Cerebra Systems shares fell nearly 20% on Wednesday, even though the company reported better-than-expected first-quarter profits on Tuesday.
That’s because the AI chip maker, in its first earnings report since going public, said it expects core business gross margins to be between 38% and 41%, compared to the 47% reported in the first quarter, and full-year profit margins of 38% to 41%. The stock hit a new low on Wednesday, almost reaching the company’s IPO price.
Cerebra CEO Andrew Feldman told CNBC that investors have misunderstood the company’s margin guidance, noting that Cerebra will need to re-lease some equipment from one of its largest customers.
The company said on an earnings call that it decided to temporarily rent back its systems from existing customers to make more capacity available faster while it builds and deploys its own data center capacity. The company said this will reduce its profit margins this year.
According to the company’s earnings report, revenue for the quarter reached $193 million, an increase of 94% from a year ago. Net loss narrowed to $14 million from $23.9 million in the year-ago period.
