Cerebras Systems CBRS shares have dropped a massive 12% since it reported second-quarter 2026 results on Wednesday (Aug. 12). The company delivered core revenues of $209.9 million, which jumped 103% year over year, while core cloud and other services revenues surged 287% year over year. However, CBRS’ third-quarter 2026 core revenue guidance of $214-$216 million implies only about 2-3% sequential growth from the second quarter of 2026, which failed to impress investors. Cerebras also acknowledged that quarterly revenues can vary significantly depending on the timing of large cloud-capacity additions and hardware shipments. Investors may also have reacted negatively to the expected deterioration in profitability during the third quarter of 2026.
Cerebras shares are also trading at a premium, as suggested by the Value Score of D. So, what should investors do with the CBRS stock post the dip? Let us find out.
Margin Compression to Hurt CBRS’ Near-Term Prospects
In the second quarter of 2026, core gross margin declined 590 basis points (bps) sequentially to 40.6% in the second quarter of 2026 as Cerebras temporarily rented systems back from customers to satisfy strong inference demand. The company expects the third quarter of 2026 to represent the trough, with core gross margin guided to 38-40%, while core operating margin is expected to deteriorate to negative 25-23% from negative 16% in the second quarter of 2026. Although management expects margins to recover as higher-cost rented capacity is replaced by Cerebras-owned systems, the near-term margin pressure likely tempered enthusiasm around the revenue outlook. For 2026, Cerebras now expects core gross margin between 41% and 43% while operating margin in the negative 19-17% range.
Cerebras is also perceived as risky by investors due to customer concentration and dependence on OpenAI. Revenues remain concentrated among a small number of customers as three customers individually represented 34%, 32% and 10% of second-quarter 2026 revenues, while a significant portion of Cerebras’ $25.4 billion remaining performance obligations (RPO) is tied to its OpenAI agreement. The company acknowledged that OpenAI will remain a meaningful contributor in 2027, even though its share of revenues should decline as AWS and other customers scale.
Moreover, conversion of RPO into revenue requires substantial infrastructure deployment. Roughly 22% of CBRS’ RPO is expected to be recognized during the first 24 months through June 2028, while another 43% in months 25-48 and the balance thereafter. Although this strong RPO provides exceptional long-term visibility, the risk remains with the timing of customer deployment decisions. Cerebras explicitly described data-center availability as an industry-wide bottleneck and said that even the more than 600 MW already live or contracted through 2027 is “not nearly enough” to meet demand.
Cerebras’ prospects are suffering from stiff competition from the likes of NVIDIA NVDA, Advanced Micro Devices AMD and Intel INTC in the AI space. NVIDIA is dominating the AI GPU market through its Blackwell, Hopper, DGX/NVL systems that are used for AI training and inference. AMD’s MI300 and MI350 accelerator families are competing with CBRS in hyperscale AI infrastructure and enterprise AI clusters. Meanwhile, Intel’s Gaudi AI accelerators target enterprise AI training and inference as a lower-cost GPU alternative.
In the past month, CBRS shares have jumped 25.5%, underperforming AMD, NVIDIA and Intel. Shares of AMD have dropped 8.4%, while NVIDIA and Intel returned 6% and 1.5%, respectively.
CBRS Stock’s Price Performance
Image Source: Zacks Investment Research
Strong Backlog & Expanding Manufacturing Capacity Aids CBRS
Cerebras’ strong RPO provides the company with strong visibility into future demand. The company expects core revenue to more than triple in 2027 and continue growing at multiples in subsequent years as this contracted demand is converted into revenue. Importantly, CBRS said the existing RPO does not include backlog from AWS or other hyperscalers, suggesting additional hyperscaler wins could represent incremental upside rather than simply supporting the existing growth target.
Cerebras is aggressively building the physical capacity needed to monetize demand. The company has secured more than 600 MW of data-center capacity that is either operating or expected to come online by the end of 2027, while its pipeline of additional opportunities is measured in gigawatts. Manufacturing capacity is expected to increase by more than 10 times during 2026 and expand further in 2027. CBRS has also secured the TSMC wafer supply required for its near-term growth plans and avoids several key industry bottlenecks because its architecture does not require HBM, CoWoS packaging or leading-edge 3nm fabrication.
Moreover, Cerebras expects significant gains in both performance and throughput. The company plans to double system speed annually over the next several years and increase throughput by more than 20 times over roughly the next 18 months. Higher throughput means more tokens generated per system and per watt, lowering the cost of inference and increasing the revenue-generating capability of each data-center installation. This technology progression should be an important driver of longer-term gross-margin expansion, with Cerebras ultimately targeting core gross margins above 60%.
CBRS’ Estimate Revisions Show Improving Trend
The Zacks Consensus Estimate for CBRS’ 2026 loss is pegged at 89 cents per share, narrower than a loss of $1.14 per share over the past 60 days.
Cerebras Systems Inc. Price and Consensus
Cerebras Systems Inc. price-consensus-chart | Cerebras Systems Inc. Quote
The consensus estimate for third-quarter 2026 loss is pegged at 32 cents per share, narrower than a loss of 44 cents per share over the past 60 days.
CBRS Stock: Here’s Why You Should Buy
Cerebras’ near-term outlook remains clouded by margin compression, customer concentration and the execution risks associated with rapidly expanding data-center capacity. However, the company’s $25.4 billion RPO, expanding manufacturing footprint, strong liquidity position and differentiated wafer-scale architecture provide solid visibility into long-term growth. Partnerships with OpenAI and AWS, along with continued improvements in inference speed and throughput, should further expand its addressable market and support margin improvement over time.
Moreover, Wall Street’s consensus price target implies roughly 24.32% upside from current levels.
Image Source: Zacks Investment Research
Cerebras currently has a Zacks Rank #2 (Buy), which implies that investors should start accumulating the stock right now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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