Cerebras Systems reported better-than-expected third-quarter earnings results on Tuesday afternoon. It's the chip maker's first earnings report since it went public in May. Shares were down more than 13% in after-hours trading.

The stock trades at a high valuation based on elevated expectations for the next three years. There's already a lot of share-price volatility and first-quarter earnings lit it up again.

Revenue for the quarter reached $193 million, beating projections of $181 million, and up 94% on the year. The company's adjusted operating loss was a smaller-than-expected $3.5 million, versus a $19.3 million loss last year.

Revenue guidance for the second quarter was also good, with an outlook for $194 million in sales, up 88% from last year and better than the $178 million in the Wall Street consensus.

One wrinkle: Cerebras' outlook for its annual adjusted gross margin shows that the company expects to see reduced profitability over the rest of the year as it ramps its $20 billion service contract with OpenAI. On its earnings call, the company said that OpenAI cloud demand is accelerating faster than it can bring new servers on-line, and it decided to rent some of the equipment it sold to other customers and sell it back to OpenAI. This arrangement is what will cut into profit margins this year.

The stock, which closed Tuesday at $226.72, was priced at $185 in its May initial public offering. The company makes a unique chip for artificial intelligence, and that sector was screaming in the weeks leading up to the IPO. It's been a wild ride, one that's probably not over.

Shares surged as high as $386 on the first day of trading. Out of the 26 trading days since then, 19 have seen share price moves of more than 3%. At Tuesday's close, the stock was at $226.72.

Some 11 analysts have already initiated coverage of the company, according to FactSet, with an average price target of $294 and a Buy rating.

Cerebras' revenue picture is clouded by warrants for 33.4 million shares that the company granted to OpenAI, practically for free. In January, 4.5 million shares vested, and the value of these warrants is recorded as a sales discount, a noncash charge called contra-revenue.

In the first quarter the contra-revenue was negligible, but Needham analyst Quinn Bolton says that it will grow as the OpenAI contract ramps up.

Another 29 million shares await vesting milestones, one of which may have been triggered this month.

OpenAI uses Cerebras' cloud to host one of its software coding models, Codex-Spark. This is typical of the medium-sized AI models running on Cerebras hardware, but the company says it will soon be able to run much larger models, like OpenAI's ChatGPT 5.5.

The chip maker also has an agreement with Amazon Web Services, which would be the first major cloud to host Cerebras' AI chips.

At the end of 2025, Cerebras' backlog was $24.6 billion, mostly from the OpenAI deal. The company said that it will recognize $3.7 billion of the backlog as revenue in 2026 and 2027.

Investors are betting that Cerebras gets caught in the same tailwind that has sent the stocks of companies like Nvidia and Micron soaring: the AI data center boom that is providing a massive secular boost to the normally cyclical chip sector. Starting from half a billion in sales last year, analysts project Cerebras' core revenue to rise to $7.2 billion in 2028. Adjusted earnings per share for that year are seen at $5.53, with the stock currently trading at 41 times that.

Another reason for the stock's volatility is that only about 15% of shares outstanding were sold during the IPO. The rest are locked up until certain milestones, one of which will be hit this Thursday, when almost 13% of the IPO shares are eligible to be sold by insiders and early investors. This may lead to downward pressure on the share price. The next trigger comes two days after the company reports its second-quarter earnings, and that will make another 17% of shares eligible to trade.