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 prior 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, with significant growth expected from the commissioning of new GPUs at the Prince George site [19][22] - The company has secured $2.3 billion of annualized revenue run rate under contract, including approximately $0.4 billion at Prince George, which is expected to increase as negotiations finalize [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%, covering 95% of GPU-related CapEx for the Microsoft contract [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 reinforce each other to support growth [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 anticipates reaching a targeted $3.4 billion annualized revenue run rate by the end of 2026, utilizing only about 10% of its secured power capacity [17][27] Other Important Information - The company has secured a new 1.6GW site in Oklahoma, expanding its total secured power to over 4.5GW, which is crucial for future growth [6][14] - The company has 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 batch processing and its impact on Sweetwater - The company believes Sweetwater will likely be included in the batching process, securing the full 2GW of power [31] Question: Thoughts on verticalized AI cloud versus colocation - The company sees AI cloud as capturing more value than colocation, with higher returns per megawatt [33][36] Question: Update on energization dates for Sweetwater - Sweetwater One is on track to energize in Q2, with customer engagement expected to improve due to the batching process [51][52] Question: Revenue recognition timeline for contracted revenue - Revenue from Prince George is already operational, while the Microsoft contract will come online progressively throughout the year [55] Question: Pricing environment for cloud deals compared to colocation - The company is seeing strong demand and is open to longer contract tenors, with a focus on maximizing the value of each megawatt [60][61]