The pluses were actually so good. Your revenue was amazing. The adjusted losses much less than I thought. Margins improved a quarter ahead of the plan. But I think maybe if you can just start by saying the demand and how outsized it is, because there were some analysts who still seem to think that this is the tail end of this revolution.
Yeah, that doesn't really actually track with the facts on the ground. The demand for this infrastructure — and I've said this to you guys now for years — outpaces the world's capacity to deliver infrastructure, and that is the case. I think I said that we are 10x oversubscribed to the existing capacity that we have left in 2027, and we are multiples oversubscribed on the capacity we have out in 2028. And so I heard those questions too, and I would like to reiterate what you're hearing across the market, which is that the demand for the infrastructure is and remains overwhelming.
There was a story that we've been believing since the so-called blue wave, which is that basically we're not going to have a lot of new data centers because of what's happening in the United States. Your international exposure makes me think that maybe we're being too parochial about our own country. There is worldwide demand and it's growing, it's insatiable.
Yeah, that's certainly true. There is a massive groundswell of demand around the world for computing infrastructure. But you know, taking a moment and talking about the US, we don't see any impact on our ability to deliver the data centers within the US that are required for us to deliver on our backlog. In Texas, the Governor-Elect said that facilities that are permitted and under construction will continue, and we've been really, really thoughtful about the broad distribution.
You mentioned her letter, which just said basically, listen, we're good citizens, and I like that. Now I think it's very important that we get to the fact that a lot of us were grading your company by looking at public debt and thinking 15, 16 — well, that is very close to where I regard it as a dangerous zone. You pretty much cleared that up by doing two things. One, the H100s are worth a lot more than you think when you get them, but also you indicated there's another kind of debt to the company that actually is basically trading at par.
That is correct. Our asset level debt has basically been rock solid through this entire thing. There is an enormous demand for that product. We're about to launch another asset level debt in the next week or two that has already been rated high investment grade. We suspect that that will be underwritten in the market at a 7 to 7.5% interest is what we expect, and that will once again bring down the average weighted cost of capital for CoreWeave, and that's really, really exciting. It has been a priority for the company to monitor that, and the high yield debt is just one corner of how CoreWeave accesses capital. And you saw that in our earnings when I said, okay, high yield debt is getting expensive, we'll go to prepayments, which we have done in the past, and we raised $9 billion worth of prepayments and deposits. And that's just another way for us to go about financing the business to ensure that we have the capital at reasonable costs to be able to execute on our roadmap.
Right. I mean, a key focus for investors is adjusted operating income and interest expense. And I mean, I am still looking — I think in the fourth quarter interest expense is still going to outpace your adjusted operating income. When do those two actually change trajectories, and so your interest expense is actually going to be less than your operating income adjusted?
So our interest expense went up 20%, our adjusted operating income went up by 300%. Right? If you look at the trajectory, it is clear that our interest expense, while growing as it should because we are delivering massive scale of infrastructure — we have 1.7 gigawatts in the ground, we will get to 1.85 gigawatts by the end of the year. That is massive amounts of infrastructure. And so yes, the debt is growing and the interest expense associated with it. But it is not growing nearly as fast as the adjusted operating income, which will cover that debt by a large amount as we talk about reaching adjusted operating income profitability in 2028.
Right. Does your inability or your unwillingness to issue unsecured debt, certainly at the prices you'd have to right now, in any way mitigate certain expansion plans you had, for example building your own data centers?
Yeah. So look, CoreWeave has so many levers to manage our cost of capital. It has so many levers, including accelerating, slowing down. But we are a success-based business. We are only going to place deals into the market if they make economic sense, including the cost of the components, including the cost of capital, including the price we're able to sell at. And so we are targeting margins here, and the margins are expanding, and that is the key to this. The margins for the infrastructure, for the product, for the cloud that we are delivering is expanding.
What does it mean for more equity issuance?
So we really do look at all of the tools available to us to ensure that we are raising money in the most cost-effective way possible. We have issued equity in the past through pipes, through other vehicles. We have also issued convertible notes, but right now the least expensive capital available to us was the prepayments. And you saw us move very aggressively to raise $9 billion of prepayments and deposits because that is the right way for CoreWeave to raise the capital that it needs now. And because our product, because our cloud, because the infrastructure we deliver is so in demand, we were able to turn those levers very, very quickly in order to raise the capital that we need to continue to execute on our business plan. It's fantastic.
All right. So Michael, you are an Nvidia shop. You're known as a media shop, but the day I met you, you're incredibly close to Jensen Huang. First, what has he told you since all this has occurred? Second, is there someone to deal with at this 40,000-person company — 42,000 — besides the man who founded it and we all think is the only person that you'll ever hear or see from this company?
Okay, so look, Nvidia is an extraordinary company, right? It is not one person. It is an extraordinary company. There are thousands of people over there that interface with thousands of people at my company every day. They integrate on the technology, they integrate on the physical infrastructure, they integrate on the networking. We have a close relationship with them up and down the companies, and they are a great partner. They have been a great partner for us for years, and they will continue to be a great partner for us. With regards to Jensen, I just don't think it's really appropriate for me, or for that matter for anyone, to really have too much of an opinion here. They've begun a process. Let's let the process run.
All right. Well, how about the chips themselves? A lot of people felt that these things after five years would be worthless, including people who told me I was out of my mind that I thought his chips, this company's chips, would be worthwhile. The value of a five-year-old H100 chip isn't worth more than you paid for it five years ago.
So this is one of the most exciting aspects of the earnings report that we just went through. It's where I got to talk about the H100s that we installed four years ago will be coming off contract in 2027, and how that technology has now been contracted at a 20 to 50% premium over where it was originally contracted. The demand for the infrastructure is enormous and overwhelming. The life cycle of this — this has been an ongoing discussion in the market, and I believe that this should resoundingly put this to bed. This infrastructure will last beyond the depreciable life, and when it...
Do you see a two-way market of compute because of this?
I think it's one of the tools that the world is doing.
You love when you do it because you know the country needs it.
We absolutely are participating in it. We've got a lot of things we've got to do, and a two-way market is definitely part of what has to happen in order for there to be transparency on pricing.
Yeah. I mean, speaking about pricing, I think you raised prices 25% in July, another 10% later in the quarter. Any pushback at all from customers?
The customer base realizes that there is a supply-demand imbalance, and they are looking at it from the perspective of what can they generate at their companies from the compute. So they are happy to pay an increased level because the margins that they are making — and you saw this in the Anthropic paperwork — the margins that they're making, they support higher prices for compute. And therefore we have tremendous demand for this infrastructure, and with that we were able to raise prices. I think you've seen that universally across the space.
Did Nvidia respond to your letter? And can you address how much of planned capacity might migrate into '28, because you did say you're waiting for '28 to season, I think is how you put it.
