Key Highlights:* Fitch Ratings assigned a first-time Long-Term Issuer Default Rating (IDR) of 'BB-' to CoreWeave, Inc. with a Positive Outlook. * CoreWeave's robust business model, stable recurring revenue streams, and limited execution risk over the near-to-medium-term support the 'BB-' rating. * The company's cash flow profile benefits from strong visibility, despite high upfront capital expenditure, reinforcing its financial stability. Original Press Release: Chicago, May 19 -- Fitch Ratings issued the following news release: Fitch Ratings has assigned a first-time Long-Term Issuer Default Rating (IDR) of 'BB-' to CoreWeave, Inc. The Rating Outlook is Positive. Fitch has also assigned a rating of 'BB-' to CoreWeave's proposed new $1.5 billion senior unsecured notes, with a Recovery Rating of 'RR4'. The 'BB-' rating and Positive Outlook reflect CoreWeave's robust business model, highlighted by its stable, recurring revenue streams. The company's execution risk over the near-to-medium-term is limited, underpinned by unit-level economics where capital expenditure is incurred only after contracts are signed. CoreWeave's cash flow profile benefits from strong visibility, despite the high upfront capital expenditure, reinforcing its financial stability. Although leverage is high, it is supported by strong EBITDA growth potential with high visibility over the next few years, demonstrating a clear deleveraging path. CoreWeave faces manageable refinancing risk, bolstered by satisfactory liquidity, which ensures the company can meet its short- to medium-term obligations. Key Rating Drivers Elevated but Improving Credit Metrics: As of December 2024, CoreWeave's gross EBITDA leverage, excluding leases, was 6.6x, with lease-adjusted gross leverage at 6.7x. In FY2025, Fitch expects gross EBITDA leverage to approach 5x, with lease-adjusted leverage around 5.7x (including the impact from not-yet-commenced leases). In subsequent years gross EBITDA leverage could range between 2.0x-2.5x and lease-adjusted leverage between 3.0-3.5x. Deleveraging is likely as EBITDA grows faster than new debt issuance needs, supported by a growth strategy requiring significant upfront capex. Fitch projects capital intensity will peak in 2025 due to major recent contract wins, with cash flow benefits materializing over the medium term. High Customer Concentration: In 2024, Microsoft represented 62% of CoreWeave's revenue, with the top two customers combined accounting for 77%. While the addition of a new OpenAI contract introduces some diversification, revenue remains highly concentrated, underscoring potential risks associated with heavy reliance on a limited number of key clients. Expanding its customer base could help mitigate these risks over time. Robust Revenue and Cash Flow Visibility: CoreWeave had $14.7 billion in remaining performance obligations (RPO) as of March 31, 2025. Its $25.9 billion total pro forma revenue backlog includes $11.2 billion from a new committed contract not yet recognized under GAAP. Management anticipates recognizing 58% of RPO within 24 months, 40% during months 25-48, and the rest during months 49-72. Committed contracts account for over 95% of revenue, featuring take-or-pay provisions that ensure payment regardless of utilization. This results in predictable cash flows and enhances resilience in varying economic conditions, although longer-term visibility is less certain. Longer-Term Visibility Less Clear: While management expects 96% of RPO to be recognized over the next four years, clarity diminishes thereafter, as CoreWeave will be reliant on contract renewals or replacements to maintain revenue growth. Customer concentration poses risks, including potential in-sourcing by hyperscalers, compounded by the company's relatively short operating history. Additionally, the rapid evolution and nascent nature of AI technology contribute to the uncertainty of CoreWeave's sustainability over the longer term, as the company must continuously adapt to fast-changing technological advancements and market demands. Potential Lease Term Mismatch Risk: CoreWeave faces a potential risk due to the mismatch between the terms of its leases with data center suppliers and the contracts with its customers. While its leases typically span 3-15 years, its customer contracts generally have shorter durations of 3-5 years. This disparity creates challenges in aligning long-term obligations with shorter-term revenue streams, exposing CoreWeave to the risk of meeting lease commitments without guaranteed customer income. The company typically manages this risk by building enough of a buffer into their contract terms to mitigate the impact of contract length mismatches. Strategic Differentiation and Market Leadership: CoreWeave's first-mover advantage, partnership with Nvidia, and top-tier performance metrics bolster its position against both hyperscalers and smaller AI-focused cloud provider competitors. Its AI specialization also helps it compete specifically against hyperscaler competitors. Managed software and application services built into its technology stack further differentiate its offerings. However, the competitive landscape poses a significant risk over time, as companies rapidly invest in their own infrastructure, potentially challenging CoreWeave's market position and requiring ongoing innovation to maintain its leadership. AI Demand Supports Growth: CoreWeave is strategically positioned to benefit from rising demand for AI and machine learning applications. According to various industry sources, global data center workload dedicated to AI will represent approximately 44 GW in 2025 and grow to over 150 GW by 2030. This demand is propelled by advancements in AI algorithms and data proliferation, bolstering the need for CoreWeave's GPU infrastructure. As industries pursue AI-driven efficiency, CoreWeave's offerings align well with their needs, supporting strong performance potential and enabling it to capture a significant share of this expanding market. Peer Analysis CoreWeave operates within the digital infrastructure sector. Its peers include Equinix, Inc. (BBB+/Stable), Digital Realty Trust, Inc. (BBB/Stable), Iridium Communications, Inc. (BB/Stable) and Viasat, Inc. (B/Stable). CoreWeave specializes in GPU-based cloud services supported by multi-year contracts, yet faces distinct challenges compared to its larger, more diversified counterparts. These challenges include shorter contract durations, uncertain renewal rates, heightened technology risk, and potential competition or in-sourcing from customers. Additionally, CoreWeave's rapid growth and shorter operating track record differ from these established companies. Equinix and Digital Realty, both leading data center companies, can be considered together in comparison to CoreWeave due to their similar business models. They benefit from low churn rates, robust global platforms, and conservative financial policies. Their strategies predominantly involve ownership, along with leasing of real estate, which contributes to their operational stability. In contrast, CoreWeave, with its technology-centric services and reliance on leased facilities, is more susceptible to rapid changes in customer demand and technological advancements, potentially resulting in higher volatility. Iridium and Viasat, satellite operators, provide a relevant comparison to CoreWeave in terms of leverage and technology focus. Both companies operate in capital-intensive sectors that require continuous innovation and adaptation to technological advancements. Iridium, with its focus on global satellite communications, and Viasat, with its broadband and satellite services, both exhibit leverage levels that are similar to our expectations for CoreWeave. This similarity underscores the importance of managing financial stability while navigating the challenges of rapid technological changes and maintaining competitive advantages in their respective markets. Key Assumptions * Total revenue growing to ~$5.5 billion in FY2025 and ~$9.4 billion in FY2026, with growth rates in the high single-digits thereafter, assuming recognition on existing RPO along with incremental future contract wins * EBITDA margin expanding to over 70% by FY2026, driven by operating leverage * Capex peaking around $15 billion in FY2025, with capital intensity normalizing to the 30%-40% range thereafter, with capex linked to specific future contracts * Incremental future debt issuance to support capex associated with contract wins * No debt repayment assumed beyond mandatory repayment schedules * Put rights on redeemable class A common stock ("put shares" converted from the prior class C convertible preferred stock at the time of the IPO) are exercised in 2027, funded by new debt issuance RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade * EBITDA leverage (ex-leases) sustained above 4.0x or lease-adjusted leverage sustained above 5.0x; * Failure to achieve positive FCF over the medium-to-long-term, resulting in ongoing reliance on external financing and potential liquidity issues; * Continued reliance on a limited number of revenue sources or major contracts, increasing vulnerability to adverse changes in customer relationships or industry conditions; * Inability to access additional debt capital on favorable terms to support its growth strategy. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade * EBITDA leverage (ex-leases) sustained below 3.0x or lease-adjusted leverage sustained below 4.0x; * Expansion into new markets or services that diversify revenue streams and reduce dependence on a few large customers, improving overall business resilience; * Demonstrated ability to consistently renew or replace major customer contracts, ensuring stable revenue flow and minimizing disruption from contract expirations. Liquidity and Debt Structure Pro forma for the new notes issuance, Fitch expects CoreWeave to have sufficient liquidity, supported by $2.3 billion in estimated cash and equivalents, and full availability under its $1.5 billion revolving credit facility, minus $11 million allocated to letters of credit. Fitch expects high capex in FY2025 will greatly pressure FCF during the year, which will likely necessitate additional debt financing sources in 2025 to support execution on growth plans. Issuer Profile CoreWeave, Inc. is a growing technology services provider, offering purpose-built AI cloud infrastructure. The company has 33 data centers across the U.S. and Europe. Its portfolio of over 250,000 NVIDIA GPUs includes high-performance GPUs with specific capacity for AI applications. Date of Relevant Committee 15-May-2025 REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS Click here to access Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included. ESG Considerations CoreWeave, Inc. has an ESG Relevance Score of '4' for Governance Structure due to concentrated shareholder voting power and an organization structure that is somewhat more complex than average, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores. Source: Fitch Ratings [Category: Healthcare, Financial Results] |
