Core Scientific falls 3% on accounting restatement
Bitcoin miner's Q4 earnings beat masked $79.8M revenue miss and material weakness in internal controls
Core Scientific shares dropped 2.8% on Tuesday after the bitcoin miner reported fourth-quarter earnings that appeared strong on the surface but revealed deeper concerns about accounting practices and deteriorating operational performance.
The company reported adjusted earnings per share of $0.42, far exceeding analyst expectations of $0.07, representing a 500% beat. However, the headline EPS figure was driven by non-cash warrant gains rather than operational improvements, obscuring more troubling developments.
Revenue of $79.8 million missed analyst estimates by 30.5%, falling well short of the $114.8 million Wall Street had expected. The significant revenue shortfall overshadowed the earnings beat and sent shares down to $16.49 in afternoon trading, extending the stock's decline from a 52-week high of $23.63 reached earlier this year.
More concerning for investors, Core Scientific announced it will restate its financial statements for 2024 and 2025 due to accounting errors related to property, plant, and equipment (PP&E). The company disclosed a material weakness in its internal controls over financial reporting, raising questions about the reliability of previously reported results.
"The company identified errors in its PP&E accounting and determined that a material weakness existed in its internal control over financial reporting," according to the company's earnings press release. Such disclosures typically trigger heightened scrutiny from regulators and investors.
The restatement comes at a sensitive time for the Austin-based bitcoin mining infrastructure provider, which has been positioning itself as a partner for artificial intelligence companies through colocation services. The company's high beta of 6.88 reflects its volatility in response to cryptocurrency price swings and operational developments.
Beneath the accounting issues, operational metrics showed significant deterioration. Non-GAAP adjusted EBITDA swung to a loss of $42.7 million, compared to positive EBITDA of $13.3 million in the prior year, indicating the business is burning more cash despite expansion efforts.
On the positive side, colocation revenue surged 268% year-over-year to $31.3 million, suggesting demand for its infrastructure services from AI clients like CoreWeave remains strong. The company confirmed its expansion with CoreWeave remains on track, and it reported liquidity of $533 million, providing substantial runway despite ongoing losses.
Core Scientific did not provide forward guidance, citing uncertainties around bitcoin prices and regulatory developments. The company's trailing twelve-month revenue stands at $334 million with negative profit margins, reflecting the challenging economics of bitcoin mining in the current environment.
Analysts remain broadly optimistic despite the earnings miss, with 16 of the 18 analysts covering the stock rating it a buy or strong buy. The consensus price target of $26.91 suggests potential upside of more than 60% from current levels, though Tuesday's decline and the accounting restatement may prompt analysts to reassess their models.
The cryptocurrency mining sector has faced headwinds from bitcoin price volatility and rising energy costs, forcing companies to diversify into AI infrastructure to utilize their power capacity and data center facilities. Core Scientific's colocation growth demonstrates that pivot is gaining traction, but the accounting issues and revenue miss raise questions about execution.
Investors will be watching closely for updates on the restatement timeline and any leadership changes that might accompany the disclosure of internal control weaknesses. The company's next quarterly filing is expected to include the restated financials, which could reveal further adjustments to previously reported results.