IREN’s (IREN) latest financial results provide a snapshot of a company in transition, and the stock is now paying the price for that transition. The company reported that Bitcoin sales and profits were lower than expected. BTC$68,453.59 Mining has put its rapidly expanding AI cloud ambitions on the back burner.
Crushed by record-low profit margins since the 2024 halving, Bitcoin miners are converting power-hungry mining sites into AI-enabled data centers and repositioning themselves as digital infrastructure players in search of more stable long-term returns.
One of last year’s best-performing stocks, not just in cryptocurrencies but in the market as a whole, IREN has come back down to earth a little since hitting an all-time high near $77 in November. Shares fell about 20% in Thursday’s market crash, but were flat on Friday at $39.77.
Along with $1.9 billion in customer advances, IREN has secured $3.6 billion in GPU financing related to its deal with Microsoft, which management says will cover about 95% of its GPU-related capital expenditures as it expands its AI business, a development that JPMorgan analysts Reginald Smith and Charles Pearce said is encouraging.
According to the Wall Street bank, IREN’s fiscal second-quarter revenue decreased from the previous quarter as a decline in average hash rate, fewer coins mined, and a sequential drop in Bitcoin prices weighed on results.
The impact from mining was partially offset by rapid growth in cloud services, with revenue more than doubling from the previous quarter to $17 million. The figure beat JPMorgan’s $14 million estimate, but fell well short of the Street’s $28 million estimate. Management said all currently powered GPUs are fully deflated, which the bank described as an encouraging sign as the company pivots toward AI infrastructure.
Cost management also helped cushion the quarter’s shock. Cash SG&A expenses fell sharply to $43 million, while power costs declined due to lower average hashrate. As a result, adjusted EBITDA reached $75 million, exceeding the bank’s expectations, due to lower operating and energy expenses. The bank rates the stock underweight.
Investment bank B. Riley raised its price target on IREN from $74 to $83 while reiterating its buy rating, arguing that the recent pullback has created an attractive entry point.
The upgrade came despite weak second-quarter results, with adjusted EBITDA of $75.3 million less than expected. B. Riley said the revenue failure has been overshadowed by IREN’s progress in pivoting its AI business, including $3.6 billion in low-cost GPU financing related to its deal with Microsoft, a $1.9 billion upfront payment that covers about 95% of its GPU capital expenditures, and an expanded power portfolio that now exceeds 4.5 gigawatts (GW).
Compass Point analyst Michael Donovan reiterated his buy rating and $105 price target on IREN, saying the latest financial results show the company is better positioned for growth despite weak recent performance. He said IREN now has a more secure mandate and a clear plan to fund its expansion, which is more important than a soft quarter.
Donovan described the fourth quarter as a time of change. Revenue fell to $184.7 million as Bitcoin mining declined while the company transitioned its equipment from older Bitcoin-centric machines to new chips for artificial intelligence. Still, the revenue mix improved as AI-related services started to become a larger part of the business.
He pointed to the $3.6 billion funding package related to IREN’s Microsoft project as an important milestone. The funding is larger than originally planned and is structured to be funded once construction progresses and revenue contracts begin.
Donovan expects IREN to begin recognizing revenue from Microsoft at the end of the second quarter of 2026, with incremental revenue accretion thereafter. He sees the business on track to generate about $3.4 billion in annual revenue by the end of 2026.
read more: Poor business performance will be a drag on IREN and Amazon. Bitcoin stock rebounds pre-market
