Cerebras Stock Sold After Earnings. Crazy Sales Investors Ignore Smart Money.

The market doesn’t always reward a good quarter right away, and Cerebras Systems (CBRS) could be the latest example. Shares of Cerebras – which designs AI chips and develops AI infrastructure and is a potential rival to AI giant Nvidia Corporation (NVDA) – fell after reporting its first earnings results as a publicly traded company. Investors have weighed in on near-term gross concerns. But many Wall Street analysts say the market may be missing the forest for the trees.

Morgan Stanley, for one, has power over Cerebras. Instead of backing down after the earnings drop, analyst Joseph Moore reiterated his “Overweight” rating and raised his price target to $273 from $250. His view is that the idea of ​​a soft margin indicates a conservative direction rather than a reduction in demand. In fact, the analyst believes that Cerebras is playing the long game as it builds one of the largest AI cloud businesses in the world.

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So, while the stock is still stumbling after earnings, Wall Street’s smart money isn’t raising a white flag. If anything, commentators seem to regard the setback as a bump in the road rather than the end of the journey. And that’s a reminder that sometimes the market focuses on the next quarter while long-term investors keep their eyes on the big prize.

About Cerebras Stock

Founded in 2015 and based in Sunnyvale, California, Cerebras Systems is one of the fastest growing names in AI hardware. The company has built its reputation on the Wafer-Scale Engine (WSE), a processor etched on an entire silicon wafer designed to train and run AI models much faster than conventional chips.

Its CS-2 and CS-3 programs serve cloud providers, enterprises, research institutions, and government-backed AI projects. With operations spanning multiple regions and a market cap of $36.3 billion, Cerebras is quickly positioning itself as a credible contender in the booming AI infrastructure market.

If there’s one word that’s described CBRS stock since its IPO, it’s volatility. The AI ​​chip maker entered the public market in May riding the same AI wave that has lifted much of the semiconductor industry, and investor appetite has proved stronger than expected.

On May 14, CBRS rose nearly 68%, ending at $311.07 after touching an intraday high of $386.34. For a moment, it seemed that Cerebras was infallible. Then the real thing started to set in. As the IPO buzz subsides, investors are starting to look more closely at the company’s rich value, and broader enthusiasm for all AI stocks is cooling. Shares are slowly moving back to the low $200 range before finding support.

Momentum rebounded earlier this month after the IPO expired. A series of bullish analyst starts helped revive optimism, with Wall Street highlighting Cerebras’ fast-moving technology and long-term AI opportunities.

The latest change comes after the company’s first quarterly earnings report. Although results were strong, management’s guidance for lower gross profit unnerved investors. The stock fell 19.6% on June 24 and fell another 7.5% in the following session. Over the past month, CBRS has fallen 24.9%, including a 22.6% slide in the last five trading days, indicating that while the long-term AI story remains the same, the road ahead is unlikely to be smooth.

Cerebras First Earnings Report as a Public Company Packed with Lots of Goodies

For a company that has only been public for a few weeks, Cerebras has delivered a strong first impression. Its results for the first fiscal quarter of 2026, released on June 23, showed that demand for its AI hardware and cloud platform continues to grow, while profits are slowly moving in the right direction.

Core revenue jumped 92.3% year-over-year (YOY) to $191.3 million. Hardware remained the biggest contributor, with revenue up 60% YoY to $111.6 million, but the real highlight was the Cloud and Other Services business, where revenue increased 167.4% YOY to $79.8 million. That mix is ​​important because cloud services typically command high margins and generate consistent revenue over time.

Profit took a significant step forward. Net profit rose 112.4% to $89.1 million, boosting the company’s gross margin to 46.5%, from 42.1% last year. Hardware generated a gross margin of 42%, while the premium cloud business posted an even stronger margin of 52.9%.

Losses continued to decrease as the business grew. Core operating loss decreased by 81.8% to $3.5 million, and net loss decreased by 83.1% to $2.5 million. Perhaps the biggest milestone was adjusted EBITDA, which swung to a profit of $12.7 million from a loss of $15.4 million in the same quarter last year.

Additionally, the balance sheet gives Cerebras room to continue investing aggressively. The company ended the quarter with $1.7 billion in cash and cash equivalents, more than doubling from $701.7 million at the end of 2025.

Beyond the numbers, Cerebras has continued to expand its AI ecosystem. Alongside its high-profile OpenAI partnership, the company launched a multi-year agreement with Amazon’s (AMZN) Amazon Web Services to deliver high-speed AI innovation globally, expanding its reach across startups, traditional AI businesses, and large enterprises.

Looking ahead, management expects Q2 core revenue of approximately $194 million, representing 88% YOY growth. It is targeting a core yield of 36% to 38% and a core operating ratio of 30% to 32%. For the full fiscal year, Cerebras is forecasting $855 million to $865 million in underlying revenue — about 69% year-over-year growth at the midpoint — and gross margin of 38% to 41%. While margins are expected to fluctuate as the company rapidly expands its cloud infrastructure, management’s outlook suggests that growth remains a priority, with demand showing little sign of slowing.

While the company is still in growth mode, so profits are not expected overnight. Wall Street projects a loss of $0.98 per share in fiscal 2026, followed by a sharp turnaround in 2027, when earnings are forecast to rise to $0.96 per share.

Why Morgan Stanley is still betting on Cerebras

Cerebras may have stumbled after its first earnings report as a public company, but Morgan Stanley believes investors were caught up in the short-term noise. Analyst Joseph Moore maintained his “Overweight” rating and raised his price target to $273 from $250, arguing that the company’s long-term story remains strong.

Moore called the first quarter a strong debut, saying the results were largely in line with expectations following the recent IPO. He believes management is deliberately setting expectations, especially as Cerebras builds its AI cloud business. While margins have appreciated, that’s not because demand is slowing. Instead, the company temporarily leased hardware from G42 to quickly meet customer needs while expanding its cloud infrastructure.

Morgan Stanley sees OpenAI’s 750-megawatt contract as a major growth engine for the next few years. Although the deal gives OpenAI an option to buy the hardware later, Moore continues to model it as a cloud services business, which he considers a strong assumption. He also highlighted that Cerebras already supports ChatGPT 5.4 and is working on future AI models, emphasizing the power of its technology.

The company believes that Amazon can contribute significantly in the long run. While the opportunity is still being modeled properly, this week’s final deal is an important milestone. Moore noted that if more power and data center capacity comes online, Cerebras should have more computing power available to expand its business with Amazon. In Morgan Stanley’s view, the immediate margin pressure is the cost of building a larger AI infrastructure business, while demand is stronger than ever.

What Are Some Analysts Saying Behind Cerebras’ Recent Selloff?

Morgan Stanley isn’t the only firm to take a back seat after the Cerebras acquisition. Some Wall Street analysts were also upbeat, saying the company’s first report as a public company strengthened, rather than weakened, the long-term investment case.

Needham analyst N. Quinn Bolton reiterated his “Buy” rating and maintained a $300 price target after Cerebras beat expectations for both Q1 results and 2026 revenue and gross margin outlook. Bolton pointed to strong customer demand, improving cloud pricing, and faster-than-expected margin improvement as key reasons for his optimism.

He also highlighted that OpenAI’s GPT-5.4 is already running on Cerebras hardware, with work in progress to bring GPT-5.5 to the platform. Another bright spot was Cerebras’ recently concluded new deal with Amazon Web Services, where Trainium3 chips will handle pre-filling while Cerebras’ CS-3 systems render the code. Needham expects that partnership to begin contributing to earnings by 2027. The vendor company also noted that the biggest obstacle for Cerebras is not the supply of chips, but simply having enough data center capacity to meet the demand.

Meanwhile, Wedbush analyst Matt Bryson maintained his “Outperform” rating and raised his price target to $280 from $270. Bryson said that the company’s earnings report has strengthened his bullish thesis. He believes management is setting realistic goals that leave room for success, while strong values ​​confirm the value of Cerebras’ technology. More importantly, Bryson sees OpenAI’s collaboration with Amazon as powerful long-term drivers that significantly reduce the risk of the company falling short of expectations.

Wall Street is very bullish on CBRS. The stock carries a consensus rating of “Strong Buy”, with eight out of 10 analysts covering the stock recommending a “Strong Buy,” one a “Neutral Buy,” and one other analyst assigning a “Hold” rating.

Analyst price target estimates suggest CBRS has a potential upside of 62.8% from current levels. The Street-high target of $325 means the stock could rally 79.5%.

At the date of publication, Sristi Suman Jayaswal did not have (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published Barchart.com