Nscale plc S-1/Aamended IPO prospectus

Executive Summary

Nscale sells dedicated AI computing capacity and cloud services to hyperscalers, frontier AI labs and technology companies, mainly through long-term take-or-pay contracts. It is expanding from infrastructure into managed AI services and software, with the proposed Anyscale acquisition intended to bring developers and workloads onto its platform. Revenue growth accelerated dramatically as deployments went live: preliminary 9M 2026 revenue reached $308M, but net loss was $1.69B. Its $106B active-and-contracted order portfolio offers substantial potential revenue, but realizing it requires financing and commissioning infrastructure before service payments begin. This unpriced IPO leaves the raise, fully diluted valuation and buyer ownership stake undetermined; investors are being asked to back delivery and financing execution, not an established profitable cloud business.

Business Model and Growth Drivers

Nscale’s immediate revenue engine is deploying GPUs against reserved customer capacity. FY2025 was its first full year providing AI cloud services, following the discontinuation of cryptocurrency-mining services. H1 2026 service fees reached $94.7M from $4.4M, while infrastructure lease revenue reached $42.0M from $6.0M. Portugal and Norway deployments drove the increase.

The company combines powered land, data centers, GPUs, networking and orchestration software. Nscale Cloud adds inference, fine-tuning, model hosting and managed computing tools, although on-demand services remain immaterial. Management expects owned facilities and lower-cost power to improve economics. Its conditional $1.65B all-equity acquisition of Anyscale would add the commercial platform behind Ray, an open-source distributed-computing framework with 740M cumulative downloads; converting that adoption into paid consumption is the commercial challenge.

Total contract value means revenue committed over signed agreements’ terms—not cash or profit. Contracts average ≈5.7 years, with customer prepayments averaging 21%. Only $6.4B relates to active contracts; service terms generally begin after successful GPU delivery. Approximately 50,000 GPUs are active vs 461,000 active and contracted.

Microsoft and Anthropic agreements provide for payments up to ≈$43.8B and ≈$44.6B, respectively, subject to delivery and availability. Figure AI’s ≈$3.5B agreement is half payable in Figure equity, making part of the consideration an investment rather than cash. The largest customer supplied 52% of H1 revenue. NVIDIA is the primary GPU manufacturer; three suppliers accounted for all GPU and related infrastructure purchases.

The Offering

• The offering is unpriced: price range, shares sold, proceeds and post-offering share counts are blank. Consequently, implied capitalization, revenue multiples, buyer ownership and fully diluted valuation cannot be computed. Existing claims include options, restricted awards, warrants and founder performance awards; future ungranted plan reserves are not existing claims.
• Proceeds would fund Nscale’s data-center deployments, technology, working capital and operating expenses, potentially including acquisitions. Goldman Sachs, J.P. Morgan and Morgan Stanley lead the underwriting; they have substantial lending and advisory relationships with Nscale. The company applied for NYSE listing as NSCL, with a 30-day additional-share option.
• Before the IPO, restructuring assumptions include preferred-share and convertible-note conversions, warrant exercises, and shares for Anyscale, Aker and NVIDIA. September subscriptions covered $3.36B principal of convertible notes and the NVIDIA transaction. After-IPO capitalization and per-share tangible-asset backing remain blank, preventing measurement of the dilution buyers face.
• Substantially all existing ordinary shares are generally locked up for 180 days, with exceptions and possible early release. Non-executive employees may sell limited eligible option shares from the first trading day. Subsequent registrations and lock-up releases could substantially expand tradable supply.

Key Financial Highlights

Dollar figures below are historical; 9M figures are preliminary estimates awaiting completion of closing procedures and auditor review.

• Growth: H1 revenue increased 1,252% vs FY2025’s 73%; preliminary 9M growth accelerated further. This is a deployment-driven business transition, not a mature recurring-revenue trend.
• Operating economics: H1 costs exceeded revenue even before separately reported depreciation. Fixed and variable lease costs reached $167M from $4.9M as capacity expanded ahead of revenue.
• Net-loss bridge: H1 fair-value losses of $457M reflected remeasurement of financing instruments, rather than current service delivery; net interest expense of $95.1M also included financing costs embedded in customer prepayments.
• Cash conversion: deferred-revenue growth of $3.81B, partly offset by receivables growth of $1.51B, supported H1 operating inflows. Advance customer billings fund construction but create future service obligations, not current profits.
• Acquisition accounting: land, customer and other rights produced $4.05B of intangible assets, explaining negative attributable tangible equity despite positive reported equity.
• Funding burden: June equipment and construction commitments totaled $27.5B, mainly payable in 2026–2027, far exceeding operating inflows; remaining service obligations were $56.4B over seven years. September estimated cash was $3.58B against debt of $5.52B. Anthropic deployment still lacked binding financing commitments.

Governance and Control

• Ordinary shares carry one vote; NVIDIA’s expected non-voting shares have economic rights and conditional conversion rights. Post-IPO ownership percentages remain blank. Eight of nine directors are independent, but founder Josh Payne combines CEO and chair roles.
• Payne’s option and performance-share grants together cover 26.5M shares; the latter have estimated grant-date compensation value of $350M. Post-IPO dilution and current award value cannot yet be calculated. New equity plans permit substantial future issuance.
• NVIDIA is simultaneously supplier, customer, investor and lease guarantor; these overlapping relationships create dependence and conflicts beyond ordinary procurement.

Risk Assessment

• Reporting controls: material weaknesses span accounting personnel, business processes and technology controls; remediation remains early-stage.
• Financing and delivery: management alleviated initial going-concern doubts through potential spending deferrals, but deferrals could undermine contracted deployments.
• Power execution: withdrawal of Loughton’s power allocation already terminated a Microsoft statement of work; Monarch construction has also suffered flooding.
• Concentrated counterparties: customer default, NVIDIA supply disruption or stricter Anthropic service requirements could leave dedicated assets and financing obligations without expected revenue.
• Founder dependence: losing Payne’s leadership could disrupt expansion and execution.

What to Watch

• Deployment conversion: active GPUs remain far below contracted GPUs; commissioning and revenue should rise together, rather than contracts accumulating behind delays.
• Software commercialization: Anyscale remains conditional; subsequent filings should show completion and paid cloud adoption, not merely developer downloads.
• Financing discipline: Anthropic infrastructure remains unfunded by binding commitments; secured funding and delivery would validate the plan, while deferrals or repeated equity raises would weaken it.