On June 25, AI chip company Cerebras Systems saw its stock price plummet nearly 20%, hitting an intraday low since going public and almost touching its IPO offering price. Surprisingly, however, the company’s first earnings report after listing released on Tuesday actually beat market expectations—first-quarter revenue reached $193 million, up 94% year-over-year, while net losses narrowed to $14 million compared to $23.9 million in the same period last year. The trigger for the sell-off was Cerebras’ guidance on gross margin. The company projected that full-year core business gross margins would fall between 38% and 41%, significantly lower than the actual level of 47% achieved in Q1. This forecast of “margin contraction” dampened investor confidence. In response, Cerebras CEO Andrew Feldman told CNBC that investors had misread the company’s gross margin guidance. He explained that the firm has temporarily leased back some of its own equipment from a major client so it can release computing capacity to the market earlier before its self-built data centers are fully deployed. This strategic move will compress profit margins this year but represents a temporary adjustment during production ramp-up. Analysts believe the fundamental challenge facing Cerebras lies in balancing short-term profitability against long-term expansion amid surging demand for AI compute power.