Thanks, Nitin, for coming. Nitin's the CFO of Koroweave. He's been at the company since March of 24, helped lead a very successful IPO, and spent a lot of time at amazing companies like Google, Amazon, among many others. But thank you for sharing your story and the wild ride we're on, and it's been fun to watch.
Thank you so much for having me here. I really appreciate it, and thank you for your partnership since we've gone public.
yeah it's been a great great story to cover I think we're all witnessing you know that this this is an incredible shift that we're all seeing I think the question we get is we're seeing it in the revenue now and we're I think the focus of like how expensive is this going to be is front and center and I know there's been a lot of focus about the back half of the year revenues coming through you're you're blowing through your booking numbers you're doing great on the top line, but I think everyone's like, hey, we're all seeing what's going on with memory. We're seeing what's going on in the supply chain. How do you think about the management of this is probably the single biggest question that we get when we talk to investors and how
you're managing it. Yeah, absolutely. So there are a few components to it. When you think about a business, it is structured on contribution margin at a contract level. That is something that we monitor diligently and make sure that our economics across those customer contracts stays intact as we write those contracts through different generations of infrastructure. What you're seeing in our business right now is that we brought in a lot of power online in the late half of last year, first half of this year, that's happening through now, through the beginning of Q3, and we are reaching an inflection point in terms of that power growth and then deploying gpus and delivering it to our end customers all of this is very near term that coupled with the disciplined contract enable contribution margins that we know we are going to accomplish because we know the cost structure for those contracts we know the revenue structure which is a fixed take of a long-term committed contract gives us confidence that as we hit this inflection from q2 to q3 our margins are going to inflict with them reaching low double digits as we exit the year the dynamics of what we deployed last year are very different based on when power is coming online to where it is this year we're going to enter 2027 in a much stronger position with this inflection point that we talked about achieving at the end of q3 q2 beginning q3 and that's what gives us confidence that because of its near-term nature on what we're deploying today as well as the strong fundamental underlying contribution margin economics for every single contract that we write, that we are going to hit those numbers.
The thing I think we're all learning is that things are changing every day. So everyone says, look, when you have thousands of components going into a data center build and the PVC piping is changing and the memory price is changing, how do you deal with all this change in in when when we see prices go higher which we're seeing a memory everyone says well how does that how do you deal with that is this contracted up front do you do you put gave you put an escalation for memory
in the contracts what so a bit of both so when we think about our contracts we have visibility into the cost structure and which data center they're going to go to and what we do in our business in a structured way we place the peels for the infrastructure as we sign customer contracts, which basically locks in both our top line as well as a large fraction of our cost structure alongside with the data center leases. That gives us confidence that the contribution margins that these contracts will achieve once they are actually deployed and running at scale would be very, very static. The variable components are very small within the error bands of what we would consider tolerable and in certain cases to your point like you know as we write the next incremental contract if the capacity prices are increasing at that time you kind of have to consider them as pass through cost to the end customer because that will get adjusted in the price that we write for the next contract based on the capacity availability and the cost at that point of time effectively we're writing each one of our contracts to certain stable margin profiles across our business depending upon the scale size strategic nature term length of the customer but that's the error bar that we look at that's great the due
diligence we've done is that you're among the elite of the elite there's not many people that can do what you do we tend to agree with that and and everyone says well how are they how are they so good at this maybe if you can describe what has made you the most elite builder of the new AI world?
Absolutely. So when you think about the cloud that exists today, it was built in the early 2000s, and it was built beautifully. I was a part of building all the three clouds that exist today from a hyperscale perspective, from Azure to AWS to Google Cloud. But they were built for a very different purpose. They were built for hosting your websites, running your web applications, hosting your data lakes, which is what you call like serialized processing. When you look at AI workloads, they are fundamentally different in how they operate. They are basically what you would call as paralyzed workloads. The infrastructure stack, the networking layer, and the software that sits on top of it to support that is fundamentally different. When all of these clouds kind of looked at the AI wave, they looked at it in an evolutionary manner, and they were tasked with taking the hundreds of billions of dollars of infrastructure and almost two decades of engineering to fit that into that construct. We built an AI-first cloud from the ground-up first principles in terms of what was needed for these workloads and these developers. That is what fundamentally differentiates us, which is why when you look at our platform today our platform is expanding beyond gpus you know two quarters ago we talked about you know the storage product in our platform exceeding a hundred million dollars arr and that's still growing as you know weeds we also talked about you know three other lines of businesses in our portfolio you know networking cpu and software all three crossing hundred million of ARR by the end of this year. What differentiates us is the software stack, along with the operational ability for us to execute, which again is aided by our software stack, to deploy and execute this performance infrastructure at scale. We were the first ones to deploy H100 at scale. We were the first ones to deploy H200 at scale. We were the first ones to deploy the Blackwells at scale, and Vera Rubens are coming just across the corner. We tend to achieve similar fates there. For the last two years in a row, we've been the single platinum cloud provider in the air infrastructure space in the semi-analysis, which is a very detailed, in-depth technical analysis of the platform. So what differentiates us is from a technology standpoint, what we've built are operational capabilities coupled with our ability to execute at this scale in the capital markets. You know, Mike and Trader, our CEO, co-founder, always says that, you know, when you're building a business, when you're starting a business, access to capital is most important. And when you're scaling a business, cost of capital is most important. We've been very diligent in lowering our cost of capital over the last couple of years with more than 600 basis points taken out on our weighted average cost of capital. And now we've come to a point where, you know, for investment-grade customers, we have rated facilities, you know, which are A-rated by three rating agencies, which allows us to basically narrow the cost of capital differential between us and the hyperscalers in a material manner. All of these three pillars, technology, operations, and our financing ability, makes us a unique one-of-one.
uh and when you think about um just uh the the next steps uh i i sat with one of your close partners and they showed me what the data center is going to look like and how complex the racks are going to look like and my head was spinning i'm like there there's no one that can keep up you know their pitches that you guys are the only ones that can do this the complexity we're about to see in the next year to two years is going to blow everyone away um how are you staying in front on this bleeding edge curve and how are you distancing yourself from others that are doing
this? Yeah. So I think that one of the key things is the customers we work with are the most leading edge customers in this space. They're the frontier labs who are basically redefining the face of AI. They are the adopters of, you know, first adopters of AI and they're the hyperscalers. We get a lot of signal from these folks in terms of understanding where the market is going and what are the next requirements are, which allows us to then build our product roadmap, our engineering roadmap, as well as our operational capabilities to what's coming next. And that has been the success mantra for Core-V for a very long period of time, where we are not going where the puck is going. We are basically leading our way to where things are heading. About two years ago, when the world was still in air-cooled, we had practically determined that liquid-cooled is the future of the world. pretty much every single data center that we signed at that time two years ago was all effectively liquid cooled so we are able to identify those trends and effectively act upon them much ahead in advance in terms of our ability to execute against them and shape those in the industry versus following them in the industry and that's been a great success parameter for us the signals
that you don't think this is a bubble um what are the what are the signals that you get that um there was someone sent something around the last time the knicks were in the championship the market peaked and sold off uh i mean so everyone's asking just like this is maybe it's gone a little crazy inside some of the infrastructure stories but what what's giving you
signals that that this is more sustainable than bubble the most sustainable signal that we're getting from the market is how the demand is now shaping towards inference. A majority of the demand that's coming to us now is for serving inference workloads, which is giving us immense confidence that this is a sustained economic change that's happening. From an end customer perspective, customers are productionalizing AI now, and they're seeing massive returns on those, And that's what is leading to the belief that the infrastructure that we are building has longevity. You know, a few facts that, you know, this kind of dovetails into a lot of questions I get around, you know, the life of the GPU and how we think about the life of the GPU. You know, we talked about this in our last earnings. The average selling price for an A100, H100, H200, and an L40 all increased quarter over quarter for us last quarter. We are selling H-100s at a price higher than what we were selling them two to three years ago when they first came out. That is sustained demand that you are seeing for serving workloads. Another important factor in this inference growth that we've seen, particularly over the last couple of quarters, is that it's not one-size-fits-all. Customers have models that have different usage and different infrastructure fits their needs. They're very happy to run those on the infrastructure where it is best supported, which oftentimes includes A100s, H100s, L40s, all of them. So this is a sustained demand signal that we continue to get from the market, and it's only accelerating at this moment.
The stickiness of these applications are, I would assume, just going to be, they're going to stay inside your platform for a long time. I don't think they're portable as easily as maybe some have made out to be. But the question we get is the durability long term. Once we build this infrastructure, then how do we ensure that they stay core weave? How do we ensure, like, what's the next layer of value creation for you?
So unlike any other vendors, we don't believe in customer lock-ins or anything like that. What we believe in is the quality of the platform and the quality of the service we deliver. And what we are seeing repeatedly from our customers is customers who have the first contracts kind of expired with us are coming back to us for not just renewing those contracts but buying incremental extra capacity from us. And that is what gives us confidence in our ability to serve these customers and these workloads to stay on our platform for a longer period of time. It's the quality, performance of the infrastructure and the software platform that we deliver that actually keeps the customers on our platform over an extended period of time. And that's the foundation of the business that we've built. And we continue to believe as we add more services, incrementally on our portfolio, customers are adopting those services. As I talked about, like storage, CPU, networking, software stack, all of those are growing rapidly within our portfolio because customers come here for the GPU infrastructure but are finding other services that we now offer to be increasingly of value and are adopting CoreWeave as a full-stack cloud platform for their AI workloads.
I know that the software business is still tiny, but this could be pretty exciting. So there are two elements of... Maybe it's not this year or next year, but when you look at a longer term, should I temper my enthusiasm? Because I look at this and I'm like, this could this become the next AWS absolutely which is where we are
heading like if you look at from our growth statistics and the revenue backlog which approached a hundred million hundred billion dollars last
quarter is where we are approaching I think you had a Wayne Gretzky 99 it's alright 99 99.4 yeah Wayne Gretzky so you have some AI images for you on that
but we'll show those later so from a software perspective there are two elements of it one is what you would call as like managed software within our portfolio you know from weave to you know our inference platform and so on so forth and the second element of this is what we call core weave omni which is monetizing the core weave AI infrastructure stack in GPUs and in data centers which are not owned by core weave so effectively you know for sovereigns or for other international entities which want to own the infrastructure or for any enterprise entities who want to own the infrastructure they can own the infrastructure but can be supported by the core weave stack which we call core weave omni both of them are very exciting incredible opportunities for us to increase our software footprint which to your point we do expect to be a meaningful size of our portfolio over the coming years they're not near-term opportunities because they're going to take time to scale relative to the existing business we have. We talked about exiting this year at 18 to 19 billion ARR. Next year, north of $30 billion ARR. So this is already a sizable business. For the software piece to get to a sizable percentage of this business will take a few years. But we are incredibly excited about the margin of creative opportunity to build our software portfolio.
So I think investors push back on me and say, well, I feel like they keep kicking the can down the road on margin. and profitability, but there's nothing that's changing in your view or how you think about your long-term margin targets.
We feel incredibly comfortable with the combination of the factors that we described on the scaling element, as well as the contract economics underlying them, as well as the incremental margin accretive portfolio that we are building, that all of them contributing, we feel incredibly comfortable in the long-term margin trajectory of our business where it's interesting is the growth profile because we are growing so rapidly and we do incur certain cost as an upfront cost before the infrastructure comes online and we start revenue generating the you know what we call is a denominator problem our base is so small relative to the incremental capacity that we are bringing on aka growth is so high that it actually has an impact on near-term margins which as we talked about we are going to inflict in the second half of this year based on our projections in terms of how we can see the power coming online and the underlying unit economics so we feel incredibly comfortable in the near-term trajectory that we've described as well as the long-term trajectory of the business that we hope to and wish to accomplish and we have a game plan around that
we've asked other execs today you get you get the magic wand to take one or two constraints away for you is it is it power is it is it is something in the supply chain is it the people like what what is the what are the constraints for you right now so this industry is rapidly
evolving like if you would have asked anybody two years ago three two and a half three years ago they would have said chips is the biggest constraint you know today if you look at you You know, that powered shell capacity is the biggest constraint, which involves a whole component of supply chain, including human supply chain. There aren't enough electricians, plumbers to do this kind of stuff that is needed to build the infrastructure. Tomorrow, you're already seeing some component kind of shortage come across. You know, memory is a great example that's happening in the market right now. So I do believe that these supply constraints are going to continue to shift across the industry because we are in a structured supply constraint environment, which is not designed to support the customer demand that's happening right now. Now, this is where it's interesting from a Corvive perspective. This is the only environment we know of. We've never, you know, Corby was born out in an environment where supply constraints were always present, and we had to navigate our way through each one of those. We feel incredibly comfortable with our operating abilities, as well as the relationships that we've formed across the stack and our own capabilities that we've built in the company that allow us to manage these supply constraints.
you have three and a half gigs under under contracted power and your goals to get to eight of active power by 2030 so that the question is you know the shift towards self-built sites and what's going to happen to get to get to those
targets yeah absolutely look initially we leased a lot of our capacity because it allowed us for two things number one is speed of execution because we wanted to get power online faster quicker because power today is more valuable than power in 2030 so it allowed us to kind of get to a certain amount of scale rapidly and quickly at the same point of time balance opex versus capex for us as we grew from a small base of a company as we look into the future two things are going to be incredibly important for us number one is you know operational control about certain of these sites so that it allows us to innovate faster you know you talked about how do you keep ahead in the innovation curve is having larger operational control over some of these variables that exist in our industry and second is through vertical integration recapturing some of the margin in that layer so as we think about building our portfolio it'll still be a healthy mix of lease versus self-built but you will see an increasingly larger percentage of our self-build coming across over the next several years we're excited to bring our first self-build site online in the next few quarters this year and we're excited about the next following site coming you know online in 2027 so you'll see an increasingly larger fraction of our portfolio become self-builds but we will continue to manage a healthy balance across both both leased as well as self-built sites.
A lot of private players emerging, lookalikes. How would you describe the environment?
Look, I think the key three differentiating factors that I talked about were, you need scale in this business. The way you have to approach scale is you need to have those three variables working for you. You need to have your technology stack working for you. you need to have an operational ability to execute against the revenue backlog and the contracts and the power that you generate this is not simply plugging the gpus and making them work it doesn't work that way and third you need to have a financing engine that actually supports that growth you know given the demand constraints i'm not surprised supply constraints i'm not surprised that these new entrants are coming in because you know if you look at from a customer perspective you know if they can't get you know what they require as capacity from us because we are pretty much sold out what are their options their options are either to bet on one of these players and see if it works or to accept defeat today there's a huge difference between signing a deal and delivering that in a performant infrastructure perspective to an end customer i'm sure some of these new players would be reasonably successful and i'm sure some of them would not be it doesn't alter anything from us in terms of our execution map you get to see
the inside uh and uh you know anytime i think nick's here too anytime we talk to nick i mean it's the the energy levels off the charts um what what are we what are you seeing that we can't see like what if you describe kind of the industry versus just us looking from the outside what what What do we miss that we can't see?
So I think the three somewhat interrelated things. Number one is a megawatt of power today and delivery today is way more valuable than that in 2030, 2031. So people are not factoring in the nearness of what the delivery looks like for a lot of other players. similar to that is when you think about you know signing a contract is one thing and delivering against that contract is another there's a lot of to your point like new players who've signed customer contracts because you know from a customer perspective it's a bet that they're taking that I'm going to sign with five of them maybe one or two of them deliver there's a huge difference between signing a customer contract and delivering and then the third is having a discipline of a financing structure that allows you to continuously scale this business for the rapid growth that it requires is not something that has been replicated. We've been using GPU backed financing for almost, you know, four years or pretty much since our existence in the company and nobody's been able to replicate that in the market because the combination of the quality of the customer contracts, our ability to execute, and the longevity of the ability for that ability to execute across the board just hasn't been there in the market. And I think these three factors put together are not necessarily well understood by the market today. Delivering GPUs and scaling them is super hard.
We could go for another hour. But thanks for the time. We got to jump to our next presenter. But thanks for coming.
Thank you so much for having me.