)
(4,111) — 
Add: Stock-based compensation expense (1)
9,593  9,154 
Add: Pass-through costs (1)
3,991  — 
Add: Amortization of customer warrant assets (1)
2,053  — 
Core operating loss
$ (3,511) $ (19,316)
_______________
(1) Core operating loss does not include the tax effects of the non-GAAP adjustments because such tax effects were not material during the periods presented.
Core Net Loss
We monitor core net loss for planning and performance measurement purposes. We define core net loss as net loss presented in accordance with GAAP, adjusted to exclude pass-through revenue and data center costs, amortization of customer warrant assets and stock-based compensation expense. We have presented core net loss because we believe that the exclusion of these charges allows for a more relevant comparison of our results of operations to other companies in our industry and facilitates period-to-period comparisons as it eliminates the effect of certain factors unrelated to our overall operating performance. Our calculation of core net loss does not currently include the tax effects of the stock-based compensation expense adjustment because such tax effects have not been material to date.
A reconciliation of our GAAP net loss, the most directly comparable GAAP financial measure, to our core net loss is presented below (in thousands):

Three Months Ended March 31,
2026 2025
GAAP net loss
$ (14,006) $ (23,867)
Less: Pass-through revenue (1)
(4,111) — 
Add: Stock-based compensation expense (1)
9,593  9,154 
Add: Pass-through costs (1)
3,991  — 
Add: Amortization of customer warrant assets (1)
2,053  — 

Core net loss
$ (2,480) $ (14,713)

_______________
(1) Core net loss does not include the tax effects of the non-GAAP adjustments because such tax effects were not material during the periods presented.

Liquidity and Capital Resources
As of March 31, 2026, our principal sources of liquidity were cash, cash equivalents, and restricted cash of $2.7 billion and marketable securities of $515.6 million. Our cash and cash equivalents primarily consisted of cash deposited in money market or holding accounts with financial institutions. Marketable securities were comprised of investments in U.S. government securities with an original maturity greater than three months at the time of purchase but less than or equal to one year at period-end.
Since our inception, we have financed our operations primarily through sales of redeemable convertible preferred stock and payments from our customers, including prepayments from customers. As of March 31, 2026, we had an outstanding Working Capital Loan of $982.9 million related to the remaining principal balance of the Working Capital Loan with OpenAI. Our principal uses of cash in recent periods have been to fund our operations and invest in research and development. As of March 31, 2026, we had an accumulated deficit of $919.3 million.
In January 2026, our capital resources increased significantly when we received an additional $2.0 billion in cash, consisting of $1.0 billion in net proceeds from the issuance of Series H redeemable convertible preferred stock and $1.0 billion from the Working Capital Loan. Refer to Note 11 – Redeemable Convertible Preferred Stock and Note 3 – Revenue, respectively, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further discussion.
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We believe that our current cash, cash equivalents, restricted cash, and marketable securities will be sufficient to fund our operations for at least the next 12 months from the date of this Quarterly Report on Form 10-Q. Our future capital requirements, however, will depend on many factors, including our growth rate, the portion of our business that comes from cloud services requiring additional capital expense for our systems and related long term data center obligations, the timing and extent of our sales and marketing and research and development expenditures including personnel costs, capital expenditures for tape-outs of our chip designs, the continuing market acceptance of our products, and the use of cash to fund potential mergers or acquisitions. In the event that additional financing is required from outside sources, we may seek to raise additional funds through equity, equity-linked arrangements, and debt. The sale of additional equity would result in dilution to our stockholders. The incurrence of debt would result in debt service obligations, and the instruments governing such debt could provide for operational and/or financial covenants that further restrict our operations. If we are unable to raise additional capital when desired and at reasonable rates, our business, results of operations, and financial condition could be adversely affected.
Revolving Credit Agreement
On April 14, 2026, we entered into a revolving credit and guaranty agreement (the “Revolving Credit Agreement”) with Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, the letter of credit issuers from time to time party thereto, and the lenders from time to time party thereto, which provides for a revolving credit facility (the “Revolving Credit Facility”) of up to $250.0 million that may initially be used solely for standby letters of credit to data center landlords and developers. Prior to the Phase Two Effective Date (as defined below), loans under the Revolving Credit Facility will incur interest, at our option, at a rate per annum equal to either (i) a base rate or (ii) term secured overnight interest rate (“SOFR”) plus 1.50%. Additionally, prior to the Phase Two Effective Date, we were required to pay commitment fees of 0.250% per annum on the undrawn portion of the commitments under the Revolving Credit Facility. Prior to the Phase Two Effective Date, the obligations under the Revolving Credit Facility were secured by cash collateral only, with no guarantees required.
Following the completion of the IPO and satisfaction of pro forma covenant compliance and customary closing conditions, on June 17, 2026 (such date, the “Phase Two Effective Date”), the Revolving Credit Facility was upsized to up to $850.0 million, the proceeds of which may be used for general corporate purposes. Following the Phase Two Effective Date, loans under the Revolving Credit Facility incur interest, at our option, at a rate per annum equal to either (i) a base rate or (ii) term SOFR plus 2.25%, which decreases to 2.00% per annum upon achievement of an enhanced debt to EBITDA ratio. Beginning on the Phase Two Effective Date, we are required to pay commitment fees of 0.375% per annum on the undrawn portion of the commitments under the Revolving Credit Facility. The Revolving Credit Facility matures on April 14, 2031. Following the Phase Two Effective Date, the obligations under the Revolving Credit Facility are secured by liens on substantially all of our assets with carveouts for certain items, including securitization and leased infrastructure assets.
The Revolving Credit Agreement contains a liquidity covenant requiring that unrestricted cash and cash equivalents (subject to certain exclusions), plus the undrawn revolver commitments, be not less than $150.0 million as of the last day of each fiscal quarter. Additionally, the Revolving Credit Agreement contains customary affirmative and, following the Phase Two Effective Date, negative covenants (including restrictions on indebtedness, liens, investments, asset dispositions, and affiliate transactions, each subject to customary exceptions and baskets) and customary events of default.
Initial Public Offering
On May 15, 2026, we completed the IPO, in which we issued and sold 34,500,000 shares of Class A common stock at $185.00 per share. The Company received net proceeds of approximately $6.2 billion from the IPO, after deducting underwriting discounts and commissions and estimated offering expenses. The shares and proceeds from the IPO are not reflected in the unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2026.
Cash Flows
The following table summarizes our cash flows for the periods presented:

Three Months Ended March 31,
2026 2025
(in thousands)
Net cash provided by (used in) operating activities
$ 12,335  $ (54,937)
Net cash used in investing activities
$ (236,616) $ (56,746)
Net cash provided by financing activities
$ 2,038,106  $ 1,552 

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Operating Activities
Net cash provided by operating activities was $12.3 million for the three months ended March 31, 2026, reflecting a net loss of $14.0 million, adjusted for $68.2 million of non-cash charges, partially offset by a $41.8 million net use of cash from changes in operating assets and liabilities. Non-cash charges consisted primarily of $18.9 million of non-cash interest expense from the Working Capital Loan with OpenAI, $18.2 million of depreciation and amortization expense, $15.8 million of non-cash lease expense, $9.6 million of stock-based compensation expense, $4.6 million of provision for product warranties, and $2.1 million of amortization of customer warrant assets, partially offset by $1.0 million of other non-cash adjustments. The net use of cash from changes in operating assets and liabilities was primarily driven by a $57.6 million increase in prepaid expenses and other assets, a $21.7 million increase in inventories, a $12.2 million increase in accounts receivable, and a $10.1 million decrease in accounts payable, partially offset by a $36.8 million increase in deferred revenue, a $14.0 million increase in customer deposits, and a $9.0 million increase in other liabilities.

Net cash used in operating activities was $54.9 million for the three months ended March 31, 2025, reflecting a net loss of $23.9 million and a $51.3 million net use of cash from changes in operating assets and liabilities, partially offset by $20.2 million of non-cash charges. The net use of cash from changes in operating assets and liabilities was primarily driven by a $159.6 million decrease in customer deposits, a $15.3 million decrease in other liabilities, and a $5.7 million decrease in accounts payable, partially offset by a $56.8 million decrease in accounts receivable, a $53.8 million decrease in inventories, a $15.1 million increase in deferred revenue, and a $3.7 million decrease in prepaid expenses and other assets. Non-cash charges consisted primarily of $9.2 million of stock-based compensation expense, $4.5 million of provision for product warranties, $3.9 million of depreciation and amortization expense, and $2.9 million of non-cash lease expense, partially offset by $0.3 million of other non-cash adjustments.
Investing Activities
Net cash used in investing activities of $236.6 million for the three months ended March 31, 2026 was the result of $308.8 million in purchases of various investments and $132.0 million in purchases of property and equipment primarily for systems to deliver Cerebras Cloud services, offset by $204.2 million in maturities of these investments.
Net cash used in investing activities of $56.7 million for the three months ended March 31, 2025, was the result of $98.2 million in purchases of property and equipment and purchases of $20.2 million in various investments offset by $61.7 million in maturities and sales of these investments.
Financing Activities
Net cash provided by financing activities of $2.0 billion for the three months ended March 31, 2026 was the result of $1.0 billion from the sale of shares of our redeemable convertible preferred stock, $1.0 billion received from the Working Capital Loan from OpenAI, $15.0 million in proceeds from issuance of common stock and $5.3 million in proceeds from stock option exercises.
Net cash provided by financing activities of $1.6 million for the three months ended March 31, 2025 was the result of $1.6 million in proceeds from stock option exercises.
Commitments and Contractual Obligations
Operating lease commitments. As of March 31, 2026, our operating lease commitments included data centers and corporate office leases, for which we had fixed lease payment obligations of $460.3 million. Refer to Note 15 – Leases to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further discussion.
Purchase commitments . As of March 31, 2026, future payments related to non-cancelable commitments for contracts with a remaining term of over one year are as follows: $5.4 million (remaining 9 months of 2026), $6.2 million (2027), and $0.5 million (2028). Refer to Note 16 – Commitments and Contingencies to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further discussion.

Critical Accounting Estimates
Management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements and the related notes thereto, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). In preparing the unaudited condensed consolidated financial statements, we apply accounting policies and estimates that affect the reported amounts and related disclosures. Inherent in such policies are certain key assumptions and estimates made by management, which we believe best reflect our underlying business and economic conditions. Our estimates are based on historical experience and various other factors and assumptions that we believe are reasonable under the circumstances. We regularly re-evaluate our estimates used in the preparation of the unaudited condensed consolidated financial
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statements based on our latest assessment of the current and projected business and economic environment. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty, and actual results could differ materially from the amounts reported based on these estimates. There have been no material changes to our critical accounting policies and estimates as described in the Prospectus. For additional information about our critical accounting estimates, see the disclosure included in the Prospectus.

Recent Accounting Pronouncements
Recent Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) . The guidance requires disaggregated information about certain income statement expense line items on an annual and interim basis. This guidance will be effective for annual periods beginning after December 15, 2026 and for interim periods thereafter. The new standard permits early adoption and can be applied prospectively or retrospectively. The Company is evaluating the effect that this guidance will have on its unaudited condensed consolidated financial statements and related disclosures.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles: Goodwill and Other‒Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”) . The guidance modernizes the accounting for software costs and enhances transparency about an entity’s software costs. The guidance will be effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. Upon adoption, the guidance can be applied prospectively, retrospectively, or under a modified transition approach. The Company is evaluating the effect that this guidance will have on its unaudited condensed consolidated financial statements and related disclosures and does not expect the adoption of this guidance to have a material impact on its unaudited condensed consolidated financial statements.

Item 3.        Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates.
Foreign Currency and Exchange Risk
The functional currency for each of our subsidiaries, including our subsidiaries located in Canada and India, is the local currency of the country in which the subsidiary operates. As such, we expect to be exposed to both currency transaction remeasurement and translation risk. However, we engage in a small number and immaterial amount of transactions outside of the functional currency of the reporting unit, resulting in negligible exposure to foreign currency risk. We have not hedged such exposure, although we may do so in the future if our exposure to foreign currency risk increases. A hypothetical 10% change in the relative value of the U.S. dollar would not have a material effect on our unaudited condensed consolidated financial statements for the periods presented.
Interest Rate Risk
We had cash, cash equivalents, and restricted cash of $2.7 billion as of March 31, 2026. Cash and cash equivalents primarily consist of amounts deposited in money market instruments with financial institutions that have an original maturity of three months or less. We hold cash and cash equivalents for working capital purposes. Due to the short-term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates would increase or decrease other income, net by $9.1 million.
We also had approximately $1.0 billion outstanding under the Working Capital Loan with OpenAI. This note bears interest at a fixed rate of 6.0% per annum. The note permits repayment in cash or through the delivery of services under the related commercial arrangement, and accrued interest attributable to amounts repaid through the delivery of services is deemed paid in accordance with the terms of the note. Because the interest rate on the note is fixed and does not reset based on changes in SOFR, prime, or another market interest rate, changes in market interest rates would not affect the contractual interest rate or related interest expense recognized on the note. A hypothetical 10% change in interest rates would not have a material effect on our unaudited condensed consolidated financial statements for the periods presented.
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Item 4.        Controls and Procedures
Limitation on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of March 31, 2026 due to the material weaknesses in our internal control over financial reporting described below.
Previously Reported Material Weaknesses in Internal Control Over Financial Reporting
A material weakness is a deficiency or combination of deficiencies in our internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis.
As disclosed in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q, we previously identified material weaknesses in our internal control over financial reporting related to the lack of effectively designed, implemented, and maintained IT general controls over applications that support our financial reporting processes; insufficient segregation of duties across financially relevant functions, and lack of sufficient number of qualified personnel within our accounting, finance, and operations functions who possessed an appropriate level of expertise to provide reasonable assurance that transactions were being appropriately recorded and disclosed. We have concluded that these material weaknesses existed because we did not have the necessary business processes, systems, personnel and related internal controls pertaining to several financial statement areas, including revenue recognition, inventory management and costing, data center assets accounting, and equity administration. The deficiencies identified did not result in a material misstatement to our financial statements.
Remediation Efforts to Address Previously Identified Material Weaknesses
We have taken and will continue to take action to remediate these material weaknesses, including:
• continued hiring of additional accounting, finance, and operations resources with appropriate and sufficient technical expertise to improve oversight across critical accounting areas;
• designing and implementing controls related to significant accounts and disclosures to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over account reconciliations, segregation of duties and the preparation and review of journal entries over significant accounting matters;
• implementing processes and controls to better identify and manage risks, including segregation of duties;
• implementing of IT general controls to manage access and program changes within our IT environment;
• engagement with external consultants with extensive Sarbanes-Oxley Act experience; and
• consulting with experts on technical accounting matters, internal controls, and in the preparation of our financial statements.
We believe we are making progress toward achieving effectiveness of our internal control over financial reporting. The actions that we are taking are subject to ongoing management review and audit committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate the material weaknesses in our internal control over financial reporting until we have completed our remediation efforts and subsequently evaluated their design and effectiveness over a sufficient period of time, and management concludes, through testing, that these are operating effectively. We may also conclude that additional measures are required to remediate the material weaknesses in our internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
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Except for the remediation measures in connection with the material weaknesses described above, there were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the three months ended March 31, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION

Item 1.        Legal Proceedings
From time to time, we may be involved in various legal proceedings arising from the normal course of business activities. We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, cash flows or financial condition.

Item 1A.    Risk Factors
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks described below in this Quarterly Report on Form 10-Q including our unaudited condensed consolidated financial statements and the notes thereto, and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 as well as the other information in this Quarterly Report on Form 10-Q. The occurrence of any of the events or developments described below may harm our business, financial condition, results of operations, and prospects. In such an event, the price of our Class A common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently believe are not material may also harm our business, financial condition, results of operations, and prospects.
Risk Factors Summary
Our business is subject to numerous risks and uncertainties and this summary provides an overview of such risks. You should read this risk factor summary together with the more detailed discussion of risks and uncertainties following this summary.
• We may not sustain our growth rate, and we may not be able to manage future growth effectively.
• We have a history of generating net losses, and if we are unable to achieve adequate revenue growth while our expenses increase, we may not achieve and maintain profitability in the future.
• We have a limited operating history at our current scale, and we may have difficulty evaluating our current business and accurately predicting our future revenue for the purpose of appropriately budgeting and adjusting our expenses.
• A substantial portion of our revenue has been, and is expected to continue to be, driven by a limited number of customers. A reduction in demand from, or a material adverse development in our relationship with any of our significant customers, including OpenAI, G42, MBZUAI, and AWS, or our failure to meet our obligations under the MRA with OpenAI, would harm our business, financial condition, results of operations, and prospects.
• Our revenue historically has been derived from sales of our hardware systems. We are in the early stages of delivering our cloud-based offerings, the market for which is nascent and evolving rapidly, and which require significant data center capacity and capital investments for which we expect to require significant additional capital. There is no assurance that we will be able to sustain or increase revenue from these efforts.
• Our cloud-based offerings are subject to certain risks and challenges. Unfavorable or uncertain conditions in the training or inference cloud market, as well as for AI infrastructure, may cause fluctuations in our results of operations.
• The market for AI computing solutions is competitive, evolving, and requires scale, and if we do not compete effectively, our business, financial condition, results of operations, and prospects may be harmed.
• The broader adoption, use, and commercialization of AI technology, and the continued rapid pace of developments in the AI field, are inherently uncertain. If we are unable to expand the application of our offerings, keep up with evolving AI technology requirements, or if new offerings we develop and introduce into the market are not successful, our business, financial condition, results of operations, and prospects may be harmed.
• We depend on third-party suppliers, including certain sole sources, and substantially all of our manufacturing services and components are procured on a purchase order basis without capacity or volume commitments, which may harm our ability to compete, meet customer demand, satisfy customer contracts or bring products to market, and our reputation, business, financial condition, results of operations, and prospects.
• Our supply chain is long, complex, and global, with many interdependencies. Any significant fluctuations of supply and demand or disruption to our supply chain may harm our ability to manufacture and deliver our products to our customers.
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• Our business and our offerings are subject to various governmental regulations, and compliance with these regulations may cause us to incur significant expense. If we fail to comply with applicable regulations, we could be subject to administrative, civil, and/or criminal penalties.
• Our offerings are subject to U.S. export controls and may be exported outside the United States only with the required export license or through a license exception. We cannot guarantee that we will be successful in obtaining all required licenses in the future. If we are unable to obtain licenses to export our offerings, our business, financial condition, results of operations, and prospects may be harmed.
• We identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our Class A common stock.
• The multi-class structure of our capital stock as contained in our amended and restated certificate of incorporation has the effect of concentrating voting control with those stockholders who held our securities prior to the IPO, including our executive officers, employees, and directors and their affiliates, and limiting your ability to influence corporate matters, which could adversely affect the price of our Class A common stock.
Risks Related to Our Business and Our Industry
We may not sustain our growth rate, and we may not be able to manage future growth effectively.
We have experienced significant growth in a short period of time. Our revenue increased from $290.3 million for the year ended December 31, 2024 to $510.0 million for the year ended December 31, 2025, and $193.4 million in the three months ended March 31, 2026. We may not achieve similar growth rates in future periods. You should not rely on our results of operations for any prior quarterly or annual periods as an indication of our future operating performance. If we are unable to maintain adequate revenue growth, our financial results could suffer, and our stock price could decline.
To manage our growth successfully and handle the responsibilities of being a public company, we believe we must effectively, among other things:
• recruit, hire, train, and manage additional qualified personnel for our engineering, security, operations, manufacturing, cloud, and data center activities;
• continue to make significant investments in our new and existing products;
• invest in long-term research and development to remain at the forefront of innovation;
• improve and scale our sales, marketing and go-to-market functions;
• improve and scale our manufacturing, supply chain, operations, and data center capacity procurement, fit-out, and deployment functions; and
• improve and scale our administrative, financial, legal and compliance functions, and operational systems, procedures, and controls.
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Our future growth is dependent on our ability to meet the needs of new customers and the expanding needs of our existing customers as their use of our solutions and services grows, as well as our ability to fulfill existing orders on their committed delivery schedules. As sales of our offerings grow, we will need to devote additional resources to expanding, improving, and maintaining our infrastructure, including our hardware, software, cybersecurity, and cloud infrastructure, and integrating with third-party applications and partner platforms and marketplaces. In addition, we will need to appropriately scale our internal business systems and our services organization, including customer support, to serve our growing customer base, and to improve our IT and financial infrastructure, operating and administrative systems, and our ability to effectively manage headcount, capital, and processes, including by reducing costs and inefficiencies. Importantly, we will need to substantially expand our manufacturing capacity and supply chain, and increase our rate of data center capacity and build-out. Any failure of, or delay in, these efforts could result in impaired product performance and reduced customer satisfaction, and in some cases breach of our contractual obligations, which would negatively impact our revenue growth and our reputation. We may not be successful in developing or implementing these technologies and business operations. In addition, it takes a significant amount of time and capital to plan, develop, and test improvements to our technologies and infrastructure, and we may not be able to accurately forecast demand or predict the results we will realize from such improvements. In some circumstances, we may also choose to scale our technology through the acquisition of complementary businesses and technologies rather than through internal development, which may divert management’s time and resources. To the extent that we cannot or do not effectively scale our operations to meet the needs of our growing customer base and to maintain performance and manufacturing capacity as our customers expand their use of our offerings, we will not be able to grow as quickly as we anticipate, our customers may reduce or terminate use of our solutions, our current and potential customers may seek more readily available alternatives, and we will be unable to compete as effectively, and our business, financial condition, results of operations, and prospects may be harmed.
In addition, certain of our customer agreements, including the MRA with OpenAI (each as defined in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), contain exclusivity provisions that restrict us from supporting, collaborating with, and/or selling certain products and services to certain named competitors of such customers. These restrictions may prevent us from pursuing strategic and revenue opportunities with major technology companies that are leading participants in the AI industry, limit our ability to diversify our customer base and revenue streams, and negatively impact our growth opportunities.
If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities or develop new products, and we may fail to satisfy customer requirements, maintain product quality, execute our business plan, or respond to competitive pressures, which may harm our business, financial condition, results of operations, and prospects.
We have a history of generating net losses, and if we are unable to achieve adequate revenue growth while our expenses increase, we may not achieve and maintain profitability in the future.
We incurred net losses of $14.0 million and $23.9 million for the three months ended March 31, 2026 and 2025, respectively, and have a history of generating net losses. We incurred core net loss of $2.5 million and $14.7 million for the three months ended March 31, 2026 and 2025, respectively, after excluding the impact of stock-based compensation expense from our GAAP net loss. For more information and for a reconciliation of core net loss to net loss, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.” As of March 31, 2026, we had an accumulated deficit of $919.3 million. These losses and our accumulated deficit are a result of the substantial investments we have made to grow our business. We expect our costs will increase over time and our losses may continue if such increases in costs are not more than fully offset by increases in our revenue. We expect to continue to invest significant additional funds in expanding our business and research and development activities as we continue to develop new products. We launched our cloud-based inference offering in 2024, which required new investments in cloud infrastructure and data center capacity that we historically did not need for hardware system sales. We expect to significantly increase our investments in cloud infrastructure and data centers to enable growth in our inference service. We also expect to incur additional general and administrative expenses as a result of our growth and expect our costs to increase to support our operations as a public company. Moreover, during the quarter in which the IPO was completed this year, we began recording stock-based compensation expense for RSUs and PRSUs that we have granted to our service providers, which generally vest upon the satisfaction of both service- or market-based and liquidity-based vesting conditions occurring before the award’s expiration date. The liquidity-based vesting condition for such RSUs and PRSUs was satisfied in connection with the IPO, resulting in significant increases to our stock-based compensation expense.
If our revenue or revenue growth rate declines or our operating expenses exceed our expectations, our financial performance will be adversely affected. We will need to generate and sustain increased revenue levels in future periods in order to achieve and maintain profitability. If we cannot successfully grow our revenue at a rate that exceeds the costs associated with our business, we will not be able to achieve and maintain profitability, and the trading price of our Class A common stock could decline.
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We have a limited operating history at our current scale, and we may have difficulty evaluating our current business and accurately predicting our future revenue for the purpose of appropriately budgeting and adjusting our expenses.
We have a relatively short history operating our business at our current scale and have grown rapidly during that time. We were established in 2016 and began generating revenue in 2019. Prior to 2023, we had limited revenue. Our limited operating experience at our current scale, a dynamic and rapidly evolving market in which we sell our products, our dependence on a limited number of customers, our limited history building and selling access to our cloud-based platform, the timing of large hardware systems sales, our limited experience in evaluating, procuring and operating data centers, as well as numerous other factors beyond our control, could impede our ability to forecast quarterly and annual revenue accurately and may make it difficult to evaluate our current business, prospects, and other trends. We have encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries and sectors, such as the risks and uncertainties described herein. Any predictions about our future financial performance may not be as accurate as they would be if we had a longer operating history or operated in a more predictable or established market. As a result, we could experience budgeting and cash flow management problems, unexpected fluctuations in our results of operations, and other challenges, any of which could make it difficult for us to achieve and maintain profitability and could increase the volatility of the price of our Class A common stock. If our assumptions regarding these risks and uncertainties are incorrect or change due to fluctuations in our markets, any material reduction in AI spending, changes in applicable regulatory frameworks, changes in demand for specialized AI cloud infrastructure and custom AI accelerators, or otherwise, or if we do not address these risks successfully, our financial condition and results of operations could differ significantly from our expectations and our business, financial condition, results of operations, and prospects would be adversely affected. We cannot ensure that we will be successful in addressing these and other challenges we may face in the future. The risks associated with having a limited operating history may be exacerbated by current macroeconomic and geopolitical conditions discussed herein.
A substantial portion of our revenue has been, and is expected to continue to be, driven by a limited number of customers. A reduction in demand from, or a material adverse development in our relationship with any of our significant customers, including OpenAI, G42, MBZUAI, and AWS, or our failure to meet our obligations under the MRA with OpenAI, would harm our business, financial condition, results of operations, and prospects.
A substantial portion of our revenue is driven by a limited number of customers. Group 42 Holding Ltd (together with its affiliates, “G42”) accounted for 11% and 64% of our total revenue for the three months ended March 31, 2026 and 2025, respectively, and in the three months ended March 31, 2026 and 2025, Mohamed bin Zayed University of Artificial Intelligence (“MBZUAI”) accounted for 63% and 24%, respectively, of our total revenue. In December 2025, we entered into the MRA with OpenAI, which represents a substantial portion of our projected revenues over the next several years.
Our dependence on our relationships with OpenAI, G42, and MBZUAI subjects us to a number of risks. Any negative changes in demand from OpenAI, G42, or MBZUAI, in their ability or willingness to perform under their contracts with us, in laws or regulations applicable to OpenAI, G42 or MBZUAI, or the United Arab Emirates, or in our broader strategic relationship with OpenAI, G42, or MBZUAI would harm our business, financial condition, results of operations, and prospects. Even if OpenAI, G42, and MBZUAI remain satisfied with our offerings, it is possible that they will no longer need to purchase additional AI compute or services at the same quantity as prior periods, or that their ability to purchase our offerings may change for reasons outside of their control. OpenAI, G42, or MBZUAI may also choose to purchase more of their AI compute from our competitors.
In addition, under the MRA with OpenAI, unless otherwise agreed to, we are required to deliver capacity tranches across specified numbers of data centers with minimum capacity thresholds upon certain time-based milestones. If we fail to deliver such capacity on the stated timelines, or if we experience a certain level of failure with respect to our service levels, OpenAI has the right to terminate a portion or all of the agreement. In addition, pursuant to the MRA with OpenAI, we received the $1.0 billion Working Capital Loan (as defined in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”). The Working Capital Loan has a maturity date of no later than December 31, 2032, and is scheduled to be repaid in equal amortized installments over a three-year term, commencing after the delivery of the final tranche of the initial 250 MW of capacity. Interest accrues on the outstanding principal balance at a rate of 6% per annum; provided that interest may be waived under certain circumstances. If the MRA is terminated for any reason other than OpenAI’s material uncured breach, or if certain trigger events occur, OpenAI may direct the bank to cease complying with our instructions regarding the Working Capital Loan funds and may instead control the disposition of funds in the account, and we may be required to immediately repay the outstanding principal balance of the Working Capital Loan together with accrued interest. Our failure to perform under the MRA would harm our business, financial condition, results of operations, and prospects.
Further, as of March 31, 2026, three customers accounted for 86% of our accounts receivable balance. As of December 31, 2025, one customer accounted for 78% of our accounts receivable balance. This customer concentration increases the risk of quarterly fluctuations in our results of operations and our sensitivity to any material adverse developments experienced by, or in our relationships with, our significant customers. G42 and MBZUAI are considered related parties with respect to each other as defined by Accounting Standards Codification 850, Related Party Disclosures . The loss of, any substantial reduction in sales to, or the default on payments by, any of our significant customers would harm our business, financial condition, results of operations, and prospects.
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In June 2026, we entered into a commercial agreement with AWS (“AWS Commercial Agreement”) that provides for a strategic collaboration to deploy a joint compute solution in AWS data centers. The AWS Commercial Agreement, which memorializes the binding term sheet that was entered into in March 2026, includes an initial multi-year lease of our systems, options for future procurement of products and services, pricing commitments, exclusivity, minimum manufacturing capacity guarantees, and certain other protections in favor of AWS. These commitments may limit our ability to satisfy demand from other customers or prospective customers. In addition, if AWS does not purchase additional products or services under the agreement, we may have excess inventory and manufacturing capacity. Conversely, if AWS purchases additional products and services, as contemplated by our minimum capacity commitments in the AWS Commercial Agreement, AWS may represent a material percentage of our revenue at such time. Any adverse developments in our relationship with AWS, including any delays in the strategic collaboration, reduced sales or AWS’s decision not to purchase products or services beyond the initial lease, or our failure to perform under the AWS Commercial Agreement, would harm our business, financial condition, results of operations, and prospects.
Our revenue historically has been derived from sales of our hardware systems. We are in the early stages of delivering our cloud-based offerings, the market for which is nascent and evolving rapidly, and which require significant data center capacity and capital investments for which we expect to require significant additional capital. There is no assurance that we will be able to sustain or increase revenue from these efforts.
Our revenue historically has been derived from sales of our hardware systems. In August 2024, we introduced our inference cloud service. We are only in the early stages of monetizing our cloud-based offerings, and we may not be able to grow these efforts into a sustainable part of our business. Additionally, we may not realize all of the benefits from our cloud-based offerings that we expect to achieve, or it may be more costly to do so than we anticipate, including as a result of substantial costs associated with data center and cloud infrastructure, which could negatively impact our cash flows and profitability. We have encountered, and will continue to encounter, challenges in compute capacity planning and allocation, as well as accurate financial planning and forecasting with the changing mix of offerings in our business model. For example, many customers or prospective customers of these offerings are startups, with capital intensive needs, that may not succeed. In addition, the difference in contract length for our data centers, which are longer term with limited ability to terminate and often include substantial liquidated damages clauses, versus our inference customer agreements, which are typically a mix of consumption-based pricing or shorter term dedicated capacity arrangements, creates further unpredictability in our results of operations. In addition, our cloud-based agreements may be terminated, not renewed, or renewed on less favorable terms, necessitating us to resell the idle capacity on an expedited basis. This may cause our results of operations to fluctuate from quarter to quarter, which makes them difficult to predict.
We intend to continue to invest significantly in infrastructure as well as sales and marketing efforts related to our cloud-based offerings. This investment requires significant capital and other expenditures, which we expect to adversely impact cash flows from operations, gross profit, gross margins, and operating margins in certain periods, particularly in the near term, and may not ultimately grow our business or result in long-term profitability. We expect to require significant additional capital to fund our cloud offerings and support our growth. For example, significant upfront costs, prepayments, and/or financial guarantees have been and may continue to be required to procure data centers that are necessary for our cloud offerings. Additional financing may not be available on terms favorable to us, if at all. While we have historically been able to fund capital expenditures from cash generated from operations, prepayments and loans from certain customers, and equity financings, many factors could materially reduce the cash available from our operations, impede our ability to raise additional capital, or significantly increase our capital expenditure requirements, which may result in the inability to fund the necessary or desired level of capital expenditures. Under the MRA with OpenAI, OpenAI has provided us with the $1.0 billion Working Capital Loan to accelerate the development and build out of services, technology, and manufacturing. If the MRA is terminated for any reason other than OpenAI’s material uncured breach, or if certain trigger events occur, OpenAI may direct the bank to cease complying with our instructions regarding the Working Capital Loan funds and may instead control the disposition of funds in the account during the continuance of such trigger events and pursuant to the terms of the MRA, and we may be required to immediately repay the outstanding principal balance of the Working Capital Loan together with accrued interest. This could adversely affect our business, financial condition, results of operations, and prospects. If we raise additional funds through equity or convertible debt issuances, our existing stockholders may suffer significant dilution and these securities could have rights, preferences, and privileges that are superior to those of holders of our Class A common stock. If we obtain additional funds through debt financing, we may not be able to obtain such financing on terms favorable to us. Further, the current global macroeconomic environment and other factors discussed herein could make it more difficult to raise additional capital on favorable terms, if at all. Such terms may involve restrictive covenants making it difficult to engage in capital raising activities and pursue business opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired and our business may be adversely affected, requiring us to delay, reduce, or eliminate some or all of our operations.
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