A Solid Quarter For IREN Limited, Q3 FY Earnings (Rating Upgrade)

Summary IREN delivered strong Q3-25 results with 172% YoY revenue growth and expanding Bitcoin mining margins, achieving a $24.2 million quarterly profit. The company remains highly dependent on Bitcoin mining but is making promising strides in AI Cloud revenue, which is growing rapidly, albeit from a small base. Shareholder dilution persists, but the stock trades at a reasonable 3x forward sales multiple, in line with sector medians even after recent ATM issuance. Given IREN’s operational efficiency, profitability at current BTC prices, and sector leadership, I’m upgrading my rating back to ‘buy.’ After a profitable quarter for the three months ended December 2024, IREN Limited ( IREN ) has produced yet another quarter with positive net income and a second consecutive quarter of improvement in Bitcoin ( BTC-USD ) mining margin. In my prior piece covering the company from October, I downgraded the stock from ‘buy’ to ‘hold’ and looked quite foolish shortly after when IREN nearly doubled by mid-December: Data by YCharts More recently, the stock has come back down to earth. Yet after falling below $6 per share in April, the stock has quietly outperformed the index since April and since my mid-October article. Before we dive into IREN Limited’s fiscal year earnings for Q3-25, I’ll provide a quick recap on my general view about the company. My Prior Points Regarding IREN Broadly, I think IREN is an interesting company because it is one of the few Bitcoin miners in the public equity market that still sells all production each and every month. With this strict ‘no-HODL’ approach to capital management, IREN is perhaps less appealing to potential shareholders who want a mix of BTC-denominated revenue as well as BTC treasuries. Longer term, IREN’s Bitcoin mining business could ultimately perform quite well if transaction fees become a larger share of mining rewards. Short of that, the company’s pivot to HPC/AI revenue through data center infrastructure as a secondary revenue stream is necessary: AI Projections (IREN Limited) That said, I wouldn’t say I’m as bullish AI/HPC as the average US equity market investor seems to be, but my view has been that companies with an ability to do both BTC and HPC are probably wise to attempt both. Though IREN is one of just a handful of BTC miner-turned-HPC providers that is actively generating revenue from the HPC/AI segment, IREN is still highly dependent on BTC for top and bottom line performance. With all of that reiterated, IREN’s numbers from FY Q3-25 actually look pretty good, in my view. FY Q3-25 Results For the quarter ended March 2025, IREN Limited reported $148.1 million in total revenue. This was a year-over-year improvement of 172% and a sequential increase of 24%: FY Revenue Q3-25 Q2-25 Q3-24 YoY Bitcoin Mining $141.2 $113.5 $53.4 164% AI Cloud Service $3.6 $2.7 $0.6 500% Other $3.3 $3.4 $0.4 725% Total Revenue $148.1 $119.6 $54.4 172% % From Mining 95.3% 94.9% 98.2% -3% Source: IREN Limited, Dollars in millions By percentage, AI Cloud growth was terrific, at 500% over the prior year period. Though at just $3.3 million in the quarter, AI Cloud Service revenue continues to make up a small portion of top line revenue. At $141.2 million in Q3 revenue from mining, IREN’s percent of revenue from mining actually grew slightly sequentially. From an expense and profit standpoint, IREN reported a 492% year-over-year increase in operating profit from $6 million last year to $35.5 million in Q3-25: FY Expenses Q3-25 Q2-25 Q3-24 YoY Depreciation $47.4 $36.2 $8.7 445% Electricity $39.4 $30.2 $19.8 99% Operating Profit $35.5 $31.1 $6.0 492% Source: IREN Limited, Dollars in millions This is now an operating profit for IREN in three of the last five quarters even as depreciation has surged 445% year over year. IREN likes to share ‘hardware profit’ which essentially shows mining profitability after electricity costs: Fiscal Year Mining Rev Hardware Profit Mining Margin Q4-24 $54.3 $29.9 55.1% Q1-25 $50.0 $20.8 41.6% Q2-25 $112.9 $76.3 67.6% Q3-25 $141.2 $104.5 74.0% Source: IREN Limited, Dollars in millions Q3-25 was the second consecutive quarter IREN was able to grow gross margin on Bitcoin mining. Bottom line, after $7.9 million in interest expense and $5 million in taxes, IREN Limited reported a $24.2 million quarterly profit for Q3-25. That was a sequential increase of 28%. Balance Sheet and Dilution At the end of March, IREN had over $184 million in cash and just under $256 million in total current assets: Assets 000s Cash and Equivalents $184,333 Total Current Assets $255,911 Property, plant and equipment $1,575,107 Total assets $1,989,755 Liabilities 000s Trade/other payables $172,272 Convertible notes $322,480 Total Liabilities $564,188 Total Equity $1,425,567 Source: IREN, as of quarter ended March The company has just $564.2 million in total liabilities. 98% of those liabilities are current through payables and convertible notes. The company’s total equity of $1.4 billion is essentially entirely due to property, plant, and equipment. Shares Outstanding as of December 2024 214.4m Shares Outstanding as of March 2025 223.6m Shares Outstanding as of April 2025* 241.0m Source: Seeking Alpha, IREN, *Analyst Estimated Shareholder dilution – which has been a significant factor over the last two years – wasn’t all that horrific during the three months ended March with roughly 9 million more shares through the ATM. However, since the end of March, IREN raised an additional $107.6 million from the ATM through issuance of another 17.4 million shares. Looking Ahead & Valuation IREN Monthly BTC Production (IREN, Author’s Chart) During the month of April, IREN produced 579 BTC and generated $50.1 million in revenue. The company is still guiding for 50 EH/s per second in the first half of calendar 2025 but will pause further scaling plans for Bitcoin mining and will instead focus on growing AI Cloud revenue. That segment, while still comparatively small at just $3.6 million last quarter is already off to a good start for fiscal Q4: IREN Monthly AI Cloud Revenue (IREN, Author’s Chart) At $2 million in AI Cloud revenue during the month of April, IREN has grown AI revenue for the third consecutive month and has an annualized AI/HPC revenue rate of $19.2 million over the last three months. Still, the company’s bread is buttered with Bitcoin mining. And if we value the business based on future expected revenue from BTC sales, we see that IREN stock may not be a bad buy at just under $8 per share. Market Capitalization $1,920,770,000 3-Month Avg BTC Production 524 FWD P/S At $85k BTC 3.59 FWD P/S At $100k BTC 3.05 FWD P/S At $150k BTC 2.04 FWD P/S At $200k BTC 1.53 Source: Author’s Estimates, 3-month average production based on Feb-Apr actuals Given the company’s three-month average production of 524 BTC per month, IREN’s not terribly expensive on a forward sales multiple at current BTC pricing. If we assume an annualized rate of production that is reasonably close to what IREN is currently doing, the company is only trading at 3x forward sales even factoring in the April ATM dilution. This is in line with the 2.9x info tech sector median, and that’s before any potential price gains in BTC between now and the end of the year. Closing Takeaways I’ve been covering IREN for Seeking Alpha for three years. During that time, I’ve gone back and forth between ‘buy’ and ‘hold’ on the company. Dilution has been an ongoing problem and the company’s pivot to AI, while admittedly more promising than most mining peers, is still far from a sure thing. But with Bitcoin back above $100k per coin and IREN maintaining a top 3 position among public miners regarding EH/s, it’s tough to argue with the results from fiscal Q3. IREN Limited is one of the most efficient operators in the sector and is a profitable company at current BTC prices. Pre-halving back in 2024, my view was and continues to be that BTC miners are great trading tickers, but not necessarily strong long-term investments. However, if you want one BTC miner to hold on fundamentals, IREN is the one I’d pick. I’m upgrading back to ‘buy.’

Source: Seeking Alpha