IREN Aims to Pour $25-30 Billion into Capacity Expansion

IREN, an Australian data-center operator, is planning to invest $25 billion to $30 billion in capacity expansion during fiscal 2027. This massive investment has raised eyebrows among investors and analysts, with some questioning how the company plans to fund it without diluting shareholders.

The company's recent financials show a net loss of $684 million for its fourth quarter, which ended June 30. However, this is largely due to non-cash ASIC write-downs, totaling $450.4 million, as IREN shifted its focus towards AI infrastructure. Adjusted EBITDA came in at $19.2 million, indicating healthier underlying operations.

The company's revenue breakdown shows that AI cloud services generated $70.5 million, surpassing Bitcoin mining revenue for the first time. AI cloud now accounts for 51.4% of total revenue. Despite this positive trend, IREN still relies heavily on its legacy business, with mining accounting for $578.2 million in revenue and $128.8 million from AI cloud.

The key to IREN's ambitious expansion plans lies in its contract backlog, which stands at $4 billion in annualized recurring revenue (ARR). This is expected to increase to above $4 billion by the December quarter, with full revenue impact from later capacity additions showing up in the March quarter. Notably, this figure excludes a $700 million ARR tied to an Nvidia contract that doesn't begin until 2027.

The company's plan to use debt rather than equity issuance is based on its argument that having $4 billion in contracted annual revenue makes it a more attractive borrower. This calculus suggests that if the revenue is already locked in, financing should follow. However, the broader question remains whether IREN can sustain this aggressive strategy without meaningful dilution.