Cerebras Shares Sink on Weak Margin Outlook

Cerebras Systems posted its first earnings report as a public company this week, and the gross margin guidance it attached to those results sent shares down roughly 14% in premarket trading on Wednesday, June 25. The Cerebras gross margin outlook for full year 2026, set at 38% to 41%, came in well below the 47% the company recorded in Q1 and sparked an immediate reassessment of the stock's valuation.

At a Glance

• Premarket decline of about 14% threatened to erase more than $6 billion in market capitalization.
• Full year 2026 adjusted gross margin guidance: 38% to 41%, versus 47% in Q1 2025.
• Guidance still beat the consensus analyst estimate of 29.58%.
• Cerebras disclosed a $20 billion multi-year deal with OpenAI and a forthcoming arrangement with Amazon Web Services.
• Shares remain down more than 27% from the IPO price heading into the session.

The Margin Gap That Spooked Investors

The raw numbers tell the story plainly. Cerebras guided to 38% to 41% adjusted gross margins for 2026, a meaningful step down from the 47% it reported for the first quarter. The implied midpoint of that range sits roughly 9 percentage points below Q1 actuals, which is a significant compression for a company that went public with high expectations baked into its valuation.

The competitive comparison is even sharper. Nvidia operates in the mid-70% gross margin range, and Advanced Micro Devices runs in the mid-50% range. Cerebras, even after a strong debut quarter, is guiding to a figure 15 or more percentage points below AMD and roughly 35 points below Nvidia. For a chip designer pitching itself as an AI infrastructure essential, that spread is difficult to ignore.

Why the Compression Is Happening

Two structural factors explain much of the pressure. First, Cerebras builds unusually large chips, a design choice that carries inherent yield and cost tradeoffs compared with smaller dies. Larger silicon area means more potential defects per wafer, which tends to weigh on margins as volumes scale.

Second, the company is currently renting its own systems back from an existing client to satisfy near-term demand while it expands data center capacity. That arrangement, essentially paying to use hardware it built, adds cost at the exact moment the company is trying to demonstrate operating leverage. Analysts had flagged both of these dynamics as margin risks ahead of the report.

The Deal Pipeline That Bulls Are Leaning On

Not every signal out of the earnings call was negative. Cerebras disclosed a $20 billion multi-year agreement with OpenAI, and CEO Andrew Feldman confirmed on the post-earnings call that OpenAI's GPT 5.4 model is running on Cerebras chips. Under the full scope of the deal, OpenAI is expected to deploy 750 megawatts of Cerebras semiconductors, which represents a substantial committed load for a company still building out its infrastructure base.

Feldman added that Amazon Web Services will begin deploying Cerebras chips in its data centers in the near term, with associated revenue expected to materialize within the next year. TD Cowen pointed to both the Amazon and OpenAI arrangements as the key variables for long-term growth. Morgan Stanley, for its part, raised its price target on the stock to $273 from $250 even after the premarket selloff.

Where the Stock Sits After the IPO Hype Fades

The premarket drop extended a decline that was already under way. Cerebras shares entered Wednesday down more than 27% from the company's market debut, which means the IPO enthusiasm has steadily eroded as broader sentiment around AI infrastructure spending has grown more cautious. Investors across the sector are weighing the scale of capital required to build AI infrastructure against the timeline to returns, and that scrutiny is landing harder on smaller, less proven names.

If the 14% premarket loss held through the open, the stock was on track to reach its lowest level since listing more than a month ago. A decline of that magnitude translates to more than $6 billion in lost market value in a single session, a number that underscores how much valuation premium had been priced in at the IPO.

Frequently Asked Questions

What gross margin did Cerebras guide to for 2026?

Cerebras forecast adjusted gross margins of 38% to 41% for the full year 2026. That compares with 47% reported in Q1 2025 and is significantly below the mid-70% range Nvidia currently posts and the mid-50% range at AMD.

Why are Cerebras margins expected to fall below Q1 levels?

Analysts have pointed to two main causes: the cost disadvantages tied to manufacturing unusually large chips, and the company's current practice of renting its own systems back from a client to bridge capacity while new data centers come online. Both factors add near-term cost pressure.

What is the OpenAI deal with Cerebras worth?

Cerebras has signed a $20 billion multi-year agreement with OpenAI. Under the arrangement, OpenAI is set to deploy 750 megawatts of Cerebras semiconductors, and CEO Andrew Feldman confirmed GPT 5.4 is already running on the company's chips.

Did any analysts raise their targets after the earnings report?

Morgan Stanley raised its price target to $273 from $250 following the report. TD Cowen identified the OpenAI and Amazon Web Services deals as the most important factors for Cerebras' long-term trajectory.

What the Numbers Signal Going Forward

The 2026 margin guide, though above the 29.58% analyst consensus, still represents a reset of near-term expectations. The question investors now face is whether the OpenAI and AWS commitments are large enough and close enough in timing to offset the margin dilution from infrastructure buildout costs. With Morgan Stanley lifting its target and TD Cowen staying constructive on the deal pipeline, the bull case rests almost entirely on whether those revenue flows arrive on the schedule Feldman described.