Cerebras Systems (NASDAQ:CBRS) shares fell 14% to about $194 on Tuesday after the artificial intelligence chipmaker reported better-than-expected first quarter results and raised its full-year revenue outlook, but forecast a sharp decline in gross margins for the current quarter.
The company, which completed its initial public offering earlier this year, reported first-quarter GAAP revenue of $193.4 million and core revenue of $191.3 million, exceeding Wall Street expectations of about $181 million. Core revenue increased 92% from a year earlier.
Cerebras posted a non-GAAP net loss of $0.04 per share, narrower than analysts' expectations for a loss of $0.16 per share.
For the second quarter, Cerebras projected revenue of approximately $194 million, ahead of analysts' estimates of $174.3 million. The company also raised its full-year 2026 revenue forecast to a range of $855 million to $865 million, compared with consensus expectations of about $828 million.
However, investors focused on the company's profitability outlook. Cerebras said second-quarter gross margin is expected to fall to between 36% and 38%, down from 47% in the first quarter and a GAAP gross margin of 45% reported for the period.
During the quarter, Cerebras announced a multi-year agreement with OpenAI valued at more than $20 billion, under which OpenAI plans to deploy 750 megawatts of the company's inference computing capacity over several years. Cerebras also launched a partnership with Amazon Web Services aimed at bringing its inference technology to AWS customers through a disaggregated inference strategy.
Andrew Feldman, Cerebras CEO, said demand for faster AI infrastructure is growing as artificial intelligence applications become more widely adopted. “The growing importance of AI in our economy requires AI infrastructure that can power the most advanced applications at unprecedented speed. This is the Cerebras mission,” Feldman said.
Wedbush analysts maintained an ‘Outperform’ rating on Cerebras and raised their price target to $280 from $270 following the results. The analysts wrote that the company's inaugural earnings report contained "no particular surprises" and validated their expectation that management would provide achievable guidance.
Wedbush noted that hardware sales exceeded its expectations and that stronger pricing for Cerebras' cloud services reflected robust demand. While gross margins are expected to decline as OpenAI-related revenue ramps, the analysts wrote that the drop appears less severe than they had previously modeled, potentially creating upside through 2026.
The firm also pointed to higher operating expenses, which it believes are likely tied to additional research and development spending and could support future product launches and customer programs.
Wedbush wrote that it remains constructive on Cerebras, citing potential catalysts including new products such as the WSE-4 processor, additional data center capacity and sustained demand for AI infrastructure.