Iris Energy (IREN) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q2 FY 2026 was $184.7 million, a decrease of 23% compared to the previous quarter, primarily due to lower Bitcoin mining revenue [19][21] - Adjusted EBITDA declined mainly due to reduced Bitcoin mining revenue, partially offset by lower payroll tax accruals and power costs [20][21] - The company recorded $31.8 million in mining hardware impairment associated with the transition to AI cloud, compared to $16 million in the prior period [21] Business Line Data and Key Metrics Changes - AI cloud revenue is accelerating as deployments ramp up, with significant growth expected from the commissioning of new GPUs at the Prince George site [19][22] - The company has secured $2.3 billion in annualized revenue run rate under contract, including approximately $0.4 billion at Prince George, with expectations for this to increase [16][17] Market Data and Key Metrics Changes - The company has secured underwriting commitments for $3.6 billion of GPU financing at an interest rate of less than 6%, which supports a $9.7 billion AI contract with Microsoft [5][23] - Demand for AI cloud services remains strong, with multiple advanced negotiations underway for larger scale deployments [6][16] Company Strategy and Development Direction - The company focuses on a vertically integrated model, controlling the design, build, and operation of its data centers, which enhances cost management and service quality [11][14] - The strategy revolves around the "three Cs": capacity, customers, and capital, which are interdependent and reinforce each other [8][26] - The company aims to scale into one of the world's largest AI cloud platforms, leveraging its secured power and operational capabilities [10][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing transition to AI cloud, expecting subsequent quarters to reflect a growing contribution from AI cloud revenues [22] - The company highlighted that demand is not a limiting factor for reaching its $3.4 billion annualized revenue target by the end of 2026, with significant runway for growth beyond that [17][27] Other Important Information - The company has secured a new 1.6 GW site in Oklahoma, increasing its total secured power to over 4.5 GW, which is crucial for future growth [7][14] - The company ended January with a strong cash position of $2.8 billion and has secured $9.2 billion from various financing sources to support growth [24] Q&A Session Summary Question: Update on ERCOT and its impact on Sweetwater - The company believes Sweetwater will likely be included in the batching process, securing the full 2 GW of power [31] Question: Economics on colocation versus AI cloud - The company sees AI cloud as capturing higher value compared to colocation, with ongoing strength in demand for cloud services [33][34] Question: Energization dates for Sweetwater - Sweetwater 1 is on track to energize in Q2, with customer engagement expected to improve due to the batching process [51][52] Question: ARR recognition timeline - Revenue from the Microsoft contract is expected to commence progressively over the year, starting in Q2 [55] Question: Pricing environment for cloud deals - The company is seeing strong demand and interest in longer tenors for cloud contracts, indicating a favorable pricing environment [58][60]