CoreWeave 11% Bond Yield Analysis ---- The Risks of Surging CapEx and Debt

• CoreWeave’s total revenue doubled YoY in the 1H of 2026, while operating losses narrowed in the Q2, signalling the emergence of operating leverage. Backlog reached US$104.2 billion, providing strong revenue visibility. However, depreciation and interest expenses continue to keep the company in the red.

• Total debt surged 218% YoY to US$35.6 billion, with net gearing reaching 570%. Elevated debt levels and high interest rates have driven up the interest burden. Interest coverage stands at only around 3.1x, FCF remains negative, and CoreWeave will continue to rely on external financing.

• CoreWeave bonds offer an attractive yield to maturity of around 11%. They are more suitable for investors who are constructive on the AI data centre outlook and can tolerate high price volatility. The bonds may also serve as a tactical trading instrument.

CoreWeave is a cloud computing provider purpose-built for artificial intelligence (AI). It leases high-density GPU computing capacity from its data centres to AI labs, hyperscale cloud providers and enterprise customers. The company listed on Nasdaq in March 2025 (ticker: CRWV) and currently has a market capitalisation of approximately US$50.2 billion. While revenue has doubled YoY, this growth has come at a steep cost: total debt has risen 218% to US$35.6 billion, net gearing has reached 570%, and the FCF deficit continues to widen. Management has yet to provide a timeline for FCF turnaround. For bond investors, the key question is whether the approximately 11% yield to maturity on CoreWeave bonds adequately compensates for the risks.

This note examines the cost structure of the debt, debt-servicing cash flows, and whether the backlog can be converted into revenue on schedule.

Depreciation and Interest Expenses Widen Losses, but Operating Leverage is Beginning to Appear

CoreWeave continued its rapid expansion in the 1H of the year. Revenue grew 112% YoY to US$4.65 billion, but depreciation expenses rose 153% YoY to US$2.54 billion, causing operating losses to widen to US$193 million (see chart 1). Net losses also increased to US$1.37 billion, driven by substantial interest expenses.

Chart 1: CoreWeave’s Operating Performance

Notably, operating leverage is starting to emerge. Operating leverage refers to the improvement in profit margins that occurs when revenue growth outpaces cost growth as the company scales. CoreWeave’s cost structure involves a timing mismatch: costs are fully incurred from the day capacity comes online, while revenue typically takes one to two quarters to catch up. During periods of rapid expansion, a large amount of newly commissioned capacity carries full costs without yet generating commensurate revenue, suppressing overall margins. As the proportion of mature, revenue-generating capacity increases, this drag gradually diminishes. Q2 operating losses narrowed to US$49 million (from US$144 million in the Q1). This marked the first time in three quarters that revenue growth exceeded cost growth, reflecting improving profitability driven by operating leverage. However, the company remains some distance from turning profitable.

Backlog climbed to US$104.2 billion, up 246% YoY. An additional more than US$25 billion in new commitments after the quarter-end has not yet been included. This indicates that demand for computing capacity continues to outstrip supply. Management stated that more than 50% of the existing backlog has already begun delivery and expects this to rise to more than two-thirds by year-end. Approximately 41% of the backlog is expected to be recognised as revenue within the next 24 months, giving CoreWeave relatively high revenue visibility. Management also raised full-year revenue guidance to US$13.2 billion, implying significantly accelerated growth in the second half and the potential for operating leverage to strengthen further.

High-Density GPUs Drive High Debt

CoreWeave’s competitive advantage lies in its high-end, high-density GPU data centres that efficiently deliver AI compute. The trade-off is higher costs, which directly drive elevated Capex. Capex in the 1H of 2026 alone reached US$14.1 billion — already 1.37 times the full-year 2025 level (see chart 2). Full-year Capex guidance stands at US$35–39 billion. As a result, management expects FCF to remain negative for the year.

Chart 2: CoreWeave’s Capex and Debt

As the FCF deficit has widened, total debt has risen 218% YoY to US$35.55 billion, pushing net gearing to a record 570%. Debt levels are elevated. Notably, US$4.4 billion of debt matures within 2026. Combined with Capex needs, CoreWeave’s cash balance of US$6.39 billion is unlikely to be sufficient; the company is expected to continue raising external capital in the second half to bridge the funding gap. Management has not provided a timeline for FCF turnaround, so debt may continue to increase for some time. Supported by its substantial backlog, refinancing pressure is currently manageable. However, should sentiment in the AI infrastructure financing market reverse, the company could face funding constraints that stall growth.

Expanding Debt Scale and Elevated Interest Rates Increase the Interest Burden

Net interest expense reached US$1.18 billion in the 1H, with US$640 million incurred in the Q2 alone. The company expects Q3 interest expense to rise further to US$940 million. Based on first-half operating cash flow of US$3.66 billion, interest coverage is approximately 3.1x — still adequate but with limited buffer (see chart 3).

Chart 3: CoreWeave’s Interest Expense

The continued rise in interest expense stems not only from higher debt levels but also from persistently elevated interest rates. Delayed Draw Term Loans (DDTLs) are CoreWeave’s primary source of debt. The effective interest rates on DDTL 1.0 to 3.0 issued between July 2023 and September 2025 ranged from 9% to 15%. Subsequently, supported by long-term contracts with investment-grade customers (primarily Meta), the effective rates on DDTL 4.0 to 5.0 issued in 2026 have fallen to around 6–9% (see chart 4). Other forms of debt financing have also been unable to secure more favourable rates due to CoreWeave’s relatively low credit ratings. Although CoreWeave attempted to balance its interest costs through convertible bonds and other instruments in the Q2 of 2026, these still account for only a small portion of total debt and have not yet had a decisive impact. Borrowing costs are improving, but they remain a heavy burden for a company that is not yet profitable.

*Delayed Draw Term Loan (DDTL): A term loan facility in which a special purpose vehicle (SPV) acts as the borrower and allows draws to be made in tranches over an agreed period.

Chart 4: CoreWeave’s Debt Structure

Insights from DDTL 4.0: Lower-Cost Financing Provides Runway

CoreWeave relies primarily on DDTLs because of their high drawdown flexibility, which aligns well with the timing of GPU procurement and data centre construction and avoids paying interest earlier than necessary. The facilities are secured by customer contracts and assets, enabling banks to provide large loans at reasonable rates. The most notable example is DDTL 4.0, backed by Meta’s US$19 billion take-or-pay order. Banks extended an US$8.5 billion facility at an effective rate of 5.9%. This demonstrates that when CoreWeave secures similarly high-quality contracts in future, it can obtain lower-cost financing to ease the pressure of early-stage investment.

Customer Quality and Construction Progress are Key to Converting Backlog into Revenue

CoreWeave currently uses its backlog as loan collateral. The value of this collateral depends on the timely conversion of orders into cash inflows. Conversion hinges on two factors: first, customers’ ability to pay, which is tied to customer quality and contract terms; second, CoreWeave’s delivery capability, which depends on construction progress.

In the 1H, the largest customer’s share of revenue fell from 72% in the same period last year to 40%. The largest customer’s share of backlog declined from approximately 85% at the beginning of 2025 to less than 35% by year-end. However, the second-largest customer still accounts for 23%, and the top two together represent about 63%. Concentration has decreased but remains high; changes at a single customer can still have a material impact on revenue. What truly enhances conversion certainty is the nature of the contracts and the quality of counterparties. In 2025, more than 98% of revenue came from committed contracts (primarily take-or-pay arrangements), under which customers must pay regardless of actual usage. In addition, major contract customers such as Microsoft and Meta are investment-grade entities, significantly improving revenue reliability.

By contrast, construction delays represent another challenge to backlog conversion. In November 2025, CoreWeave lowered its full-year 2025 revenue guidance by US$100 million due to delays caused by weather and design changes at third-party developers. Another market concern — power supply — is similarly outside CoreWeave’s direct control, as the company primarily leases third-party sites and power availability depends on the landlords securing it. That said, the growth in active power (commissioned capacity) outpaced the growth in construction work-in-progress in the 1H of 2026, suggesting that construction progress has been reasonably smooth (see chart 5). Nevertheless, because buildings are developed by third parties, ongoing monitoring remains warranted.

Chart 5: CoreWeave’s Active Power Growth

Bond Investment

In summary, CoreWeave’s revenue performance is strong, and its substantial backlog provides relatively high visibility for the coming years. Operating leverage has also begun to appear. However, the cost of growth is elevated Capex that continues to widen the FCF deficit, while debt levels and the interest burden rise in tandem. The data centre capacity that underpins order conversion is built and powered by third-party landlords, so delivery timing is not fully within CoreWeave’s control. In other words, while CoreWeave’s revenue potential is substantial, the heavy debt load pressures debt-servicing capacity. The company’s ability to repay its bonds depends on data centres being completed on schedule and on sustained demand for AI compute — both macro factors.

There are currently two CoreWeave US dollar bonds available on the platform. The bonds are rated B / BB- (S&P / Fitch) and are classified as high-yield (see table 1). The bonds offer a yield to maturity of approximately 11.0%. Investors should note that both are senior unsecured obligations and rank behind the company’s secured debt in the capital structure. Given the uncertainty around CoreWeave’s debt-servicing capacity, the bonds are suitable for investors who are constructive on the AI data centre sector and have the risk tolerance for elevated price volatility. The bonds’ price volatility also makes them potential instruments for tactical trading.

Table 1: CoreWeave Bonds

Technical depreciation and collateral valuation also merit monitoring. The company assumes a six-year useful life for equipment, which is relatively aggressive. Older GPU models still retain value today, but if supply catches up with demand and secondary market prices weaken, accelerated depreciation or impairment may be required. This would simultaneously reduce the value of DDTL collateral and impair refinancing capacity.

Customer concentration and competitive risks should not be overlooked. The top two customers still account for approximately 63% of revenue, indicating elevated concentration. Moreover, several major customers are hyperscale cloud providers that are both customers and potential competitors. They have both the capability and the incentive to build their own capacity or to exert significant pricing pressure once contracts expire.

Conclusion

CoreWeave’s total revenue doubled YoY in the 1H of 2026, while operating losses narrowed in the Q2, signalling the emergence of operating leverage. Backlog reached US$104.2 billion, providing strong revenue visibility. However, depreciation and interest expenses continue to keep the company in the red.

Total debt surged 218% YoY to US$35.6 billion, with net gearing reaching 570%. Elevated debt levels and high interest rates have driven up the interest burden. Interest coverage stands at only around 3.1x, FCF remains negative, and CoreWeave will continue to rely on external financing.

CoreWeave bonds offer an attractive yield to maturity of around 11%. They are more suitable for investors who are constructive on the AI data centre outlook and can tolerate high price volatility. The bonds may also serve as a tactical trading instrument.

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a position in CRWV 9.250% 01Jun2030 Corp (USD) and the analyst who produced this report hold NIL positions in the abovementioned securities. This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.