Cerebras (CBRS) Stock Drops 3% as Analyst Sees Buying Opportunity

TLDR

• Cerebras (CBRS) stock fell more than 3% on Tuesday after Freedom Capital initiated coverage with a Hold rating.
• Q1 revenue jumped 92% year over year to $193.4 million, but gross margin guidance disappointed investors.
• The company expects full-year 2026 core revenue of $855 million to $865 million, roughly 69% growth.
• Cerebras has a $20 billion multi-year deal with OpenAI and a new partnership with Amazon Web Services.
• Wall Street’s average price target of $299.30 implies 44% upside from current levels.

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Cerebras Systems stock dropped more than 3% on Tuesday, trading well below its 52-week high. The decline came as Freedom Capital analyst Paul Meeks started coverage of the AI chipmaker with a Hold rating and a $209 price target.

Cerebras Systems Inc., CBRS

The stock has had a rocky few months. It surged on its Nasdaq debut on May 14, priced at $185 per share, but has slid steadily since. It briefly dipped below its IPO price last week.

Meeks said he wasn’t interested in Cerebras before the post-earnings sell-off. The pullback changed his mind, though he still sees risks investors may have missed.

What Happened With Earnings

Cerebras reported its first results as a public company after the bell on June 23. Revenue grew 92% year over year to $193.4 million. Net loss narrowed to $14 million from $23.9 million a year earlier.

Hardware revenue climbed 60% to $111.6 million. Cloud and other service revenue surged 167% to $79.8 million. Those numbers beat expectations.

The trouble came from gross margin guidance. Margins had expanded from 42.1% a year ago to 46.5% in Q1. But Cerebras forecast margins would drop to between 38% and 41% for the full year.

Management explained the company decided to temporarily rent back systems from an existing customer while it builds out its own data center capacity. The CEO later said investors were confused by the guidance, since the margin dip was tied to that single decision rather than a deeper problem.

The Bigger Picture for CBRS

Cerebras makes large, wafer-sized inference chips that require specialized cooling. Because of their size, the company sells them only as full systems rather than standalone parts.

The company has landed some big partners. It signed a $20 billion multi-year deal with OpenAI in December. It also struck a deal with Amazon Web Services to pair Amazon’s Trainium chip with Cerebras’ CS-3 system inside AWS data centers.

That AWS partnership isn’t expected to become a major revenue driver until 2027. For now, Cerebras is leaning on its existing hardware and cloud business to hit its targets.

Looking ahead, Cerebras projects Q2 revenue to climb 88% to $194 million. Full-year core revenue guidance sits between $855 million and $865 million, which works out to about 69% growth.

Meeks pointed to two main businesses for Cerebras going forward. One is selling CS-3 systems for fast AI inference. The other is working with hyperscalers to split inference tasks, using other companies’ GPUs for early-stage processing and Cerebras’ chips for the decode stage.

He sees more long-term upside in that second business. He also noted the recent sell-off has removed much of the investment risk that existed earlier.

Still, Meeks warned there’s no guarantee the recent low of $161 will hold as a support level. He believes that if Cerebras can triple sales in 2027 as planned, the stock could see far more upside than downside.

Before Meeks’ Hold rating, Wall Street’s consensus on Cerebras was a unanimous Strong Buy across 10 analysts. The average price target of $299.30 implies 44% upside from current levels.

CBRS shares were trading around $214 as of Tuesday, down from a 52-week high of $386.34 and above the 52-week low of $160.81.