CoreWeave turns to prepayments and short-term deals to fund AI growth

CoreWeave, a company that rents out the computing power behind AI, says it is changing how it pays for its expansion. In its third-quarter earnings, reported on Tuesday, it said it is increasingly asking customers to pay up front, borrowing against specific contracts and pursuing short-term deals that could bring higher prices.

The company reported $3.66 billion in revenue, up 168% from a year earlier. It also posted a $709 million net loss and $846 million in quarterly interest expense. CEO Michael Intrator said on the earnings call that CoreWeave will not use the unsecured debt market at current yields. The company plans to rely on loans backed by customer contracts to build out infrastructure for its $132.5 billion backlog.

CoreWeave expects about $9 billion in customer prepayments and deposits over the next three months, including more than $3 billion tied to new contracts for capacity it has already built. Intrator said the company raised prices by about 25% in July and by another 10% later in the quarter. He also said it is putting more capacity into short-term deals priced above $40 million per megawatt annually, while four- and five-year contracts for new infrastructure are moving to $20 million to $25 million per megawatt.

In August, CoreWeave closed a $2.6 billion loan, its first designed for shorter-term contracts. There are trade-offs: upfront payments could lock in prices that look less attractive later, and lenders tend to favor longer-term contracts. Wall Street reacted positively to the results, but bond investors are more wary. Yields on some of the company's bonds topped 15% last month, reflecting concern about debt used to fund data center buildouts.