Why Wall Street Still Believes in IREN Despite Earnings Miss

$184.7 million in revenue. $75 million in adjusted EBITDA. On paper, IREN's fiscal second-quarter numbers tell a story of disappointment. But dig deeper, and Wall Street sees something else entirely: a company successfully executing one of the most ambitious pivots in the crypto mining space.

The former bitcoin mining darling missed revenue expectations and saw losses widen, yet analysts are raising price targets. What do they know that the market doesn't?

The Great Mining Migration

IREN isn't just reporting earnings – it's documenting a fundamental industry transformation. The 2024 bitcoin halving crushed mining margins to record lows, forcing companies to reimagine their power-hungry facilities as AI-ready data centers. It's a bet on stability over volatility, predictable contracts over crypto's wild swings.

The transition pain shows clearly in the numbers. Lower average hashrate, fewer coins mined, and quarter-over-quarter bitcoin price drops all weighed on traditional mining revenue. Meanwhile, cloud services revenue more than doubled to $17 million, beating JPMorgan's$14 million estimate but falling short of the Street's ambitious $28 million forecast.

IREN management's key message: all currently energized GPUs are fully contracted. Translation – demand for AI infrastructure isn't theoretical, it's locked in.

The Microsoft Multiplier Effect

Here's where the story gets interesting. IREN has secured $3.6 billion in GPU financing tied to its Microsoft contract, alongside a $1.9 billion customer prepayment. Together, these funds cover roughly 95% of GPU-related capital expenditures as the company scales its AI business.

B. Riley raised its price target to $83 from $74, calling the recent pullback an "attractive entry point." Compass Point's Michael Donovan maintained his $105 target, arguing that one soft quarter pales compared to the company's transformed financial position.

Donovan expects IREN to begin recognizing revenue from Microsoft toward the end of Q2 2026, with a path to $3.4 billion in annualized revenue by year-end 2026. That's roughly 18 times current quarterly revenue.

The Contrarian View

Not everyone's buying the AI infrastructure story. JPMorgan maintains an underweight rating, focusing on near-term earnings pressure. The bank acknowledges encouraging signs but remains cautious about execution risks in such a capital-intensive pivot.

The stock reflects this uncertainty. Down about 20% from November's record high near $77, IREN closed Friday at $39.77. For a company that was one of 2024's best-performing stocks across all sectors, the comedown has been swift.

Beyond the Numbers Game

What makes IREN's story compelling isn't just the financial engineering – it's the broader question of how traditional industries adapt to AI disruption. The company isn't just changing what it does; it's changing what it is. From a commodity-exposed mining operation to a contracted infrastructure provider.

The 4.5 gigawatts of power capacity IREN now controls represents more than just electricity – it's optionality in an AI-hungry world. As hyperscale cloud providers scramble for compute capacity, owning the power and real estate becomes increasingly valuable.