CleanSpark Gets Attention For The Wrong Reasons, It's The Transition That Matters

Summary CleanSpark (CLSK) is transitioning from pure bitcoin mining to AI and HPC data center development, diversifying revenue streams and reducing earnings volatility. Despite recent earnings misses and negative EPS revisions, I maintain a Buy rating, supported by strong analyst forecasts and anticipated profitability in 2027. Industry-wide earnings cyclicality and recent bitcoin volatility have pressured CLSK, but its robust balance sheet and asset base support the transition strategy. The transformation may enable recurring revenue, less dilution, and REIT-like characteristics, fundamentally altering CLSK’s investment thesis and capital structure. Investment thesis Last week, beginning on Sunday, February 2, 2025, was a busy week for CleanSpark, Inc. ( CLSK ) watchers. On Monday, bitcoin, which the company mines, plunged and the CLSK share price toppled with it. On Thursday, the firm released its latest earnings report. Friday, the share price came roaring back. But there were two other issues of interest to investors: first, a red banner warning on its summary page at Seeking Alpha and second, an ongoing transition that began last fall. I believe the transition is the most important of these issues, and after examining the structural changes that will come out of it, maintain my Buy rating. About CleanSpark A transition is underway at the firm. Previously, bitcoin mining was its sole business, but it is now becoming an AI and HPC (high-performance computing) data center developer. It is assembling land and power assets that serve data center companies. In its 10-K for fiscal 2025 (which ended on September 30, 2025), it stated, “Leveraging our power optimization, land acquisition, engineering, operations and construction expertise, we have been actively pursuing opportunities to develop portions of our sites and power pipeline for AI and HPC hosting and leasing.” And, “This diversification strategy reflects our commitment to leveraging our expertise in energy management, data center operations and large-scale computing infrastructure to address rapidly growing demand in AI and HPC markets.” Latest earnings CleanSpark released its Q1-fiscal-2026 earnings report after the close on February 5, 2026. Those results came out as bitcoin, the only cryptocurrency the firm mines, was falling. According to CNBC on February 5, bitcoin was down nearly 30% on the first four days of the week. It added that the cryptocurrency was falling as U.S. tech stocks sold off sharply. Not all of its troubles were external, though, as its GAAP EPS of minus $1.35 missed estimates by $1.10 and its revenue of $181.2 million missed by $6.53 million. It did not provide guidance. Perhaps in anticipation of the earnings report and the bitcoin price falling farther, investors bid the price down by 10.04% on February 4 and by a whopping 19.13% on the day of the release. The fundamentals included: Quarterly revenues gained 11.6%, to $181.2 million. Net loss for the quarter was $378.7 million or a loss of $1.35 per share; for the same period last year, it recorded net income of $246.8 million or $0.85 profit per share. Adjusted EBITDA declined from $321.6 million Q1-2025 to a loss of $295.4 million in Q1 this year. This five-year chart shows revenue, net income, and basic EPS over the past five years, and its cyclical performance backs up management’s decision to diversify: CLSK revenue, net income, and EPS (Seeking Alpha ) On the balance sheet, CleanSpark had cash of $458.1 million, plus bitcoin valued at $1.0 billion. Total assets came to $3.3 billion while total liabilities were $1.9 billion. While recent quarters disappointed investors, the odds are strong that the share prices are in a trough and may rise sharply again. In the meantime, the Quant system has posted a red warning banner on the CleanSpark summary page. Warning Click on the banner and Quant reports the details: “CleanSpark, Inc. (NASDAQ: CLSK ) has characteristics which have been historically associated with poor future stock performance. CLSK has negative EPS revisions and inferior profitability when compared to other Information Technology stocks, to the point that it gets a Sell rating from our Quant rating system.” Two concerns then, negative EPS revisions and poorer profitability than its peers. We will analyze them in turn. Negative EPS revisions Seven Downs and no Ups. That is the current status of revisions: CLSK revisions table (Seeking Alpha) However, the revisions, which presumably come from the Wall Street analysts followed by Seeking Alpha, are at odds with the same analysts’ forecasts and ratings. Specifically, the 13 analysts have an average one-year price target of $19.43, an increase of 92.76%. Turning to ratings, they have nine Strong Buys and four Buys—not a single Sell or Strong Sell which we might expect from the revisions. As we saw on the revenue-net-income-EPS chart above, earnings have plunged twice before in the past two years, and then shot back up again. Is there any reason to think that won’t happen again? Probably not. If you are considering buying or selling this stock, you should take the negative EPS revisions into account, but it seems counterproductive to give them much weight. Inferior profitability The following chart provides context to explore the idea of substandard earnings. It compares the basic EPS of CleanSpark with those of Riot Platforms, Inc. ( RIOT ), Cipher Mining Inc. ( CIFR ), and Mara Holdings, Inc. ( MARA ): CLSK comparative EPS chart (Seeking Alpha) Two of the three other firms, Riot and Mara, have earnings profiles similar to that of CleanSpark, suggesting the current dip in earnings is an industry, rather than a CleanSpark-specific, issue. Mara also receives a warning banner on its summary page. The next question: Will earnings recover? We’ve already reviewed the cyclical nature of earnings, but bullish investors can also cite the Wall Street analysts’ forecasts: CLSK EPS estimates table (Seeking Alpha) The analysts expect the company to reduce its loss in 2026 and then shoot up to $0.77 in 2027. As for the plunge back down again in 2028, presumably the analyst who provided that estimate expects bitcoin and/or cryptocurrency to be enveloped by another downcycle. Again, be aware of the risk, but don’t let the banner warning necessarily scare you away from CleanSpark. The rebound Bitcoin fell off significantly during the week that began on February 1 (Sunday) and February 2 (first regular trading day). It bottomed out at around $60,000. But the low was short-lived; on February 6 it jumped from around $62,850 to $70,560, and by Sunday, February 8 it closed at $70,900. Along with bitcoin, its miners also jumped. CleanSpark was up 21.95% on Friday, February 6, erasing at least part of its losses earlier in the week. And, it wasn’t alone: the biggest bitcoin miner, Strategy ( MSTR ), gained 21%, Riot jumped 19.82%, Cipher picked up by 15.98%, and Mara rose 22.44%. While CleanSpark’s rebound was not enough to get it back to the levels of last October (it peaked at $23.61 on the 15 th of that month), it would have raised investor hopes. It would also remind us of the inherent volatility of cryptocurrencies and their miners. A look at the analysts’ forecasts should also cheer investors, with a forecast that the company will achieve profitability in calendar 2027 (as noted, one analyst thinks it will record a loss in calendar 2028). The transition I believe shareholders should take more interest in the transition than in the warnings or in the volatile share price. As the transformation proceeds, CleanSpark will change significantly. The company said in an October 20, 2025 news release , “This strategic evolution will diversify the Company's revenue streams, strengthen long-term cash flow potential, and enhance its ability to serve the world's leading technology companies.” First, its revenue, and probably earnings, should become less volatile, with cyclical mining revenues being replaced by recurring data center revenues. Second, with a steadier revenue and perhaps earnings, profile, it should be able to use operating cash flow and retained earnings more and equity raises less often. That will mean, among other things, less dilution of shareholders’ equity. Third, with steadier revenue streams and more physical assets, the firm will likely use more debt, since assets like data centers make good collateral. Since data center space is in high demand, the company may be able to negotiate for lower rates on longer-term borrowing. Fourth, CleanSpark may be able to generate annual recurring revenue that makes its financial results more predictable. Steady revenue and earnings could, in turn, lead to dividends and share repurchases. Fifth, it may come to look more like a real estate investment trust than a miner. Assuming it keeps using mining to generate cash flow, it might end up being a hybrid miner-real estate trust. As a result, the rationale for being a CleanSpark investor could be quite different a year or two from now. I think the company will deliver on its transition plan, opening new investment opportunities, leading me to maintain my Buy rating. Risk factors It is possible my interpretation of the Quant warnings is incorrect, that I may have overestimated its ability to rebound. Perhaps the EPS revisions should be given more weight than the bullish analysts’ target price. In a similar vein, I may be incorrect in looking at its earnings as being cyclical. I have assumed that the transition from mining to data center development will be successful. It is possible macroeconomic or technological advances will depress the need for this space. The transition also assumes good execution on the part of the firm and senior management. Perhaps management changes, whether voluntarily or through an activist investor, or the delivery of space and power turns out to be more difficult or costly than expected. A significant and lengthy downturn in the value of bitcoin would pull down the value of its assets and reduce or slow its cash flow. Major changes in the price of property and electricity could affect the costs of its inputs, potentially reducing the earnings power of its mining, real estate, and power holdings. Conclusion The yo-yoing price of CleanSpark made the headlines and the warning banner would have caught investors’ attention. But the most significant issue is its transition from a miner into something like a real estate investment trust. This will lead to profound changes in CleanSpark’s capital structure and a new rationale for ownership. I maintain my Buy rating.