Hut 8 Momentum Seems Finally Broken As Operating Profitability Eludes

Summary Hut 8 (HUT) has surged in price but remains reliant on Bitcoin appreciation, lacking true operating profitability from its core or side ￰0￱ beating Q3 earnings estimates, HUT's share price dropped, signaling waning market momentum and growing skepticism about its business ￰1￱ remains a concern, with HUT funding operations by issuing new shares rather than utilizing its Bitcoin reserves, worsening its balance sheet. I downgrade HUT to a hold with a bias toward sell, urging profit-taking and caution due to persistent operational losses and premium valuation over ￰2￱ in January I went with what I thought was a rather unusual topic, Hut 8 ( HUT ), a company I rated a buy based on encouraging reports about their attempts at energy optimization and the introduction of a GPU-as-a-service side ￰3￱ stock has done incredibly well since ￰4￱ by YCharts object HTMLElement Though the price has obviously surged in recent months, it looks like a very different company in November than it did in January, having moved to increase their energy capacity in recent months and, more importantly, creating a majority-owned subsidiary that went public in the form of American Bitcoin ( ABTC ).

Perhaps most importantly, though, is that we just had the Q3 earnings report from Hut 8, and while they beat on both EPS and revenue , the stock price also dropped pretty substantially, suggesting that the market’s love affair with the company’s momentum may finally be broken. There’s a lot to talk about here but most important is the earnings. Let’s see what it does, and doesn’t, ￰5￱ Continues But Operating Profitability Eludes Them Hut 8 is a strange beast in 2025, as they remain profitable on paper, but when you look at the earnings there is a persistent problem that they don’t seem to be able to shake. 2024 (First 3 Q’s) 2025 (First 3 Q’s) Total Revenue $130.7 million $146.6 million Gains of Digital Assets $201 million $182 million Operating Income $179 million $113 million Interest Expenses ($20.2 million) ($24.5 million) Net Income $180 million $53.5 million Diluted GAAP EPS $1.95 49¢ () The problem, in short, is that while the company is booking substantial gains in digital assets, which is to say the value of Bitcoin has gone up, those gains are actually bigger than the overall net income of the entire company, in 2025 dramatically ￰6￱ short, Hut 8 is not making any real operating profit through their day-to-day operations, but actually a significant operating loss that’s being papered over by appreciation in the value of their digital ￰7￱ happened in 2024 as well, and I noted it in January, but the hope at the time was that the company’s side businesses and optimization were such that they would grow into a business that could sustain itself on something other than Bitcoin going up in ￰8￱ 2025 numbers show that has yet to happen, and if anything has gotten quite a bit ￰9￱ rate of growth has also worsened, as estimated 2025 revenue was revised downward substantially from where we were in January, and 2026 revenue is following suit. 2027 revenue is expected to be enormously higher, but seems a lot less certain, as that far out in this industry is all but impossible to ￰10￱ we’re left with at the moment is a Hut 8 that was able to book pretty good paper gains on their digital assets, but the cost of the various other things they’re doing or attempting to do exceeds the money they’re bringing ￰11￱ January I called Hut 8 “more than a Bitcoin miner,” but in a way, the more is a liability.

Dilution, the Ongoing Concern There’s another problem here, and that’s ￰12￱ hope was that with their large reserve of Bitcoin was giving them room for an operating budget as they grow, and that the previous years of dilution to fund day-to-day operations were coming to an end. That, however, is not what we’re ￰13￱ January Hut 8 has 93.5 million shares outstanding, and a slew of Bitcoins on the balance sheet. Today’s 10-Q shows over 108 million shares outstanding despite those digital asset gains, and the company bragging of being able to secure a good price when they issue new shares of the company as evidence of their ￰14￱ they are able to get a premium to their underlying book value for the shares, and that’s not necessarily a bad thing, Hut 8 seems to prefer to keep funding their unprofitable day-to-day operations by issuing more shares, rather than taking some profits by selling some of their hoard of ￰15￱ that’s the one thing they’re unwilling to ￰16￱ Now Cash $72 million $33.5 million Total Current Assets $110 million $223 million Total Current Liabilities $110 million $310 million Loans and Notes Payable $297 million $217 million () While Hut 8 has been slowly growing revenue, the balance sheet is seemingly getting worse.

I wasn’t so worried about the iffy current ratio of 1.0 in January because I believed the large Bitcoin reserve was something of a backstop. That’s only true if they’re willing to use it, however, and with the current ratio down to 0.72, we might well see further dilution on the ￰17￱ concern, in short, is that a share of Hut 8 stock represents in the ballpark of $13 worth of Bitcoin and a business that seemingly can only book a profit when the price of the Bitcoin ￰18￱ that problem persists, the question is how long we can justify paying 3.6 times premium for the underlying Bitcoin when it’s tied to an otherwise unprofitable venture. That’s not a problem unique to Hut 8, of course, but I’ve yet to hear a good answer for why such premiums are justified compared to investing directly in Bitcoin if one is bullish about the ￰19￱ Growth of the Energy Business The side business Hut 8 seems most interested in of late is buying up cheap energy capacity, with plans to more than double their capacity under management with four new sites representing over 1.5 GW in ￰20￱ sites are heavily centered around Texas, which is 1.18 GW of the new capacity, with the remainder involving 300 MW in Louisiana and another 50 MW in ￰21￱ they are able to get this new capacity commercialized at the same high rate we’ve seen of late, that could increase the scale of this aspect of the business by quite a bit, but at the same time, the revenue for the power side of the business was only $18.2 million, 15% of total revenue, so far in 2025 to begin with, so this is not likely to be a huge driver of revenue growth even at higher ￰22￱ 8 is ambitious about growing the capacity quite a bit further than this, and it remains possible they will be able to do so in a way that makes them a profit on this particular side ￰23￱ is difficult to envision them being able to do so at such a vast scale as to make this a big part of the overall operations, ￰24￱ the Momentum Gone?

Surging from $11 per share to over $50 this past week, Hut 8 had quite a run as a momentum stock, with excitement fueling price increases and yet more ￰25￱ market sentiment was where it was during this huge increase in share prices and Hut 8 came in beating both revenue and earnings estimates as they just did, one would expect a further ￰26￱ we saw a 12% drop in share ￰27￱ me this suggests that the market may be getting beyond the exuberance around the company and starting to ask more questions about where the underlying business is going. That’s certainly where I’m at at the moment. That’s not to say that things couldn’t change at a moment’s notice once again, with the underlying Bitcoin price always subject to ￰28￱ the Bitcoin on the balance sheet amounts to most of Hut 8’s underlying value, the risk and the potential gains are both inexorably tied to the price of ￰29￱ could be that the cryptocurrency itself could start rising again, and the excitement surrounding that could restart the momentum behind Hut ￰30￱ Bitcoin is more or less stabilized, however, I think the questions about the premium Hut 8 shares command will loom ￰31￱ Be Time to Take Profits I was enthusiastic about Hut 8 in January and the price went up.

I now feel like I was right but for the wrong reasons, that the company was rather cheap at the time, but the underlying business was not, as it turns out, on the cusp of ￰32￱ a much higher share price and less conviction that the underlying business is ever going to be profitable beyond Bitcoin gains, I’m going to revise my rating downward to hold, with a bias toward ￰33￱ that bought at lower prices may want to consider taking the profit, and those using Hut 8 to play the Bitcoin market may do well to find something with less of a premium behind ￰34￱ should keep a close eye on Bitcoin prices, naturally, but should also track the difference between gains on digital assets and net income for the entire business, because so long as the former remains higher than the latter, I believe Hut 8 has some substantial ￰35￱ 8 may well be more than the Bitcoin miner, but the more may not be all that desirable at the end of the day.