Galaxy Digital: Buyer Beware!

Summary Galaxy Digital (GLXY) earns a Hold rating due to bearish crypto markets, high debt, and uncertain near-term profitability. GLXY's core revenue comes from low-margin crypto market making, with nascent data center and tokenization initiatives offering longer-term upside. Debt maturities loom within five years, and recent equity issuance highlights capital needs and potential dilution risk. Data center growth and tokenization are promising but require significant investment and face execution uncertainty; a lower entry price is warranted. Galaxy Digital ( GLXY ) released full-year earnings for 2025 earlier this month. While there's a growth story here, the company is struggling with a bearish crypto markets and has a debt load to manage. I wouldn't buy right now, and those who do can at least see why they should beware! Business Model Galaxy bills itself as a company that provides infrastructure for digital assets and data centers. Q4 2025 Investor Presentation Digital Asset operations primarily refer to trading services for cryptocurrencies, but it also entails asset management. Full-Year 2025 Earnings Release The bulk of their revenue ultimately comes from Digital Assets, primarily in the form of market making cryptocurrencies. This is why most of their revenue is offset by transaction expenses. Full-Year 2025 Investor Presentation Smaller portions of revenue (lumped under Treasury and Corporate) come from management fees, lending, and staking some of their own crypto assets. Full-Year 2025 Investor Presentation Data Center operations are much newer, with much less revenue and gross profit garnered in 2025. In essence, it's a tried and true way to run a business, but it's important to realize that market making is the main operation, while the other aspects are rising and more forward-looking. Financial Profile It is often the case that companies providing some kind of digital financial service will have capital-light businesses, but Galaxy's balance sheet shows quite a bit going on. Assets (Full-Year 2025 Earnings Release) For starts, one will note that various classes of digital assets are reported among their assets. These do not account for Galaxy's long-term holdings. Rather, they reflect the capital deployed for their market making and other trading services. The $1.7B of investments (current and non-current) are mainly their proper crypto holdings, among other things. Investment Portfolio (Full-Year 2025 Investor Presentation) The chart above shows that, while a majority of it is crypto, namely Bitcoin ( BTC-USD ), Ether ( ETH-USD ), and Solana ( SOL-USD ), a little over a third is in venture and fund investments. In addition to this portfolio, they reported $1.2B in cash. Liabilities (Full-Year 2025 Earnings Release) The liabilities show a similar breakdown, with much of the debt being related to the operation of their trading services. The "true debt" borne by Galaxy is found under the $2.9B in notes payable. Debt Maturities (Q3 2025 Form 10Q) As the 2025 Form 10K remains to be filed, we can look at the latest Form 10Q to see that about $1.3B of this is due in less than five years. The discrepancy between Q3 and now is explained by a $1.15B offering that occurred in October (Q4), which refinanced some of the near-term maturities and added the total debt to the current balance. Income Statement (Full-Year 2025 Earnings Release) The full income statement reveals that, with the tight margins on market making, operating expenses are currently too high to produce a GAAP profit. Much of this is due to impairment of digital assets, which was associated with bearishness in crypto market late in 2025 (which has persisted into 2026). Up-C Structure (Full-Year 2025 Earnings Release) These financial details are also consolidated results of a limited partnership, which GLXY shareholders own a stake through an Up-C structure. Partnership units are exchangeable for GLXY shares on a 1:1 basis, and GLXY currently owns about 49.3% of the company. Outlook and Valuation Priced under $22 per share, Galaxy has a market cap of about $8.5B (factoring in the consolidated partnership). As they are not consistently profitable, it's a question of when we believe the company will shift into steady, consistent earnings and what a good price for that would be. Full-Year 2025 Investor Presentation For starters, the gross profit adjusted for the digital asset impairments shows earnings between $426M and $1,016M in 2025 and 2024 respectively. The main issue that they still have more than half a billion in other operating expenses and that offset this. Market making is too narrow in margin and too dependent on trading volume alone for Galaxy to have a compelling growth story here. Their real shot is recent efforts in data centers and tokenization. Full-Year 2025 Investor Presentation Their Helios data center campus currently only leases 800MW in electrical capacity out of 3,400. It's worth noting that not all of that capacity is currently built out with data center assets, and so additional investments will need to be made here before it becomes a meaningful revenue source. Full-Year 2025 Investor Presentation The recent earnings release and investor materials indicate that the data center rollout is going to be an incremental process, with much of their capacity remaining unleased even by 2028. Nevertheless, they believe the data centers will be able to contribute about $1B in revenue, with about 90% EBITDA margins at that point. If operating expenses can be contained, this could grow earnings by hundreds of millions. Full-Year 2025 Investor Presentation On the topic of tokenization, management points to a $700T opportunity of global assets, virtually none of which are tokenized for trading and transaction on the blockchain. As this would primarily be a software product with less capital needs, I expect it to contribute to improved earnings much more easily than data center investments. Full-Year 2025 Investor Presentation While they don't exactly have a major product for this right now, they have the basic in place to enable issuance of tokens, management of token assets, distribution. All of these things can earn modest fees. If global wealth becomes modestly tokenized, and if Galaxy has reasonable participation in this, it would be a lot of low-cost revenue slapped on top of their financial results. I find myself seeing three areas of growth: Recovery of crypto trading : Volatile, not sustainable over time Data center : Easier to anticipate but capital-intensive, requires debt Tokenization : Capital-light but more speculative and harder to gauge Galaxy's balance sheet isn't exactly hurting, but debt maturities are only a few years out. I feel need for more certainty about their growth with such a schedule. Cash Flow Statement (Q3 2025 Form 10Q) Galaxy issued $522M in common stock in the first nine months of 2025. This is a measure of their capital needs for the foreseeable future, any additional need to tap into this, potentially at a distressed share price, would be dilutive. Moreover, when management's opening remarks in the earnings call contain the following, I do worry about these risk factors more than I normally would: This is a bear market in crypto right now. We are below every moving average. We had expected better performance last year with gold up. The Bitcoin narratives were working, and we had a good administration, yet we were met with more sellers than buyers. And the only bright news to that story from a Bitcoin perspective is I really do think $60,000 was a 200-week moving average. It looks like what feels like tradable bottom. We put a kind of a spiking low and bounced. I understand Galaxy to be more dependent on external factors right now, just going off these remarks and much of what was said thereafter. For that reason, I hesitate to assume that the company is close to earning $500M to $1B. I think there's are plausible ways things could go badly, and I'd prefer an entry price that braces for impact. Below $10.50 (essentially half off and ensuring a future P/E in the single digits), I'd be willing to reconsider with the current financial picture. Conclusion I'm not convinced that GLXY is a doomed investment, but I am convinced it could easily be knocked over if growth opportunities do not materialize quickly enough. This is especially true, given the bearishness that affects their core market making segment. For that reason, I think a cautious approach is wise and just leave it with a Hold rating today.