Author: Rita

Tide Guide

On June 24, Morgan Stanley released its first follow-up report on Cerebras Systems after its IPO, raising its target price from $250 to $273, maintaining an overweight rating. This chip company occupies a unique position in the fast inference field, with the latest financial report showing revenue and gross margin both exceeding expectations. Analysts believe that the 750MW capacity agreement and the in-house cloud service plan will drive rapid growth in the next two years. Crucially, the market's doubts about this company's technology scalability have been dispelled.

First Quarter Performance Exceeds Expectations

Cerebras performed well in the March 2026 quarter. Revenue reached $193.4 million, a 13% quarter-over-quarter increase, exceeding expectations. Non-GAAP gross margin reached 46.5%, which may not seem particularly high, but considering that the company currently relies on renting servers to deliver services, this result is quite impressive.

Morgan Stanley pointed out that the management's performance outlook is relatively conservative. This also means there is potential for upward revisions in the future. The FY2026 revenue guidance is $864 million, far exceeding last year's figures. FY2027 expected revenue is $2.714 billion, nearly triple.

Gross margin is expected to rise quickly from 39.4% in FY2026 to 51.1% in FY2027, and then to 57.9% in FY2028. The key to this improvement is that the company is transitioning from renting hardware to building its own cloud services. Renting servers has a gross margin of only 37%, while the long-term gross margin target for self-built cloud services is 57.9%. This is a fundamental change in profitability.

750MW Agreement Lays Growth Foundation

Cerebras has signed an official agreement for a capacity of 750MW. The 750MW capacity agreement means that customers have provided clear capacity demands, essentially locking in the company's revenue floor for the next 2 to 3 years. Many chip companies are still struggling to secure orders, while Cerebras has proactively locked in long-term capacity. This agreement covers multiple clients, and the cooperation with Amazon has transitioned from intention to a formal agreement. Although analysts are conservative in estimating Amazon's contribution, this leaves room for future growth.

Previously, the market had doubts about Cerebras's wafer-level processor, worrying whether its architecture could truly support large models. This issue has been clearly addressed. The company has successfully validated its actual performance on trillion-parameter models (such as Kimi K2.6), proving the scalability of this architecture. With the elimination of technical risks, investors' attention naturally shifts to the pace of commercialization. The 750MW capacity agreement serves as evidence of customer trust in this technology.

Inference Chips Become the New Battlefield

Why fast inference instead of training? Because inference is becoming the fastest-growing area of AI infrastructure spending. Training is a one-time investment, while inference is continuous and repetitive. As large model applications spread, inference costs will gradually dominate the entire AI chip market expenditures.

Cerebras's leadership position in fast inference gives it a special market position. Most competitors focus on training chips, while this company has chosen the differentiated path of inference. This specialization has actually become an advantage.

Three Scenarios and Target Price

Morgan Stanley provided three scenarios. In the baseline scenario, adjusted revenue reaches $6 billion in 2028, corresponding to a target price of $273. This is the scenario the analysts are most confident in, based on the timely deployment of the 750MW capacity. The bull case scenario assumes that capacity deployment exceeds expectations, reaching over 1GW, with 2028 revenue potentially breaking $10 billion, corresponding to a target price of $400. The bear case scenario assumes delays in capacity deployment, with 2028 revenue possibly only reaching $2.7 billion, corresponding to a target price of $90.

As of June 23, 2026, Cerebras's stock price closed at $226.72, representing a 20% upside to the target price of $273. Even compared to the market consensus target price of $250, there is about a 10% upside. Morgan Stanley's increase in target price reflects recognition of the company's certainty.

Risks and Opportunities

The pace of capacity deployment is the main risk; if the infrastructure construction of large data centers is delayed, Cerebras's revenue growth will also be affected. Customer concentration is another risk; changes in demand from major customers could have a significant impact on the company. However, if deployment goes smoothly, there may be greater opportunities to acquire new customers. The inference chip market is rapidly expanding, and Cerebras's differentiated products are likely to attract more clients.

Cerebras has transformed from a controversial emerging company into a business with confirmed orders, thanks to its first-quarter performance and technology validation. This transformation is crucial. Morgan Stanley's increase in target price reflects recognition of that certainty. The wafer-level chip sector remains full of variables, but Cerebras has established its leading position in the fast inference field. Whether this company's revenue and margins improve as expected in the next two years will determine investor returns.

Disclaimer

This article is a compilation and interpretation of third-party brokerage research reports by Tide Research. The ratings, target prices, earnings forecasts, and related judgments quoted in the text reflect the views of Morgan Stanley analysts, representing their institution's stance, and do not represent the views of Tide Research or constitute any investment advice.

Please note three points when reading: 1. The target price is the analyst's expectation for about the next 12 months; it is a forecast rather than a commitment and will be adjusted repeatedly with performance and market conditions. 2. Sell-side research is naturally biased towards bullishness, and some covered companies have investment banking relationships with the brokerage. 3. The value of the research report lies in the main logical thread and its underlying assumptions, rather than a specific target price. Focus on the logic, not just the price.

The market carries risks; decisions should be independent. This article should not be used as a basis for buying or selling any securities.

Data Source: Morgan Stanley Research Report (Joseph Moore, June 24, 2026) · Public Market Data

Tide Research · June 2026