Backlog is converting to fast cloud growth while the shares trade at a discount after halving. I expect delivery to lift sales and profit to support a higher price.
Key points
- $19.3 billion in sales in Q1 FY27 rose 30% in Q1 FY27 on cloud strength.
- $28.5 billion in building spend in Q1 FY27 topped $23.1 billion in operating cash in Q1 FY27.
- 97.9% fleet use in Q1 FY27, or share of rented AI computers in use, with renewal prices up 20% in Q1 FY27.
The call
Doubt sets the price today. At $143.93 a share today the stock trades at about 22 times earnings over the past year, or price paid per dollar of profit. That discount reflects $125.3 billion in borrowings last quarter and negative cash flow after building last quarter.
Revenue history with near-term outlook ($ billions)- Reported revenue
- Muse forecast
Source: SEC XBRL facts to Aug 31 2026; E = Muse forecast to May 2027 guide.
Delivery will beat fear next year. Infrastructure sales grew 121% last quarter to $7.4 billion in sales last quarter. Fleet use stayed at 97.9% last quarter with renewal prices up 20% last quarter, which shows backlog turning into sales next year.
Cash coming in still trails cash going out ($ billions)Source: SEC XBRL facts; Q1 FY27 OCF includes $11.4B customer prepayments per 10-Q.
Valuation
| Step | Figure |
|---|
| Guided sales for year to May 2027 | $90 billion |
| Forecast sales for year to May 2028 | $112 billion |
| Forecast profit per share for year to May 2028 | $9.20 a share |
| Multiple paid per dollar of profit | 19 times |
| Twelve month target to Oct 2027 | $174.80 a share |
A 19 times multiple fits a fast grower carrying heavy debt. Peers without this debt trade near 30 times yearly profit. A 21% gain in the coming year after a 50% fall in the past year favors a Buy.
Risks
- Builds stall and dent sales next year, which you would see in fewer megawatts delivered each quarter.
- Customer prepayments shrink next year, which you would see in lower operating cash each quarter.
- Older chips lose value next year, which you would see in lower renewal prices and use rates each quarter.
What would change my mind
I would turn cautious if fleet use or renewal prices fall for two quarters in the coming year while net borrowing keeps rising.