Why IREN's Post-Market Selloff Misses The Big Picture

Summary Iren Limited is executing a strategic pivot from Bitcoin mining to contracted AI infrastructure, with AI Cloud revenue up 136% QoQ to $17 million. IREN secured $3.6 billion in GPU financing and $1.9 billion in customer prepayments, covering 95% of GPU capex and reducing future dilution risk. Despite a headline net loss, adjusted EBITDA remained positive at $75.3 million (41% margin), signaling resilient core operations during the transition. With $3.2 billion in cash, over 4.5 GW of secured power, and a targeted $3.4 billion AI ARR by the end of 2026, IREN offers a compelling long-term entry point. Thesis: Focus on What's Important Here's what I think about IREN Limited (IREN). The headline numbers this quarter still show us a business that is mostly Bitcoin mining, even though that is no longer the company’s strategic future, and management has stressed this multiple times. What grabbed a lot of investors immediately on the call is that roughly 95% of 2Q26 revenue came from mining, yet management is expecting that mix to flip rapidly. The projections are that Bitcoin contribution should fall considerably by year-end as AI Cloud is expected to ramp up. That's the segment that actually matters going forward, AI revenue, and it grew 136% quarter over quarter to $17 million, with management still reiterating that all major expansions are now fully funded and that power is secured. So when I heard that, I thought that they’ve now removed the two biggest historical risks in dilution and build-out uncertainty. Infrastructure under contract and GPU financing are in place, and the company is also set up nicely to move from today’s rather modest AI revenue base to a target figure of $3.4 billion run-rate by the end of calendar 2026. So in that context, the after-hours selloff we saw seems to be mainly driven by the pretty weak Bitcoin headline revenue and also some accounting noise, which I’ll explain. As for the current stock price, it has pulled back a lot, and I would view this as a good buying opportunity for those willing to hold Iren in the long run. IREN Limited 2Q26 Iren has released 2Q26 results , and the market wasn’t very impressed, to say the least, with shares sliding about 11% yesterday and a further 18% post-market. The results clearly show a company in the middle of a pretty hard but strategic pivot. For a while now, we’ve seen Iren try to push from volatile Bitcoin mining toward more long-term, contracted AI infrastructure. So the numbers still show the pain of transition and the scale of what Iren is actually trying to build. Firstly, on the surface, the 2Q26 report looks rather weak, with revenue falling to $184.7 million, down from $240.3 million. IREN Limited The company also posted a net loss of about $155.4 million. However, we have to keep in mind that this headline loss is mainly driven by non-cash and one-off items, not complete operational collapse. Unrealized mark-to-market losses on financial instruments swung very violently quarter-to-quarter, from a $665 million gain to a $107 million loss. On top of this, Iren took a $111.8 million debt conversion inducement expense and also about $31.8 million in mining hardware impairments, since throughout this shift, they’ve been retiring ASIC rigs in favor of GPUs. So after we stripped these out, adjusted EBITDA actually remained positive at $75.3 million, with margins improving to 41%. So that tells me core operations are still throwing off cash here, even while reported earnings look pretty ugly. Most important was the AI Cloud revenue, which we saw more than double quarter-on-quarter from $7.3 million to $17.3 million, which goes to show that their revenue mix is already shifting away from Bitcoin. This is exactly the strategic objective going forward. GPU Fleet Buildout Elsewhere, what I think really matters is the forward-looking transformation we saw embedded in financing and capacity announcements. Iren secured about $3.6 billion in GPU financing at sub-6% interest for its Microsoft ( MSFT ) contract, and they’re set to combine that with $1.9 billion in customer prepayments. That should cover around 95% of GPU capex, which should dramatically lower execution risk/equity dilution moving forward. That is quite strong financing for infrastructure at this scale and rather unusual. Essentially, this means that Iren has found a decent way to build out that massive GPU fleet for Microsoft without actually having to fund the majority of it with new equity. That would have been a pretty painful option for shareholders. So that set plan pools up enough capital funds to cover about 95% of the actual cost of buying/installing the GPUs. In other words, Iren is left to put up roughly 5% of the money itself. So there shouldn’t be much fear over any “we’ll raise money later” concerns, as the capital is already matched to the contract. Microsoft is basically helping pre-fund the infrastructure, and lenders are also comfortable offering money at a relatively low rate. It’s a pretty good indication that the revenue stream from this contract is being seen as high-quality and low-risk. It’s another step away from relying on volatile Bitcoin margins. Iren here is showing signs of a well-financed, contracted AI infrastructure provider, where the GPUs can be paid for upfront, and later revenues should arrive over time. The upside is that future earnings from this GPU fleet should flow much more cleanly to equity holders, rather than just being swallowed by emergency capital raises. Keep in mind it's a targeted 140,000 GPU expansion with estimates to generate $3.4 billion in ARR by end-2026. We also have to put that in context with the current quarterly revenue of under $200 million, so there are implications here for almost an order-of-magnitude step-change in earnings power if the delivery stays on schedule. Balance sheet expansion is also showing signs of this build-out, with total assets jumping from $4.3 billion to $7.0 billion. Of course, this is mainly driven by data center assets and hardware, with cash also surging to over $3.2 billion thanks to some capital raises and convertible notes. Just to expand on this, I’ve also seen some investors highlight concerns about the hefty increase in Iren’s fully diluted weighted-average share count . We saw it jump from around 200 million for the six months ended in December 2024 to 350 million for the six months ended in December 2025. I think we can put this jump mainly down to those significant equity/convertible instrument issuances, which we’re tied to funding the company’s AI cloud transition. If we take a look at Iren’s 10-Q, we can see that the diluted share count expanded due to the inclusion of options, restricted stock units, and convertible notes in the EPS denominator. For example, in 1Q26, that diluted count included tens of millions of convertible note-related shares on top of service-based and market RSUs plus options. I think the reason for this dilution isn’t random; it's just a side effect of massive capex and funding strategy tied into a hefty figure of $9.7 billion for GPU services contracted with Microsoft. We have to remember that under the agreement, Iren is actually obligated to purchase around $5.8 billion of GPUs and infrastructure from Dell, which wasn’t cheap. They needed to raise capital via those registered direct equity offerings, convertible note issuances, and financing deals over the past year; they couldn’t just rely solely on operating cash flow. What's important with regard to this is that management has already told us on the recent earnings call that the funding for all their contracted expansions, which also included the Microsoft GPU buildout, is now set in place. This again means that the major capital needs that drove the earlier dilution we saw are largely behind them. So I’m tipping for dilution moving forward to not be significantly affected. Again, it’s a sign of that inflection point, with the share count increasing materially and capital being raised to build out a very long-duration, contracted AI infrastructure plan. Financially Weak in Isolation, but Cash is Impressive I think a big talking point on this earnings should be that Iren reported in the release about cash and power, not just general optimism about the AI space going forward. Now, as of late January, Iren held roughly $2.8 billion to $3.3 billion in cash, which gives them unusually deep liquidity for a company of its size. On top of this, they also have more than $9.2 billion of funding secured year-to-date across things like customer prepayments, GPU financing, and convertible notes. Iren has also announced a new 1.6 GW data center campus in Oklahoma, which is set to lift the total secured, grid-connected power capacity to over 4.5 GW, which is pretty massive. The grid studies are complete, and power is tipped to ramp from 2028. On the call, management also explicitly framed this as a big competitive moat for them, with large AI customers getting increasingly bottlenecked not by GPU supply alone, but by access to scalable power with low-latency network connectivity. IREN Limited We're seeing AI Cloud revenue already start to ramp up, from $7.3 million to $17.3 million, and targeted GPU deployments are expected to support $3.4 billion of ARR by end-2026. The logic here would tell me that Iren is no longer just a speculative builder; they now control the two scarcest inputs for hyperscale AI workloads in capital and electricity. So I think they’re in a pretty good place to absorb a meaningful share of the surging compute demand. And keep in mind that's a demand that even the largest technology firms admit they cannot meet internally. IREN Limited Valuation Iren’s valuation now is a bit of a mixed bag; on one hand, some investors will be looking at this lower share price as a big buying opportunity given the levels we’ve seen the stock at last year, whilst others will still think Iren screens as expensive on traditional metrics. That pullback in stock price also showed us how much future growth is already priced in. They have a trailing twelve-month revenue figure of roughly $185 million per quarter or $740 million annualized. They also hold a market cap nearing $14.8 billion, with the stock trading around 15x trailing sales and about 13x forward sales, versus sector medians closer to 3x. With regard to earnings, Iren’s forward GAAP price-to-earnings sits at a hefty 42x, and forward non-GAAP price-to-earnings is even heftier, nearing 59x. These are also well above sector averages and tell us that investors are valuing the company more like an early-stage hyperscale AI infrastructure platform rather than a mature data-centre or mining operator. So overall, the valuation post earnings still isn't anchored to current revenue but to expectations that those contracted AI deployments can materially scale revenue/margins over the next several years. Looking Ahead Lastly, we have to touch on the new share price. Shares post-market are around the $32 mark, which I think should be seen as a buying opportunity should investors wish to hold Iren until after this transition we're seeing is complete. We should expect Bitcoin's contribution to revenue to drop and for that AI contribution to slowly ramp up. As that happens throughout the rest of the year, there may well be more stock volatility. However, Iren's funding for the buildout is in place, and management has reaffirmed those bullish ARR targets.