Cerebras Systems Inc. — financial distress indicators
Financial-health summary
Cerebras Systems Inc.'s reported numbers place it in the 'Watch' financial-health band (distress score 39/100). The main indicators are liabilities exceed assets (negative equity), losses in 2 of the last 3 years and elevated market-implied default probability. Independently, the Ohlson accounting model puts its 1-year failure probability at 33% and the market-implied (Merton) default probability is 5.4%. In its favour: cash on hand covers all debt (net-cash balance sheet).
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Total liabilities are 1.04× total assets.
Balance-sheet insolvency test: debts exceeding the fair value of assets is the statutory definition of 'insolvent' in 11 U.S.C. §101(32).
Recurring net losses.
Repeated losses are a core input in both Ohlson and Altman failure models.
Merton distance-to-default 1.61 σ → PD 5.4%.
Investment-grade issuers typically have 1-year PD well below 1%.
Operating cash flow negative in 2 of the last 3 years. The company is profitable, so this likely reflects working-capital or loan-book growth.
A business that cannot fund itself from operations depends on external capital to survive.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Cash on hand covers all debt (net-cash balance sheet).
- Strong current ratio (2.51).
- Revenue still growing (+76% YoY).
- Large market capitalisation — strong access to capital markets.
📰 Recent news scan
- Jim Cramer Says Cerebras (CBRS) Is a Good Company and Too Expensive a StockYahoo Finance · 2026-10-09
- Cerebras Stock Has Been a Bust Since Its IPO. That Could Be About to Change.Yahoo Finance · 2026-10-08
- Cerebras Systems (CBRS) Lands Gimlet Labs Deal, Is The Stock Still Below Fair Value?Yahoo Finance · 2026-10-07
- Why Cerebras speed could be worth billionsYahoo Finance · 2026-10-06
- The top wall street firms are fighting over one AI chipYahoo Finance · 2026-10-06
- SemiAnalysis Sank Cerebras with a Tweet. Altman Saved It.Yahoo Finance · 2026-10-05
⚖️ U.S. legal pathway — Title 11, U.S. Code
Which chapter would apply?
- Chapter 11 — reorganisation. Management usually stays in control as debtor-in-possession; the automatic stay (§362) halts collection; a plan must meet the best-interests test (§1129(a)(7)) and the absolute priority rule (§1129(b)) — creditors are paid before shareholders, who are frequently wiped out.
- Chapter 7 — liquidation. A trustee sells assets and distributes proceeds by statutory priority (§§507, 726).
- Subchapter V (“Chapter 5”) is a fast track for small-business debtors under a statutory debt cap, but SEC-reporting companies are excluded (§101(51D)) — so it rarely applies to listed companies.
What typically triggers a filing
- Payment default or covenant breach lenders will not waive; a debt maturity that cannot be refinanced.
- Auditor going-concern doubt (ASC 205-40 / PCAOB AS 2415) — often itself a default trigger in loan agreements.
- Creditors can force a case with an involuntary petition (§303) if debts are not paid as they come due.
- Delisting after sustained sub-$1 prices or equity deficits cuts off equity funding.
Transactions shortly before filing can be clawed back (preferences — 90 days, §547; fraudulent transfers — 2 years, §548).
Frequently asked questions
What do Cerebras Systems Inc.'s financial-health indicators show?
As of 2026-10-08, Cerebras Systems Inc.'s public financial data places it in the 'Watch' band with a distress score of 39/100, driven by liabilities exceed assets (negative equity), losses in 2 of the last 3 years and elevated market-implied default probability. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is Cerebras Systems Inc.'s financial distress score?
39/100 ('Watch'). Ohlson O-score -0.73 (model 1-year failure probability 33%). Merton distance-to-default 1.61 σ (model default probability 5.4%).
What works in Cerebras Systems Inc.'s favour?
Cash on hand covers all debt (net-cash balance sheet). Strong current ratio (2.51). Revenue still growing (+76% YoY). Large market capitalisation — strong access to capital markets.
How are shareholders treated if a company enters insolvency?
In a Chapter 11 reorganisation the absolute priority rule pays secured lenders, then unsecured creditors, before shareholders — so existing shares are usually cancelled or heavily diluted. In Chapter 7 the company is liquidated and shareholders rarely recover anything.
Other Semiconductor companies with distress indicators
- GCT Semiconductor Holding, Inc. (GCTS)Very weak 72/100
- Wolfspeed, Inc. (WOLF)Very weak 70/100
- Fabric.AI, Inc. (FABC)Weak 65/100
- SmartKem, Inc. (SMTK)Weak 65/100
- Peraso Inc. (PRSO)Weak 63/100
- POET Technologies Inc. (POET)Weak 50/100
Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.