Cerebras stock plunges 20% after earnings; CEO says margin outlook misunderstood

Shares of Cerebras Systems dropped almost 20% on Wednesday, hitting a new low that nearly matched the company's IPO price. The decline came despite the company reporting better-than-expected first-quarter earnings on Tuesday.

In its first earnings report since going public, the AI chipmaker projected a narrower gross margin for its core business, forecasting a full-year margin of 38% to 41%, compared with the 47% reported in the first quarter.

Cerebras CEO Andrew Feldman told CNBC that investors had misunderstood the company’s margin guidance. He explained that Cerebras will need to rent back some equipment from one of its largest customers.

During an earnings call, the company said it decided to make more capacity available sooner by temporarily renting its own systems back from an existing customer while it builds out and deploys its own data center capacity. The company noted that this would cut into profit margins this year.

According to the earnings report, revenue for the quarter reached $193 million, up 94% year-over-year. Net loss narrowed to $14 million, down from $23.9 million a year earlier.