Cerebras tipped for another earnings beat as Wedbush maintains bullish stance

Cerebras Systems Inc (NASDAQ:CBRS) is expected to deliver another earnings beat and raise its forward guidance, according to Wedbush, which maintained its Outperform rating but cut its price target to $190 from $290 amid a broader valuation pullback across semiconductor and hardware stocks.

The broker said concerns about data center spending have weighed on Cerebras shares, alongside questions about the lifespan of its wafer-scale engine (WSE) chips, the status of its agreement with OpenAI and demand for its fast-inference technology.

However, Wedbush believes many of these concerns are misplaced or unsupported by available evidence.

On chip longevity, the analysts said there was no evidence that Cerebras' WSE processors were failing prematurely or that the company was using overly generous depreciation schedules to inflate profits.

They pointed to Cerebras' continued use of capacity deployed at G42 in 2024 to serve OpenAI as evidence that the systems remain operational.

Wedbush also challenged speculation that OpenAI had passed on an option to deploy an additional 1.25 gigawatts of Cerebras capacity, noting that the option does not expire until the end of 2030.

As a result, the analysts said it was unlikely OpenAI would need to make decisions about further capacity today.

While acknowledging uncertainty about the commercial value of fast inference, Wedbush said the pricing of OpenAI's commitments represented a relatively low cost per megawatt of data center inference capacity.

The broker also argued that Cerebras' base sales model is well positioned to withstand potential funding concerns through at least 2028, and possibly 2030, given the extent of its support from OpenAI commitments.

Looking ahead, Wedbush expects Cerebras to beat third-quarter estimates and provide slightly higher guidance for the fourth quarter, while setting expectations at levels it believes the company can exceed again.

A more substantial earnings upside may take longer to materialize, however, with the analysts identifying two key milestones: a full ramp-up of the company's CS-4 systems, potentially by the first quarter, and the deployment of 500 megawatts of data center capacity needed to support OpenAI through 2027.

That additional capacity could also create opportunities to serve other customers, providing another potential source of growth.