Cerebras (CBRS) Stock Sinks 14% on Weak Margin Forecast

Cerebras Systems, the California based AI chip designer, is facing its sharpest single day selloff since going public after warning that full year profit margins will fall well below what it posted in the first quarter. Shares of Cerebras Systems Inc. (NASDAQ:CBRS) dropped sharply on news that undercut the optimism that surrounded its blockbuster IPO.

At a Glance

• CBRS closed at $186.12, down 17.89% on the day, touching near its 52 week low of $185.22
• Market cap sits at $49.79 billion after the selloff wiped out more than $6 billion in value
• Cerebras guided full year 2026 adjusted gross margins of 38% to 41%, down from 47% in Q1
• Morgan Stanley raised its price target to $273; TD Cowen pointed to Amazon and OpenAI deals as long term drivers
• A $20 billion multi year deal with OpenAI and a pending Amazon Web Services partnership anchor the growth story

What Spooked the Market

Cerebras delivered its first earnings report as a public company and the headline figure that rattled investors was the margin outlook. The company projected adjusted gross margins of 38% to 41% for all of 2026. That is a meaningful step down from the 47% it recorded in the first quarter, and it sits far below what peers like Nvidia post in the mid 70% range and Advanced Micro Devices in the mid 50% range.

There is a structural reason for that gap. Analysts have noted that Cerebras makes unusually large chips, which carry higher production costs. The company is also renting back its own systems from an existing client to cover near term demand while it builds out additional data center capacity. That arrangement compresses margins in the short run.

Even so, the 38% to 41% guidance came in ahead of what Wall Street had penciled in. Analysts had forecast margins of roughly 29.58%, so Cerebras cleared that bar by a wide margin. The selloff reflects how high expectations had been set rather than a miss against consensus.

The Partnership Pipeline

CEO Andrew Feldman used the post earnings call to remind investors why the company went public at a premium valuation in the first place. Cerebras has a $20 billion multi year agreement with OpenAI, and Feldman confirmed that OpenAI's GPT 5.4 is currently running on Cerebras chips. Under the deal, the ChatGPT maker is set to deploy 750 megawatts worth of Cerebras semiconductors.

Feldman also said Amazon Web Services will begin using Cerebras chips in its data centers soon, with revenue from that relationship expected to flow within the next year. TD Cowen flagged both the Amazon and OpenAI agreements as central to the company's long term growth thesis.

What the Numbers Say

Valuation. At $186.12, CBRS is trading near the bottom of its 52 week range of $185.22 to $386.34. The stock has shed more than 27% since its market debut, reflecting the broader cooling of enthusiasm around AI infrastructure names. No P/E ratio or EPS figure is available at this stage given the company's early public life, which means the market is pricing the stock almost entirely on future growth expectations and the value of its partnership book.

Momentum. An RSI of 33.73 places the stock just above the conventional oversold threshold of 30. That reading suggests the selling pressure has been severe and sustained, though it does not signal a guaranteed floor.

Yield. Cerebras pays no dividend, which is typical for a capital intensive growth company at this stage. The $49.79 billion market cap reflects the premium investors are still assigning to its chip architecture and its customer relationships despite the margin concerns.

Bull case. Two of the most consequential names in AI, OpenAI and Amazon, have committed to using Cerebras chips at scale. If revenue from those deals ramps as expected, margins could recover as the company spreads fixed costs across a larger base of data center capacity. Morgan Stanley's revised target of $273 implies meaningful upside from current levels.

Bear case. The gap between Cerebras' margins and those of Nvidia or AMD is not a rounding error. Investors who bought the IPO on the assumption that margins would track toward industry norms may reassess. The chip rental arrangement that pressures near term margins is a workaround, not a permanent fix, and any delay in the Amazon revenue timeline would extend the period of below peer profitability.

Frequently Asked Questions

Why did Cerebras stock fall so sharply?

The company's first post IPO earnings report included a full year gross margin forecast of 38% to 41%, down from 47% in the first quarter and well below rivals like Nvidia and AMD. That gap raised questions about the company's cost structure and near term profitability.

What is the OpenAI deal worth?

Cerebras signed a $20 billion multi year agreement with OpenAI. Under the deal, OpenAI will deploy 750 megawatts of Cerebras semiconductors, and its GPT 5.4 model is already running on the company's chips.

Is Cerebras profitable?

The company has not disclosed a public EPS figure at this stage. Its margin guidance suggests profitability is constrained in the near term by chip size economics and temporary capacity arrangements.

What is Morgan Stanley's view on CBRS?

Morgan Stanley raised its price target on Cerebras to $273 from $250 following the earnings report, signaling continued confidence in the longer term story despite the margin miss on guidance.

Where Things Stand

Cerebras is navigating a rough stretch. The margin outlook disappointed relative to where the stock was priced, and the AI infrastructure trade broadly has cooled since the IPO frenzy earlier this year. What has not changed is the company's position inside two of the largest AI compute deployments on the planet. How quickly those revenue streams translate into improving margins will determine whether $186 looks like a floor or a waypoint.