Hello, and welcome to Nebius Group's Fourth Quarter and Full Year 2024 Earnings Conference Call. My name is Neil Doshi, Head of Investor Relations. Joining me today to discuss our results are Arkady Volozh, Founder and CEO, and the rest of the Nebius management team. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in today's earnings press release and in our quarterly report on Form 6-K filed with the SEC. Any forward-looking statements that we make on the call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. The earnings press release is available on our website at group.nebius.com/investor-hub. And now, I'd like to turn the call over to Arkady.

Thank you, Neil, and welcome everyone to our fourth quarter earnings call. As we said on our last call, our aim is to build one of the world's largest AI infrastructure companies. We believe that we are well positioned to do this because we have a proven track record of building and running efficient data centers with stable power, delivering GPU-based AI compute infrastructure, cloud, and offering a wide range of value-added services to businesses that are adopting GenAI. Since we publicly launched Nebius in July of last year, just seven months ago, we have been extremely focused on putting in place the foundation to support our future growth in '25 and beyond. I'd like to share what we accomplished in the fourth quarter alone. First, we resumed trading as a public company in October, becoming the first publicly traded AI specialized cloud. This came much faster than expected as we were still building our corporate and business functions. We also raised $700 million in capital in December in an oversubscribed offering, a deal that saw the likes of NVIDIA, Accel, Orbis, and others enter our capital structure. On the infrastructure side, we successfully expanded our data center footprint and our GPU deployments, and we are building the foundation which will enable us to aggressively scale up this year in the US and Europe. Also, we launched our new AI cloud platform and migrated all of our customers to it in Q4. We also launched our Inference-as-a-Service platform called AI Studio. And we made great progress in building our global sales and marketing team with a particular focus on the US market. In that context, I'm very pleased with everything we were able to accomplish in Q4. Our sales function is now up and running and we are seeing the results. More clients are coming onto the platform and our more diversified customer base is already contributing to strong growth run rate revenue. Based on the contracts already in place, March analyzed run rate revenue will be at least $220 million, and we have more potential contracts in the pipeline. Given this momentum, as well as the anticipated impact of additional data center capacity that we're building and the next-generation Blackwell's GPU coming online later this year, our projected December 2025 analyzed run rate revenue of $750 million to $1 billion is well within reach. Looking ahead to 2025, we have three strategic focus areas. The first is our unique full-stack AI technology. In addition to our European data centers in Finland and France, we started deploying GPU clusters in Iceland and in Kansas City, which was the first capacity in the US for us. Also, we will soon announce our first US data center built to our own design. We will continue to enhance and expand our AI cloud and Inference-as-a-Service platforms. The second area of focus is the capital to invest in our future growth. At the end of last year, we had $2.4 billion in cash, including the $700 million raised in Q4 from high-quality investors. Being a public company also gives us access to a wide variety of efficient financing options. Finally, another focus point is our corporate structure. We have been particularly focused on our sales and marketing and customer support teams. We made great hires from within our industry in the last quarter and we are already seeing positive results in terms of run rate revenue growth as we start 2025. Additionally, our business units are doing very well. Avride, our autonomous technology platform, signed a contract with Uber as one of just two autonomous technology partners in the US, along with Waymo and Zoox. Uber Eats has already deployed Avride robots for food delivery in Austin, Dallas, and Jersey City. Avride also signed a contract with Grubhub, which now uses Avride robots for food deliveries on college campuses across the United States, starting with Ohio State University. In addition, Avride's robots have recently received certification in Japan. The team will start to explore opportunities there as well. Toloka, our data training platform for GenAI, grew full-year revenue by 140% and diversified its customer base by adding several leading AI labs to its client portfolio. It has also completed its transition to a new platform tuned for complex GenAI tasks such as red teaming for AI agents, evaluation of reasoning models, and scalable training by coding and math experts. TripleTen, our education technology business, doubled its new student additions year-over-year in 2024 and maintains its position as one of the leading IT boot camps in the US by student feedback. Finally, as a reminder, we still own a 28% stake in ClickHouse, which we believe is a significant potential source of value, although it is not part of our consolidated results. All in all, 2024 was just the starting point for Nebius Group, and I'm excited to enter 2025 with significant momentum and big ambitions to scale and grow our business. Now, I turn over to Tom for questions.

Thank you very much, Arkady. And thanks to those of you who've already sent through your questions. We'll try and cover as much ground as we can on this call. The first question is about capacity expansion plans. And so, I'll actually come to Andrey Korolenko for this first one. Andrey, can you discuss a little bit more the broader plans for capacity expansion over 2025?

Sure, I can, Tom. Thank you. Hi everyone. Before getting into 2025, let me quickly recap what we did last year. We announced tripling the capacity of our data center in Finland, and the expansion is going well. The construction is going according to schedule with the first part of the delivery to be completed in Q3. The remaining capacity will come online around year-end. We also added a data center facility in France, which is already up and running. Recently, we announced our first US cluster in Kansas City, which is now in the deployment phase and should be up and running by the end of this quarter. For 2025, we are already well underway in scaling up further. We can announce today that we are deploying a new H200 cluster in Iceland, which we expect to be available for customers in March. With the additions of Iceland and Kansas City, it takes our total current capacity to around 38,000 GPUs, most of which are H200s. I'm also pleased to announce that we just signed a significant new build-to-suit facility in the US, specifically equipped for Blackwell deployments, and we will update on the details soon. Our guidance calls for 100 megawatts in operations by the end of this year, and we are on track to deliver that. I would also like to highlight that all these new facilities are potentially scalable to a total of more than 300 megawatts as and when we are ready to do so. We are working on even further expansion focusing on greenfield sites in the US and Europe that would multiply our capacity many times. That's it, Tom.

Thank you very much, Andrey. And actually, the next question, Arkady, I'll come to you on this as it relates to you. So the question is, in some of your recent public appearances, you talked about potential growth in capacity that went beyond the state of guidance. Can you give us an update in terms of how you're thinking about capacity expansion generally?

Well, I think what you're referring to is my comments at the recent conference when we were having a more general discussion about the overall market opportunity, which we believe is huge. During that conversation, I talked about the potential for building a gigawatt and more of capacity if we see that the demand is there. I still believe that the advantage of having a team like ours, with decades of experience of building hundreds of megawatts of data centers, gives us an advantage. As Andrey said, we already have over 300 megawatts secured, and we know how to scale it well, much more above that.

Thanks, Arkady. I'll stick with you. In the press release, you reconfirmed the 2025 ARR guidance. The question is, how are you thinking about that, and what is it that gives you the confidence that you'll be able to achieve it?

There are a number of factors that give us confidence in our full year ARR revenue run rate guidance. First, we're significantly scaling up our data center capacity this year, and we will have more than enough to support this ARR number. Second, we also have not yet deployed all of our H200 GPUs. We have Blackwells reserved and coming online later this year, which may be the main source of our income. Finally, we entered 2025 with great momentum. Even with existing capacity and based on contracts already in place, our March ARR will be at least $220 million, and we have more potential deals to come soon. So we feel very good that we are well on track to hit the ARR guidance through the end of 2025, and we believe that the scale opportunity could be even much bigger.

Thank you, Arkady. There's one question about Q4 and the revenue in Q4. Roman, I wonder if I can come to you to just explain a little bit of how we saw the revenue dynamics in the last quarter.

Yeah, thank you, Tom. Okay, talking about Q4 revenue and analyzed revenue run rate as of the end of Q4, I believe these were mostly timing issues that were very specific for Q4. Now we feel that we are very much on track. If we deepen some details, we observed that deals with customers took longer than we observed in previous periods of 2024, as customers became much more selective and wanted to do more in-depth proof-of-concept testing or proofs of concept. This was anticipated, but because of the longer lead times, we were not able to replace a couple of large customers that completed their engagement with us in Q4 before the end of the year. We had a couple of new efforts focused on launching our new AI cloud platform, which took some resources to support customer migration. Now we are done with that and focused on scaling. It's also worth mentioning that during this period, we were busy building out our sales and marketing teams, which we had to do from scratch, but we started to see early results in terms of new contracts. To reiterate, as Arkady said, this was more a timing issue, and we are back on track in 2025.

Okay, thank you very much, Roman. And actually, I'll stay with you. It picks up on a topic that you briefly addressed there around the sales function. Can you give a little bit more color in terms of the ramp-up of the sales function and just generally, when you think you're going to start to see that flowing into additional deals and revenue?

Sure. I think we made very good progress on hiring front and we're starting to see the benefits with new customer additions and a ramp-up in revenue in this quarter, as Arkady mentioned. We were focused on building our sales, marketing, and customer success functions in the US because many of our customers come from there. Regardless of the strength of our hires, it typically takes about six months or more for new sales hires to become fully productive. So, I believe we are moving in the right direction now and we see some results already, but the growth opportunity ahead of us is huge, and we'll continue to develop our sales, marketing, and other customer-related functions.

Thanks very much, Roman. I'll stay with you for another question, which is around the customers. Can you give some color in terms of the types of customers we are working with and attracting, and if there's anything you can comment on in terms of the length of contracts we're seeing?

In terms of customers, I want to emphasize that we are building a very flexible platform that allows us to attract and work with a wide variety of customers, from small ones to large enterprises. Many of our customers are native GenAI startups and tech-native companies who appreciate the flexibility and scalability of our platform, which allows us to provide services very quickly. We see a diverse mix of contracts, including short-term on-demand contracts that we benefit from because we believe we’re one of the best providers in the market who can serve cloud-type workloads. As the Blackwells come online, we anticipate moving to more of a mix of short-term as well as long-term contracts, since at the beginning of the generation of Blackwells, we expect to sign longer-term contracts.

Okay, that's great. And just a reminder to all the investors on the line, you can send through questions via the chat function.

There's a question about the competitive environment. So, can you help us think about what the competitive environment looks like now? Roman made a reference to longer deal times. Is that due to increased competition in the market? Generally, how do you see it evolving going forward? In terms of market developments, the longer lead times for deals are less a function of increased competition in the market and more a reflection of the increasing maturity of our customers and the larger scale of the opportunities we are seeing now versus six months ago. This reflects the competition on the customer side. We are now seeing longer proof of concepts with new customers, and as we build out our AI-specific cloud platforms, we expect this trend to work in our favor as we not only demonstrate our price advantage but also the quality and flexibility of our platform. We are increasingly working with customers looking for clusters in the multiple thousands of GPU size range. Logically, these represent more significant investment decisions and therefore take a bit longer from a sales cycle perspective.

Thank you very much. There’s a question regarding DeepSeek. DeepSeek took the market by storm a couple of weeks ago. What do we think about it and what has been the impact on our business, if any? Arkady, maybe I can ask you to share your thoughts?

DeepSeek just highlights that the nature of this market is very dynamic. It is a great example that demonstrates that our strategy to deploy flexible and extendable AI-focused cloud infrastructure is working because we were able to meet the demands of the customers. At the infrastructure level, we saw incremental demand for several thousand NVIDIA chips, H200s, because that was the best processor to run inference with DeepSeek. We had a spike in demand for those chips at the end of January. We are ready for more DeepSeeks on the way. The industry is very young, and these kinds of things, like DeepSeek specifically, just lowered the bar for the really good high-end models, which will help to accelerate the growth of the whole industry.

Thank you for that, Arkady. We have a question around the full stack. We’ve talked about how we see that as an interesting advantage against our peers in the space. Can you give us a bit more color on how we're thinking about full stack, why we see it as an advantage, and what type of customers are utilizing particularly the software layer at the top of the stack? Daniel, maybe you can address this?

Having a full-stack approach sets us apart in the marketplace. For us, it is comprised of four main components. The first is our ability to leverage our experience in building and operating data centers specifically with high power-intensive workloads that we see across the AI landscape. We are experts at building high power use efficiency (PUE) data centers, which support our cost advantage among peers. Coupled with that is our expertise in developing our own hardware. This gives us a massive advantage in terms of our ability to provide the most cost-effective solution on the market. We have built an AI-specific cloud platform from the ground up tailored to AI workloads. This helps us deliver the flexibility and reliability that our customers need, especially for deploying AI infrastructure. Lastly, we provide value-added services that extend the economic life of our GPUs. Overall, we believe our investments across the stack will pay significant dividends in the mid to long term.

That’s great, thank you very much. There’s a question around hardware deployment plans for this year. Andrey, maybe I can come to you on this one. Can you update generally and also more specifically when do you expect to deploy the GB200s and B200s in the next Blackwell series?

Sure, Tom. We are continuing with the deployments of H200s, which will be available to customers in late March or early April. After that, we will switch to the Blackwell generation, including B200, GB200s, and GB300s later in the year. B200 should be available in Q2, while GB200 should be on the platform in Q3. We plan to deploy GB300s later this year.

Very good; we're all waiting for the Blackwells to come online. Thank you, Andrey. The next question is, Neil, actually, perhaps I can come to you on this one. How should we think about the cadence of revenue run rate and revenue over the year?

We are really in the early days of building our business. There are many variables, including how quickly we can build data centers, the time of GPU delivery, and the deployment and availability of those GPUs. More H200s will be coming online in Iceland and Kansas City by April, and then we'll follow up with GPU deployments for Blackwells afterward. Therefore, we expect most of our ARR and revenue will come in the second half of the year and probably be weighted more towards the end of the year.

Okay, thank you, Neil. The next question is about investment plans for 2026 and beyond, specifically about raising capital to support those future expansion plans.

Right now, the full management focus is on executing the plans for 2025. As I reiterated in the press release and as Arkady mentioned, we are targeting to exit the year with an ARR of $750 million to $1 billion. Based on positive dynamics coming into 2025, we're confident that we're within reach of that target. At the same time, we're looking at the roadmap for the next generation of GPUs. We believe the opportunity here is very significant. Moving forward, our aim is to grow as quickly and aggressively as we can to maximize value for shareholders. This will certainly require significant capital beyond what we currently have, but we're confident in our ability to fund this growth. We've seen strong interest and demand, and we'll be opportunistic about when and how we raise.

We have another question around the next generation Blackwell series. Roman, maybe I can come to you on this one. We launched presales of GB200s and B200s right at the end of 2024. Can you update on the progress there and the feedback from the market around the next generation?

We are still working through the initial customer demand for Blackwells as that is functionally dependent on delivery and deployment timelines. Demand is positive at this stage, and we expect to complete pre-sales for a proportion of the initial deliveries. We are discussing a variety of reserve contracts, with lengths from one year and higher, and we have multiple thousands of GPUs pre-committed before they are delivered. We see positive dynamics supported by our focused efforts in building sales and marketing, as well as strong overall market demand. We'll keep you updated on the Blackwell developments in future calls.

Thank you very much, Roman. One moment. The next question is around return on invested capital. How should the market be thinking about CapEx investments and the expected returns?

If we consider the Hopper generation of GPUs, we are very excited about this, especially with the H200s coming online. Based on calculations, we believe that the payback period is somewhere between the 2.5 to 3-year range. It is too early to determine the Blackwell payback period. However, we think other aspects of our business can expedite the payback period. We can build efficient data centers, and our developed hardware and full-stack business allows us to offer additional value-added services, enhancing the capital return and creating new revenue streams that enable software-like margins.

Thank you, Neil. We have a few questions asking about how things are going with our other businesses, particularly Toloka, TripleTen, and Avride. Arkady, could you please address their performance?

Let me revisit them. All three are growing very well. Toloka grew revenue again by 140% in 2024 versus 2023. Last year, they pivoted the platform to focus on more expert-driven tasks rather than just simple crowdsourcing for data labeling. Most importantly, they added nearly all the leading AI labs as their customers. In TripleTen, the revenue increased even more, by 250%. They closed 2024 with 14,000 students in the US, which was a record in their short history. Avride established a partnership with Uber in the US, and their delivery robots are being tested in multiple markets for Uber Eats in Dallas, Austin, and Jersey. We recently deployed around 100 robots for food delivery at Ohio State University. They achieved over 1,000 daily deliveries in the first week alone, which is impressive. Additionally, Avride received certifications in Japan and began exploring opportunities there. We plan to bring co-investors to this business due to substantial capital requirements and significant market opportunities, but we will update everyone as it progresses.

Thank you very much, Arkady. Just to confirm a couple of numbers mentioned earlier, with the Grubhub partnership, we've indeed deployed around 100 robots for food delivery service, achieving 1,000 daily deliveries in the first week. We're very pleased with how that is going and see significant opportunities in that space, along with interest from outside. A reminder, please continue to submit questions via the chat function. We still have a bit more time. There’s been a question on the regulatory front.

How does the US IFR on the Framework for Artificial Intelligence Diffusion impact Nebius's core business outlook? Have you assessed whether Nebius will qualify for universal verified end user status? It remains to be seen how the framework will be implemented in practice, but our initial reading suggests that as a Netherlands-headquartered business with the largest data center in Finland and significant expansion focused in the US market, we expect to qualify for UVEU status. We do not anticipate any material negative impact on our business at this time, and we will be closely monitoring how it will look in practice.

Continuing with a regulatory focus, there's a question about servicing US clients despite many data centers being in the EU. Do we foresee risks if tariffs are imposed against the EU? Are we considering a corporate relocation to the US?

While our initial data center footprint started in Europe, we are actively building out our physical footprint in the US, which includes data centers, GPU hardware, and our team. We do not foresee any material risks to our business concerning tariffs. As a global business powered by the needs of AI companies worldwide, many of whom are located in the US, it makes sense for us to build out a US presence. We have sales and customer-facing offices in San Francisco and Dallas and will continue to develop our US operations.

There’s a question concerning the Stargate project and how Nebius might benefit from European investments in AI infrastructure.

We believe that AI infrastructure is a huge opportunity, and it’s encouraging to see strong focus in this space. Eventually, someone will need to build all of this infrastructure, and our technology and expertise position us as one of the best companies to help build AI cloud data centers at scale.

Thank you very much, Arkady. There’s a question on pricing. Roman, can you clarify if we saw price declines for the H100s in Q4 of the last year?

Yes, we did experience some price pressure in Q4 as was expected once the H200s came online. However, we believe we have one of the best cost structures in the market and can succeed even in a pricing pressure environment. Furthermore, most of our fleet will consist of new generations of chips like Blackwells this year, allowing us to maintain healthy margins going forward.

Can you clarify our current status regarding GPU deployments?

We will have around 38,000 GPUs deployed by the end of March, with 20,000 of those being H200s. We started deploying these numbers for the last half year. The H200s became available for deployment in late October and November, covering the second half of Q4 and the first quarter.

Neil, can you provide an update on the revenue and EBITDA guidance?

As you read in our press release and from Arkady's remarks, we reiterated our annualized run rate revenue guidance for exiting 2025 at $750 million to $1 billion. This reaffirms our revenue and EBITDA guidance provided previously, which projects revenue for Nebius Group in the range of $500 million to $700 million. We expect EBITDA to remain negative for the year, but we anticipate passing breakeven at some point during the year. Timing on this is uncertain, as numerous factors will influence it as we scale the business. Blackwells coming online and pre-sale developments should drive higher revenue and margin growth.

There was a specific question regarding churn with some of our clients. Could you provide more details?

Churn is expected in an AI market; it’s embedded in our plans. Churn indicates our unique customer range, from single-instance inference with AI Studio to large implementations that use thousands of GPUs. Our demand for H200s surged as DeepSeek gained attention. Churn reflects our learning process and customer interactions, which we aim to address as we progress into ‘25.

Neil Doshi, let's turn to you for an update on sell-side analyst coverage and the IR calendar for the year.

We are building out the Investor Relations plan for 2025. Currently, we have no sell-side analysts covering us. It’s a priority to enlist analysts from broker-dealer firms to provide coverage. We are having promising discussions and will attend investor conferences this year to elevate Nebius's profile. Arkady will be speaking at the Goldman Sachs Disruptive Technology Symposium in London in March.

We have a follow-up question about Dutch tax liability. Can you provide an update?

We previously estimated a potential Dutch tax payment of around $400 million, but through discussions with the Dutch tax authorities, we were able to reduce the potential obligation. We submitted the required filings last month and paid $180 million, which we believe will be the final amount, freeing up $220 million for expansion plans.

Thank you very much to everyone for joining us on the call. This is only our second quarterly results call since we became Nebius, but we’re looking forward to many more. Arkady, do you want to wrap up?

Thank you, Tom. Again, the company actually didn't exist seven months ago. Look where we are today. We are public on NASDAQ. We raised our investor profile. We started building our infrastructure, and now we have hundreds of megawatts of data centers guaranteed this year with huge plans going forward. We deployed the first tens of thousands of GPUs and are waiting for the next generation with more tens of thousands to deploy this year. We completely relaunched our cloud platform and Inference-as-a-Service platform as well. We now have hundreds of customers, growing quickly into the thousands. We believe we will secure big contracts on this new generation of Blackwells. All our businesses are growing well, and there's a lot going on. Overall, the group, which didn't exist just seven months ago, is doing well. I’m looking forward to great results this year.

Thank you so much, Arkady. It’s been a busy season for us, and we look forward to keeping in touch with everyone over the coming periods. Thanks again and be in touch.