Iris Energy plunges 11.5% on earnings miss, Bitcoin mining revenue collapse
AI cloud growth of 137% fails to offset steep decline in cryptocurrency mining operations
Iris Energy shares tumbled 11.5% on Wednesday after the Bitcoin mining company reported quarterly revenue that missed analyst expectations by 18.6%, as a steep decline in cryptocurrency mining operations overshadowed progress in its artificial intelligence cloud business.
The Sydney-based company reported revenue of $184.7 million for the quarter, falling short of the $226.9 million consensus estimate among analysts. The sharp miss triggered a sell-off that erased roughly $2.1 billion in market capitalization, leaving shares at $39.79 by market close.
The earnings release revealed the extent of the mining slowdown: Bitcoin mining revenue declined to $167.4 million from $233 million in the previous quarter, a drop of more than 28%. The decline reflects the challenging environment for cryptocurrency miners, who have faced pressure from rising energy costs and increasing network difficulty.
"Bitcoin mining revenues were impacted by lower average hashrate and the Bitcoin halving," the company stated in its quarterly report. Iris Energy's net income swung to a loss of $155.4 million, reversing a profit of $384.6 million in the prior period.
The company's strategic pivot toward AI data center services showed progress, with AI cloud revenue surging 137% to $17.3 million. However, this growth proved insufficient to offset the significant contraction in its core mining business, which still accounts for roughly 90% of total revenue.
Despite the disappointing quarterly results, management emphasized progress on its long-term transformation. The company announced it had secured $3.6 billion in GPU financing tied to a contract with Microsoft, positioning Iris Energy to compete in the rapidly expanding market for AI infrastructure.
The company remains on track to deploy 140,000 graphics processing units, targeting $3.4 billion in annual recurring revenue by the end of calendar year 2026. Additionally, Iris Energy is developing a new 1.6-gigawatt data center to support its AI ambitions.
Analysts maintain a generally positive outlook on the stock despite the near-term challenges. The consensus target price stands at $84.85, with 10 analysts rating the shares a buy versus two holding and two recommending sell, according to market data. The stock's 52-week range spans from a low of $5.12 to a high of $76.87, reflecting the volatility typical of companies transitioning between business models.
The earnings miss highlights the execution risk facing Bitcoin miners attempting to repurpose their energy infrastructure for AI applications. While the high-margin AI cloud business offers attractive growth prospects, investors are questioning whether the company can scale the operation quickly enough to offset the cyclical weakness in cryptocurrency mining.
"We're focused on executing our data center expansion strategy, leveraging our power infrastructure advantage to capture the significant AI compute opportunity," Iris Energy's management said in the earnings statement. The company's ability to deliver on its $3.4 billion ARR target will likely determine whether the current share price weakness represents a buying opportunity or a prolonged period of underperformance.
The sharp decline in mining revenue raises questions about the sustainability of the company's legacy operations, even as it invests heavily in the AI transition. With Bitcoin's price remaining volatile and network difficulty continuing to increase, pressure on mining margins may persist through 2026, extending the timeline for profitability in the AI-focused business model.