IREN Ltd (IREN) Q1 2026 Earnings Call Highlights: Record Revenue Growth and Strategic Microsoft ...

This article first appeared on GuruFocus.

Revenue: $240 million, up 28% quarter over quarter and 355% year over year. Adjusted EBITDA: $92 million, reflecting continued margin strength. Net Income: Significantly up due to unrealized gains on financial instruments. Operating Expenses: Increased due to higher depreciation and SG&A expenses. AI Cloud Contract with Microsoft: $9.7 billion contract expected to generate $1.94 billion in annual recurring revenue. Annualized Run Rate Revenue: Expected to reach approximately $3.4 billion once GPU expansion is fully deployed. Capital Expenditures: Supported by a 20% upfront prepayment from Microsoft contract. Cash Position: $1.8 billion at the end of October. GPU Fleet Expansion: Scaling from 23,000 to 140,000 GPUs by the end of 2026. Project EBITDA Margin: Estimated at 85% for the Microsoft contract. Convertible Notes: Issued $1 million in zero coupon convertible notes in October. GPU Financing: Secured an additional $200 million, totaling $400 million to date.

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Release Date: November 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

IREN Ltd (NASDAQ:IREN) reported a fifth consecutive quarter of increasing revenues, reaching $240 million, with a strong adjusted EBITDA of $92 million. The company secured a significant $9.7 billion AI cloud contract with Microsoft, expected to generate approximately $1.94 billion in annual recurring revenue. IREN Ltd (NASDAQ:IREN) plans to expand its GPU fleet from 23,000 to 140,000 by the end of 2026, supporting an estimated $3.4 billion in annualized run rate revenue. The company's vertically integrated model, controlling the entire stack from substation to GPU, is seen as a key differentiator, eliminating dependence on third-party providers. The Microsoft contract includes a 20% upfront prepayment, aiding capital expenditures and supporting a capital-efficient growth strategy.

Negative Points

Operating expenses increased due to higher depreciation and SG&A costs, driven by a higher share price and associated payroll tax expenses. The expansion and enhancement of data centers, such as the Childress site, have resulted in incremental cost increases. The company faces potential risks associated with the execution and timely delivery of the Microsoft contract, although they have a strong track record. There is uncertainty regarding the future reuse of auxiliary equipment for new GPU generations, which could impact future CAPEX efficiency. The company is reliant on securing additional funding, including $2.5 billion through secured initiatives, to support its ambitious expansion plans.

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Q & A Highlights

Q: Can you expand on the strategic value of the Microsoft deal and discuss the return profile and hurdle rates for future deals? A: Daniel Roberts, Co-CEO, explained that the deal with Microsoft validates IREN's proprietary data center design and positions them as a trusted provider. The deal demonstrates strategic value by proving their capability to serve a major technology company. Anthony Lewis, CFO, added that the deal is expected to deliver low double-digit unlevered IRRs and 25-30% levered IRRs, assuming a $2.5 billion leverage package. The deal's structure, including a 20% prepayment, enhances capital efficiency and supports attractive returns.

Q: How many GPUs will be deployed as part of the Microsoft deal, and how is the Horizon platform future-proofed for future chip generations? A: An unidentified speaker mentioned that each phase of Horizon will accommodate 19,000 GB300 GPUs, totaling four phases. The data centers are designed to handle rack densities up to 200 kilowatts, exceeding the current 135 kilowatts required by GB300s, ensuring they can support future GPU generations.

Q: What are the pricing dynamics in the cloud market, and how does this affect IREN's strategy? A: Daniel Roberts, Co-CEO, noted that demand for GPU hours is increasing, and while specific pricing wasn't disclosed, the focus is on risk-adjusted returns. The Microsoft deal offers over 35% levered IRRs, making it an attractive investment. Kent Draper, Chief Commercial Officer, added that demand is strong across all offerings, with pre-contracting for GPUs in Canada indicating robust market interest.

Q: Was co-location ever considered with Microsoft, and how did the negotiations evolve? A: Daniel Roberts, Co-CEO, stated that while co-location was discussed, the focus was on cloud services, which aligned with IREN's strategic goals. The preference for cloud deals is due to the attractive returns and strategic alignment with IREN's capabilities.

Q: Can you provide an update on contracting the remaining GPUs in British Columbia and the demand for bare metal offerings? A: An unidentified speaker reported that over 12,000 GPUs have been contracted, with strong demand continuing. The remaining GPUs are scheduled for later delivery, and discussions are ongoing. Demand spans AI-native enterprises and inference-based enterprise customers, indicating a diverse customer base.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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