Summary I maintain a Hold on IREN, as aggressive growth and a pivot to AI Cloud drive recent valuation highs, but execution risk remains. The timing of the AI Cloud transition is favorable, leveraging Bitcoin strength to support a seamless shift and long-term growth potential. AI Cloud is scaling rapidly with strong margins but still represents a small revenue share; execution and contract wins are critical to future upside. Bitcoin mining's strong cash flow and minimal debt provide ample funding for AI Cloud expansion, but sustained performance in both segments is essential. IREN Limited ( IREN ) is still a long-term Hold at the highs. Continued aggressive growth, a transition to profitability, and an asset-light balance sheet led to a run-up in valuations in the past quarter. The outlook for its core Bitcoin mining business is good for the upcoming earnings. The business may remain supported beyond the next quarter as well, but my Hold thesis hinges on IREN's pivot to AI Cloud. I feel the timing of the pivot is great. At a time when the Bitcoin segment should go through a relatively strong phase, a transition to AI Cloud will be more seamless than in a tough environment for Bitcoin. The AI Cloud transition will have room and legs to grow in this regime. However, investors should remain cautious while the execution delivers on the growing AI Cloud business over the next couple of years. The Growth Story IREN is still in its nascent growth phase for the AI Cloud business. The company's overall revenue growth has been explosive in triple digits for the past couple of quarters. That is because the Bitcoin mining business has expanded in Q3 2025 due to mining capacity expansion and better utilization before the pause (management has indicated a pause in mining expansion to foray into AI Cloud). Going ahead, I expect the legacy Bitcoin business to continue to benefit from a supportive Bitcoin regime and a rally that took place in Q4. However, my thesis hinges critically on the AI Cloud foray and growth in the segment. It would be great optics and supportive financially too if the Bitcoin business supports the transition, but triple-digit growth may be challenged, particularly as capacity pauses and business emphasis changes play out. Data by YCharts The Transition Scope and Path AI Cloud is now only ~2% of the overall revenues. In Q3 2025, AI Cloud clocked $3.6m in revenues, compared to ~$140m from the Bitcoin mining business. In such a mix, the Bitcoin business' trough could very well drag revenue growth from the triple-digit levels to near zero or even negative over the next few quarters. However, I am not looking at that as a critical and long-term valuation definition. As long as the topline keeps itself stable with fluctuations, the AI Cloud story could grow through such troughs. The initial signs from the AI Cloud business are very encouraging. The revenue, though small now, is scaling at 33% QoQ as per the last earnings report. Hardware profit margins are very strong at 97%. A mixed contract duration of up to 3 years gives visibility of ~$28m contracted revenue run rate annually. So while the actual revenues are still in single digits, the run rate pickup is already significant for the entire business' revenues. As per June 2025 updates , the AI Cloud business continues to scale well. If IREN utilizes the Horizon 1 buildout efficiently, the AI Cloud revenues could reach $100m in a couple of years, by conservative estimates (30% QoQ growth now plus the added capacity from Horizon 1 and later from Horizon 2). At those levels, the topline with a far better margin profile should start influencing IREN's valuations. The Ask from the Bitcoin Business The Bitcoin business has been growing through a purple patch with record revenue growth, as seen before, at decent margins. Cash balance is also strong, and debt levels are minimal . This should enable the company to divert capex into AI Cloud expansion without overleveraging. Data by YCharts IREN identifies $250m as the funding required in 2025 to expand to 50 EH/s, completion of Horizon 1 and Sweetwater substations, and development works. If Bitcoin prices remain supportive, as I expect, or even correct by 10-20%, the EBITDA covers the funding ask comfortably, as per IREN's own estimates. Which means sufficient and comfortable cash-backed AI expansion till it stands on its own. EDITDA Projections - IREN (Q3 FY25 Results Presentation - IREN) The progress in AI Cloud is therefore now squarely dependent on the execution. This entails continued AI demand for GPU and compute capacity. I will be watching for key contract signings and hardware deployments to back the capacity created in 2025. Valuation Expectations Bitcoin is anyway, a high-gross-margin business, clocking 80%+ generally. I expect the AI Cloud business to deliver close to 70% gross margins, as is commonly seen elsewhere. A ramped-up AI Cloud business also smooths the EBITDA profile and decouples it from Bitcoin price fluctuations. The path to stability in AI Cloud could lead to short-term net margin fluctuations, as Bitcoin price changes continue to impact that as much as AI investments and R&D, as data center costs hit before AI Cloud revenues ramp up. However, this is funded by existing cash and future cash flows, not dilutive equity or debt raises. Data by YCharts The current levels of EV to forward revenues at ~4.4x are slightly elevated from recent historical averages. The Bitcoin-led growth and profitability trends alone justify the multiple expansions. I feel the markets are not yet fully baking in the upside narrative that the AI Cloud augmentation brings to the table. As and when the AI Cloud execution shows more promise, I expect further rerating for IREN. But near-term valuations may still be dictated by the Bitcoin story—the outlook for which is not weak but open to stagnation or minor corrections from here on. IREN a Long Term Hold IREN is not yet an outright Buy, as I am awaiting further traction and execution around the AI Cloud business. Some more capacity utilization of the new facilities (Horizon 1) will get me interested in fresh Buys. Till then, investors may see valuations and share prices react to the near-term volatility of the core Bitcoin results and the lumpy nature of progress in AI Cloud. I recommend a Hold on IREN and keep an eye out for the funding status versus progress made in the AI Cloud ramp-up. As Bitcoin mining expansion pauses, that could mean monitoring for sharp corrections in Bitcoin prices or executional issues in the core business. I believe the inflection point for IREN is not very far off, when the markets start valuing IREN as a Cloud AI business and valuations start respecting that narrative. Till then, existing investors should keep a longer-term vision and only add to positions as more progress is evident.
