IREN’s (IREN) latest earnings offered a snapshot of a company in the throes of transition, with the stock currently paying the price for that transition. The company reported weaker-than-expected revenue and profits like bitcoin Mining took a backseat to its rapidly expanding AI cloud ambitions.
Crushed by record margins after the 2024 halving, bitcoin miners are reconfiguring themselves as digital infrastructure players, converting power-hungry mining sites into AI-ready data centers in a bid to earn more stable long-term income.
IREN, one of last year’s best-performing stocks, not just in crypto, but in the entire market, has come back down to earth a bit since hitting an all-time high near $77 in November. Down about 20% amid Thursday’s market decline, shares are holding steady on Friday at $39.77.
IREN has secured $3.6 billion in GPU financing tied to its contract with Microsoft, along with a $1.9 billion customer prepayment, financing that management says will cover about 95% of GPU-related capital expenditures as it scales its AI business, a development that JPMorgan analysts Reginald Smith and Charles Pearce described as encouraging.
IREN’s fiscal second-quarter revenue fell sequentially as a lower average hash rate, fewer coins mined and a quarter-on-quarter drop in bitcoin prices weighed on results, according to the Wall Street bank.
The drag from mining was partially offset by rapid growth in cloud services, where revenue doubled from the previous quarter to $17 million. That figure beat JPMorgan’s $14 million estimate, but well below the Street’s $28 million forecast. Management said all currently activated GPUs are fully engaged, a sign the bank described as encouraging as the company pivots toward AI infrastructure.
Cost controls also helped cushion the quarter. Cash SG&A expenses fell sharply to $43 million, while energy costs decreased due to a lower average hash rate. As a result, adjusted EBITDA reached $75 million, exceeding the bank’s estimate, driven by lower operating and energy expenses. The bank has an underweight rating on the stock.
Investment bank B. Riley raised its price target for IREN to $83 from $74, while reiterating its buy rating, arguing that the recent pullback has created an attractive entry point.
The improvement comes despite a weaker fiscal second quarter, during which adjusted EBITDA of $75.3 million fell short of expectations. B. Riley said the lack of profit is overshadowed by IREN’s progress in its AI pivot, including $3.6 billion in low-cost GPU financing tied to its deal with Microsoft, a $1.9 billion prepayment covering about 95% of GPU capex, and an expanded power portfolio that now exceeds 4.5 gigawatts (GW).
Compass Point analyst Michael Donovan reiterated a buy rating and $105 price target for IREN, saying the latest earnings show a company better positioned for growth, even though recent results were weaker. He said IREN now has more secure power and a clearer plan to finance its expansion, which matters more than a weak quarter.
Donovan described the fourth quarter as a period of change. Revenue fell to $184.7 million as the company mined fewer bitcoins and moved its facilities from older bitcoin-focused machines to newer chips used for artificial intelligence. Still, the revenue mix improved as AI-related services began to account for a larger proportion of the business.
He pointed to the $3.6 billion financing package linked to IREN’s Microsoft project as an important milestone. The financing is larger than originally planned and is structured so that money will be drawn down as construction progresses and revenue contracts are activated.
Donovan expects IREN to begin recognizing Microsoft revenue toward the end of the second quarter of 2026, and for revenue to gradually increase thereafter. By the end of 2026, he sees a path for the company to generate around $3.4 billion in annualized revenue.
Read more: Weak earnings drag down IREN and Amazon; Bitcoin Stock Rebounds in Pre-Market
