IREN stock surged more than 17% in premarket trading on Friday after the Bitcoin miner-turned-neocloud company reported a narrower quarterly loss and a sharp increase in artificial intelligence cloud revenue, offering investors some reassurance amid a severe selloff in AI infrastructure stocks.
The rebound followed a particularly difficult month for the company, whose shares had plunged more than 55% over the past month, including a 17% decline during Thursday’s session alone.
The latest results provided some evidence that IREN’s transition towards AI computing is gaining traction.
However, the company also outlined substantial additional spending and delays to infrastructure being developed for Microsoft, highlighting the execution and financing challenges facing the sector.
IREN earnings beat estimates as quarterly loss narrows
IREN reported a net loss of $263 million for the fiscal first quarter ended September 30, compared with a loss of $684 million in the preceding quarter.
The latest loss was also narrower than the Visible Alpha consensus estimate of $322.98 million.
Total revenue increased to $228 million from $137 million in the previous quarter, exceeding the average analyst estimate of around $222 million.
The improvement was largely driven by the company’s expanding AI cloud business, which is becoming increasingly important as IREN moves beyond its traditional Bitcoin mining operations.
AI cloud revenue nearly tripled to $200 million from $71 million in the previous quarter, comfortably beating the consensus estimate of $185.02 million.
In contrast, Bitcoin mining revenue declined to $28 million from $67 million, missing the analyst estimate of $32.95 million.
The contrasting performance highlights the changing composition of IREN’s business as it increasingly deploys its computing infrastructure to serve customers seeking access to AI workloads.
“This quarter Horizon 1 went into service for Microsoft with NVIDIA Exemplar status, AI cloud revenue nearly tripled to $200M, and operating ARR doubled to a billion,” said Co-CEO Daniel Roberts.
Microsoft infrastructure delays push back revenue target
Despite the strong growth in AI cloud revenue, IREN acknowledged that some infrastructure deliveries for Microsoft had been delayed.
The company is developing 200 megawatts of data-centre capacity for the software giant in Texas.
The delay stemmed from a customer-requested network-design change and supplier timing, rather than an issue with the commercial agreement.
IREN said the changes would not result in financial penalties.
However, the company pushed back the timeline for bringing more than $4 billion in contracted annualised run-rate revenue into operation from the end of the year to January.
The timeline could extend to the end of February.
“The more than $4B of contracted ARR is funded and now targeted for January; after a customer-requested design change and supplier timing moved it from year-end, it may extend to the end of February,” said Roberts.
On its post-earnings call, executives said the company exited September with $1 billion in annualised run-rate revenue and expected roughly one-quarter of that amount to be recognised in the December quarter.
IREN signs new GPU contracts as capital spending rises
The company also announced additional commercial agreements after the quarter ended, including a five-year contract valued at approximately $22 million per megawatt of computing capacity.
The unnamed customer prepaid 90% of the capital expenditure required for the GPUs associated with the agreement.
IREN also signed a short-term contract worth $40 million per megawatt.
“Since quarter-end we have signed a five-year contract at about $22M per megawatt with 90% of the GPU capex prepaid by the customer, and a short-term contract at $40M per megawatt.
“We own the land, the power, and the data centers under all of it, which gives us more ways to fund growth and lets us set its pace,” said the Co-CEO.
IREN pointed to assets worth $20.6 billion, saying its revenue and assets were “underpinned by customer contracts with Nvidia, Microsoft and 13 other customers.”
According to the company, two-thirds of its revenue backlog is tied to “investment-grade counterparties.”
Nevertheless, its expansion plans will require substantial investment.
IREN expects to spend approximately $15 billion on capital expenditure over the remainder of its fiscal year as it continues building computing capacity and expanding its AI cloud operations.
Its quarterly filing showed capital commitments of $18.95 billion at the end of September, up from $13.81 billion three months earlier.
GPU hardware on its balance sheet nearly tripled to $5.82 billion from $2.04 billion, while construction in progress stood at approximately $4.61 billion.
What analysts say about IREN stock after earnings
IREN has been particularly vulnerable to the recent technology sector selloff because its business depends on investor confidence in the long-term demand for AI computing infrastructure.
Like fellow neocloud provider CoreWeave, the company rents out access to computing capacity, making it sensitive to concerns about data-centre spending, financing requirements and the returns on AI investments.
However, analysts at Bernstein identified several factors that could support IREN’s longer-term prospects.
They noted that Texas’ approved data-centre capacity “may end up commanding a scarcity premium”, despite concerns surrounding the election of a Democratic governor who has promised a tougher approach to data-centre development.
The analysts also pointed to IREN’s diversified customer base and “well calibrated” financial management as potential strengths.
Goldman Sachs reiterated its Neutral rating and $30 price target following the fiscal first-quarter results.
The investment bank noted that AI Cloud Services revenue of $200 million exceeded its projection of $167 million and the consensus estimate of $185 million.
However, Goldman expects heightened execution risks across the industry and financing concerns to remain important factors influencing the stock.
BTIG, meanwhile, lowered its price target on IREN to $65 from $80 while maintaining a Buy rating.
The brokerage highlighted the contracts involving nearly fully depreciated assets and the expanding useful lives of older-generation GPUs.
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