IREN stock retreated by over 6% in the premarket session as investors reacted to its financial results. It slipped to $38, down sharply from the year-to-date high of $70.60. This retreat happened even after the company reached a major milestone, with its AI revenue surpassing its Bitcoin mining operations.
IREN stock drops after a major milestone
IREN, formerly known as Iris Energy, published an encouraging report, which showed that its AI revenue surpassed its Bitcoin mining one in the last quarter. Its AI cloud solution rose from $33 million last year to over $70.5 million last quarter. For the first six months, revenue rose to over $128.8 million.
IREN’s Bitcoin mining revenue dropped to $66 million, down from $111 million in the same period last year. This revenue slipped as Bitcoin price dropped and as the company continued its pivot towards the AI data center industry. In total, IREN’s revenue fell to $137 million from $144 million in the same period last year. The CEO said:
“This year, that founding thesis became tangible. Exponential AI consumption growth has fueled demand for compute capacity well beyond the available supply of infrastructure. IREN was built for this moment.”
Why IREN is dropping after earnings
IREN’s stock dropped for several reasons. First, the company’s impairments jumped sharply in the last quarter, losing over $450 million, up sharply from the previous $140 million. As a result, its total loss jumped to over $684 million in the quarter. It lost $247 million in the same period last year, and the loss trajectory continued to soar.
Second, the company continued its cash burn during the quarter as its data center spending rose. Its cash burn, which is defined as operating cash flow minus expenditures, rose to $303 million. This happened as it spent over $2.1 billion in the quarter.
Additionally, the company continued to borrow heavily, with its long-term debt rising to over $7.4 billion during the quarter from $962 million in the same period last year. As we have seen with similar neocloud companies, this borrowing will likely continue in the foreseeable future as it continues to fund its growth.
The need for cash means that the company will need to raise money to fund its plants. This will see its debt continue to grow and possibly result in shareholder dilution.
Still, on the positive side, the company continues to see more demand for its services, with the 2027 capacity being nearly sold out. It has more room to grow as demand for compute continues rising.
IREN share price technical analysis
The daily chart shows that IREN has come under pressure, moving from a high of $49.22 on August 13 to the current $38.17. It has now filled the gap that was formed on August 11.
The stock remains below the 50-day Exponential Moving Average (EMA), while the Relative Strength Index (RSI) has pointed downwards. Therefore, the most likely forecast is where it remains under pressure, potentially to $29.
In the long-term, however, there is a likelihood that the stock will bounce back, potentially to over $90 as Cantor Fitzgerald and BTIG predict.