Summary Bit Digital posted solid Q3 results with $30.5M revenue, $146.7M net income, and a notable earnings beat driven by digital asset appreciation. BTBT's investment thesis now centers on its Ethereum treasury strategy and WhiteFiber AI hosting pivot, as Bitcoin mining operations were further wound down in Q3. The lack of a major AI hosting contract announcement for WhiteFiber has muted market enthusiasm, despite solid GPU assets and ongoing capacity expansion. BTBT's risk profile is increasingly tied to ETH price and new WhiteFiber deals, but guidance and liquidity remain robust, supporting a bullish outlook. Bit Digital ( BTBT ) released Q3 earnings last Thursday and delivered $30.5 million in revenue, a 33% YoY growth, and $146.7 million in net income, which was driven by $166.8 million in adjusted EBITDA (which includes a $168 million gain on digital‑asset appreciation). Ethereum ( ETH-USD ) staking yields on staked treasury ETH are also becoming a growing boost to margins. Ethereum staking revenue came in at $2.9 million. Q3 GAAP EPS was $0.47 and was an earnings beat. The market reaction has generally been muted despite the headline earnings beat. Bitcoin ( BTC-USD ) miners that have scaled their pivot to high-performance computing ((HPC)) and have secured multi-year, multi-billion HPC deals are the top focus at the moment. The market is thus placing a much less premium on miners with no contractual progress in HPC in the last few months. BTBT last saw its strong momentum earlier this year on spinning its HPC business line to a separate unit, WhiteFiber. The conversion of all existing Bitcoin assets to Ethereum for an ETH treasury strategy also sparked some interest in the stock. The ETH treasury strategy was a major driver for most crypto stocks in Q2 and Q3 this year. The ETH treasury momentum seems to have stalled a bit across ETH treasury stocks, as ETH and major cryptos have seen an extended pullback . ETH now trades around $3,000, fighting not to break the next support at $2,800. ETH’s pullback has somewhat weakened the investment thesis for Bit Digital. It is normal for investors to be lackadaisical towards the stock because of the lack of a concrete AI hosting contract announcement. By the look of it, investors highly anticipated an announcement of a specific, finalized new AI client contract for WhiteFiber in the back half of Q3. Q3 was a continuation of the sunsetting of Bitcoin Digital's Bitcoin mining business. Bit Digital's mining hash rate dropped to 1.9 EH/s, and only 65 BTC were mined in the quarter. The company plans on retiring old mining hardware, and forward guidance for mining hash rate is around 1.2 EH/s by next year. But mining efficiency is expected to improve from 22 J/th at the moment to around 19 J/th when the older mining machines are retired. The implication of this is that each BTC Bit Digital mines will be cheaper on a cost basis, at least until the next Bitcoin halving, when the company could maybe decide to upgrade to new fleets in Bitcoin mining if they see fresh prospects. (Please note that the last statement is just my assumption and not an official forward-looking statement from management). Even if much less BTC is mined, if they are mined very efficiently at an attractive cost, it will be a boost to cover ongoing OpEx. For now, Bit Digital has become almost a pure bet on Ethereum, save for the 71.5% stake in WhiteFiber, which exposes the company to AI hosting and colocation revenue. As of Q3 end, Bit Digital held 122,000 ETH in treasury. That figure now stands at 153,546 ETH after the 31,000 ETH purchased with proceeds of the $150 million convertible notes offering last month. The total acquisition cost of Bit Digital's 153,546 ETH is now $467.6 million, and the ETHs are now worth $463.4 million at the current ETH price of $3,020. Bit Digital's ETH holdings value now sits slightly below their cost. If ETH dips further at this point, there is some risk of further unrealized losses and mark-to-market volatility in reported financial values, except they actively dollar cost average new ETH purchases at lower prices. The good thing is that Bit Digital is using a balanced capital strategy by combining unsecured converts and ATM equity to fund ETH accumulation, so ETH holdings are also unencumbered, which means ETH’s dip doesn't present any further worries near term beyond temporary valuation swings. Bit Digital ended Q3 with ~179 million in cash and cash equivalents. And with the substantial amount of ETH held by the company, the company’s liquidity is very strong at over ~$600 million (cash plus digital assets, per the Q3 earnings call ). Management is also confident in the company's ability to continuously raise unsecured convertible debt. But I think in the case of a prolonged crypto bear market, that ability to raise additional unsecured debt could become constrained if sentiments shift greatly among investors and lenders. The company could be forced to turn to the $500 million ATM, which would be dilutive, especially if ETH's dip drags BTBT's price lower. The Market Awaits a WhiteFiber Deal Bitcoin miners have been leveraging their power assets to secure multi-billion-dollar build-out financing and massive contracted revenue pipelines. The challenge for Bit Digital's WhiteFiber pivot at the moment is one of scale. The 5MW colocation contract with Cerebras Systems (CBRS) remains the only anchor colocation tenant to date. Though that deal validates the ability to handle high-density AI infrastructure by the recently IPOed company, it still pales in comparison to the massive, multi-billion-dollar deals being executed by peers. For context, miners like Cipher Mining ( CIFR ) recently secured long-term AI hosting agreements valued at multi-billion dollars (a $5.5 billion lease deal with AWS for 300MW of capacity for 15 years, adding to a $3 billion, 168MW Fluidstack agreement ). TeraWulf ( WULF ) also recently signed a multi-billion dollar agreement with Fluidstack for AI compute capacity. Though colocation deals seem lacking at the moment, Bit Digital does have a solid GPU portfolio with over 4,500 next-gen Nvidia GPUs deployed as of the time of the IPO back in August (which were mostly under contract for the GPU-as-a-Service cloud offering in a deal with a cloud gaming platform called Boosteroid ) and has been acquiring and deploying newer hardware, including Nvidia B200 and H200 GPUs . This creates a meaningful GPU-as-a-Service pipeline opportunity. The buildup of significant power capacity is also ongoing with the 1 million square foot property in North Carolina ; that site has the potential to reach 200 MW of capacity over time. All these are great assets; however, it seems the current market premium is reserved for the miners who have successfully monetized their power infrastructure with immediate, transformative, multi-billion-dollar contract colocation announcements, which is the precise, large-scale news investors were hunting for in Bit Digital's Q3 report. Q4 is expected to be a better quarter for Bit Digital and WhiteFiber. Revenue recognition from the Cerebras deal will commence in Q4 this year or Q1 next year and should begin contributing to recurring revenue and improving margins. I believe the current setup does not warrant BTBT for a rating downgrade to a Hold or Sell. But the risk profile just became more concentrated. It now largely hinges on ETH price performance and a material new contract win from WhiteFiber. I believe guidance for the HPC rollout and for WhiteFiber to reach 76 MW gross capacity by next year's end remains unchanged (management has not hinted at any change in the roadmap). Which is achievable considering current sites at MTL-2, MTL-3, and NC-1 facilities. MTL-3 (where the Cerebras tenant is located) is expected to be completed by the end of this year (per the S-1 filing during the WhiteFiber IPO). Guidance for MTL-2 completion is the first half of next year. The first gross 24 MW at NC-1 should be completed in Q1 next year. The completion of these sites’ capacity will precede new HPC deals. There is enough dry powder to fund these. With current demand for AI compute, I believe momentum will return and BTBT will be back in favor of investors in short order.
