A maker of the largest computer chips ever built, Cerebras Systems designs processors for artificial intelligence. Instead of cutting a silicon wafer into many small chips, the company keeps nearly the whole wafer as one giant processor about the size of a dinner plate, which research labs and AI developers use to train large models. Founded in 2015 by engineers from the server company SeaMicro, the firm takes its name from the cerebrum, the thinking part of the brain.
Gross margin collapsed to 14.2% as IPO-related stock-based compensation and customer warrant amortization hit the income statement.
The flipped from a $309.5 million profit a year ago to a $450.5 million net loss. rose 81% to $180.1 million, but fell to 14.2% from 31.1% as $44.3 million in and $15.8 million in IPO-related and tax costs hit cost of revenue. The company now carries $7.4 billion in cash after its IPO, but the cost of building its cloud business is reshaping the income statement.
Key takeaways
rose 81% to $180.1 million, driven by a 232% increase in cloud and other services revenue in the first half of the fiscal year, while hardware revenue fell 23% in the quarter as $28.0 million in offset higher revenue from existing arrangements.
fell to 14.2% from 31.1% a year ago and 44.6% in the prior quarter, as cost of absorbed $44.3 million in and $15.8 million in IPO-related and tax costs.
What changed
trajectory: Management warned last quarter of a near-term decline from , pass-through data center costs, and start-up costs for the OpenAI cloud build-out. The decline materialized sharply — gross margin fell to 14.2% from 44.6% in the prior quarter, with $44.3 million in customer warrant amortization and $15.8 million in IPO-related costs as the primary drivers.
Customer concentration: The prior quarter flagged G42, MBZUAI, and OpenAI as representing a substantial portion of . This quarter, two customers accounted for 76% of , and the filing adds that exclusivity provisions in the OpenAI and AWS agreements restrict the company from pursuing business with certain competitors.
What to watch
in Q3 FY2026 — specifically whether and IPO-related continue at the same magnitude or begin to taper as management's 'near-term' warning plays out.
Customer concentration metrics and composition, given that two customers represent 76% of receivables and exclusivity provisions now formally restrict business with certain competitors.
and the pace of capital investment as the company builds cloud capacity under the OpenAI and AWS agreements, against a backdrop of negative .
Section summaries
Management's Discussion and Analysis
Revenue rose 84% to $373.5M in H1 2026 driven by cloud services ramp, but GAAP net loss was $464.5M on IPO-related stock-based compensation.
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Total grew 84% to $373.5M in H1 2026, with cloud and other services surging 232% to $208.8M on higher customer consumption and dedicated capacity deployments.
Operating loss widened to $477.2 million from $57.2 million a year ago, as total operating expenses reached $604.0 million in the first half, including $386.6 million in — $273.6 million of which came from restricted stock units that vested upon the IPO.
Cash and equivalents rose to $6.7 billion from $376.9 million a year ago, reflecting $6.2 billion in net IPO proceeds and a $1.0 billion loan from OpenAI.
was negative $476.7 million, compared to negative $155.8 million a year ago, as the company invested in cloud infrastructure while remained negative at $59.8 million.
Two customers accounted for 76% of as of June 30, 2026, and the company disclosed that its new agreement with OpenAI and an AWS commercial agreement contain exclusivity provisions that restrict it from pursuing business with certain competitors.
: Negative free cash flow deepened to $476.7 million from negative $119.6 million in the prior quarter, as swung back to negative $59.8 million from positive $12.3 million, and capital investment continued.
Material weaknesses in internal control: The prior quarter noted remediation was still ongoing. This quarter, the risk factors confirm the material weaknesses related to accounting expertise and IT general controls remain unaddressed.
Progress on remediating the material weaknesses in internal control over financial reporting, which remain outstanding.
Hardware increased 18% to $164.7M in H1 2026, but Q2 hardware revenue fell 23% as $28.0M in customer warrant offset higher existing-arrangement revenue.
total fell to 14% in Q2 2026 from 31% a year ago, pressured by $44.3M in customer warrant and $15.8M in IPO-related and tax costs.
Operating expenses surged to $604.0M in H1 2026, driven by $386.6M in total , including $273.6M from RSUs that vested upon the IPO.
Cash, equivalents, and restricted cash stood at $7.4B and marketable securities at $1.2B as of June 30, 2026, bolstered by $6.2B in net IPO proceeds and a $1.0B loan from OpenAI.
The company expects near-term to remain significantly lower due to ongoing customer warrant , pass-through data center costs, and start-up costs to expedite cloud capacity.
Quantitative and Qualitative Disclosures About Market Risk
Market risk is primarily from interest rates; a 10% rate change would impact other income by $22.0 million.
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Cash, cash equivalents, and restricted cash totaled $7.4 billion as of June 30, 2026, held mainly in short-term money market instruments.
A hypothetical 10% change in interest rates would increase or decrease other income, net by $22.0 million due to these short-term investments.
The $918.2 million Loan with OpenAI carries a fixed 6.0% rate, so changes in market interest rates do not affect its contractual .
Foreign currency exposure is negligible because the company engages in few and immaterial transactions outside functional currencies and has not hedged this risk.
A hypothetical 10% change in the U.S. dollar's relative value would not materially affect the financial statements.
From time to time, we may be involved in various legal proceedings arising from the normal course of business activities. We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a m…
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From time to time, we may be involved in various legal proceedings arising from the normal course of business activities. We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, cash flows, or financial condition.
Customer concentration, cloud transition costs, and export control dependencies pose material risks to the business.
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is heavily concentrated: MBZUAI, G42, and the new MRA with OpenAI represent a substantial portion of current and projected revenue, and two customers accounted for 76% of as of June 30, 2026.
The shift to cloud-based offerings requires massive data center capital investment and long-term lease commitments, while customer contracts are shorter-term, creating financial risk if demand is overestimated or capacity is not filled.
The company depends on TSMC as the sole-source foundry for its proprietary wafer-scale engine without long-term supply commitments, exposing it to geopolitical risks in Taiwan and potential supply disruptions.
U.S. export controls require licenses to sell products to key customers in the United Arab Emirates; failure to obtain or maintain these licenses, or comply with their conditions, could severely impact .
The company identified material weaknesses in internal control over financial reporting related to accounting expertise and IT general controls, which could affect the accuracy of financial statements.
Exclusivity provisions in the MRA with OpenAI and the AWS Commercial Agreement restrict the company from pursuing business with certain competitors, potentially limiting growth and customer diversification.