Jim Cramer unpacks CoreWeave’s earnings

CNBC’s Jim Cramer on Thursday said he was impressed with CoreWeave‘s first quarter since its market debut, citing strong demand for the artificial intelligence infrastructure outfit’s services.

“As far as I’m concerned, this was a great quarter from CoreWeave,” he said. “The demand for their computing power is clearly there, and that was not a given at the time of the IPO, when everyone assumed the AI infrastructure story was about to collapse.”

CoreWeave’s revenue rocketed 420% over the quarter, blowing past estimates. But while the company had better-than-expected sales, its profitability was more mixed, Cramer said. The stock initially soared Wednesday evening in extended trading after the company posted earnings. But trading was choppy on Thursday, with shares ultimately closing down 2.51%.

According to Cramer, CoreWeave’s weaker profitability is to be expected as it manages high demand from customers and elevated costs for certain pieces of equipment. He was also encouraged that management claimed macroeconomic uncertainty isn’t impacting customers’ behavior. In fact, he pointed out, CFO Nitin Agrawal said on the earnings call that the company is actually “seeing an acceleration of customer demand.” CoreWeave provides key AI equipment to tech outfits including Microsoft, Meta and OpenAI. Nvidia is also a major supplier and customer.

Some on Wall Street were wary of CoreWeave’s ambitious capital expenditures plan, which came in at $20 to $23 billion, substantially higher than the $18.4 consensus estimate from LSEG. Cramer suggested the heightened capex forecast made some investors nervous because CoreWeave will likely have to borrow billions.

But Cramer was satisfied with CEO Michael Intrator’s explanation for the colossal spend, which he said is “driven by success within the company.” He told Cramer in an interview that CoreWeave is spending so much because customers are eager to receive computing power as soon as possible, and he affirmed that the company is able to repay lenders according to the terms of the contracts.

“Once you get past all the talk of revenue growth, backlogs, margins, capex, I think that the CoreWeave story comes down to whether or not you trust management,” Cramer said. “Specifically, whether or not you trust that the investments the company’s making today will pay off down the line. Given that they’ve already got lots of new business lined up, I do trust them.”

CoreWeave did not immediately respond to request for comment.

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Disclaimer The CNBC Investing Club holds shares of Nvidia, Microsoft and Meta.