NBIS

We rate Nebius Group N.V. (NBIS) as a Reduce with a composite score of 47.0/100 at a current price of $102.02. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in momentum (89th percentile) and investment (67th percentile), which together account for the majority of the composite score. Offsetting weakness in value (17th percentile) and quality (19th percentile) tempers our overall conviction. We assign a No Moat rating (31/100), Very High uncertainty, and Poor capital allocation.

Key items to watch: sustainability of the current growth rate; the path to profitability; valuation compression risk if growth disappoints. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is narrowing, which raises the risk of a future downgrade if the trend persists.

Nebius Group N.V. holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 47.0/100 places it at rank #2493 in our full 7,333-stock universe. With a $10.0B market capitalization, Nebius Group N.V. operates at meaningful scale within the Services sector, providing competitive advantages in distribution, procurement, and customer reach.

The near-term outlook is constructive, with revenue growing at 462% and momentum in the 89th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 67th percentile indicates the company is reinvesting effectively to sustain this trajectory.

The margin cascade tells an important story: gross margins of 38% (-22.0pp vs sector) narrow to operating margins of -375% (-378.6pp vs sector) and net margins of -545.9%, yielding a gross-to-net conversion rate of -1454%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $102.02, Nebius Group N.V. is trading at a premium to fundamental value. Our value factor score of 17/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at P/B of 7.6x, P/S of 52.7x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Very High uncertainty rating to Nebius Group N.V.. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 2.45), current negative profitability (net margin -545.9%), below-average price stability (21th percentile). The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 2.45); current negative profitability (net margin -545.9%); below-average price stability (21th percentile); weak quality scores (19th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 21th percentile and quality factor at the 19th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (0% D/E) limits balance sheet risk. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate Nebius Group N.V.'s capital allocation as Poor. Key concerns include low returns on equity (-78.8%), negative profitability, weak asset returns (ROA -72.3%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Nebius Group N.V. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Nebius Group N.V. receives a Reduce rating with a composite score of 47.0/100 (rank #2493 of 7,333). Our quantitative framework assigns a No Moat (31/100, trend: narrowing), Very High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 42/100.

Our analysis does not support a constructive view on Nebius Group N.V. at this time. The combination of limited competitive advantages, very high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.