Hi YXI friends,

A quick intro - you can think of IREN (formerly Iris Energy) as the hyperscaler side of the Mag-7s, providing "Hyperscaler-as-a-Service" or "AI Infrastructure-as-a-Service" for those unwilling to splash the enormous CapEx on building their own.

Instead of tech companies spending billions and waiting years to secure power grids and build data centres, they can rent IREN’s specialised, high-density infrastructure.

While the legacy revenues from Bitcoin mining are declining, the contracted backlog ($3.1 billion ARR from Microsoft and Nvidia) and Nvidia’s 5GW endorsement provide a credible bridge to a fundamentally different earnings profile in a year’s time.

The critical catalyst is the Horizon 1 handoff to Microsoft in Q3 this year. If that lands on time, it unlocks the revenue ramp that may justify the current valuation.

All of the charts in this note were developed using proprietary analytical tools to provide a unique set of insights for YXI Premium subscribers.

You can find the past earnings of the companies we cover in the “Asset Profile” section of YX Insights below.

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

IREN was originally built around Bitcoin mining, but has now aggressively pivoted toward high-performance computing (HPC) and AI cloud services.

It does so through AI Cloud Compute Services (GPU-as-a-Service), i.e. renting out massive arrays of high-performance Nvidia GPUs.

IREN also provides AI Colocation & Data Centre Capacity, by leasing physical data centre space, high-voltage power hookups, and specialised liquid-cooling infrastructure directly to hyperscalers (like Microsoft) who bring or manage their own hardware.

Revenue Overview

Customer acquisition in mining is effectively automated (via mining pools). In AI/HPC, direct enterprise sales and long-term contracts are required.

Key Risk

The business is capital-heavy, with CapEx running well above revenue in recent quarters as IREN aggressively expands capacity. Total assets ballooned from $2.9 billion at June 2025 to $7.3 billion by March 2026. This was funded by a combination of equity raises and debt, as total liabilities jumped from $1.1 billion to $4.6 billion over the same period.

IREN’s latest quarterly revenue fell 21.6% QoQ to $144.8 million, driven by Bitcoin mining decline. Meanwhile, AI cloud revenue nearly doubled QoQ to $33.6 million from $17.3 million.

IREN has signed a $3.4 billion 5-year AI cloud contract with NVIDIA for Blackwell GPU deployment across 60 megawatts at Childress, generating approximately $700 million ARR. Nvidia is effectively renting compute capacity from IREN rather than building and operating its own facilities.

Furthermore, IREN has a $3.7 billion year-end ARR target, primarily driven by its contract with Microsoft, in addition to its latest Nvidia partnership.

IREN has previously secured a massive 5-year, $9.7 billion contract with Microsoft. In terms of funding, Microsoft provided a $1.9 billion upfront cash prepayment. Combined with a $3.6 billion GPU financing package backed by Goldman Sachs and JPMorgan, 95% of the capital needed to buy the chips for Microsoft is funded.

Therefore, the primary way to evaluate IREN’s stock is:

IREN is spending nearly $1 billion every quarter on its infrastructure rollout.

Here are the key financial metrics from the past four quarters. I designed the table this way so we can focus solely on the key top-line, profit, and cash flow metrics.

NTM

WS expects NTM revenue to grow by 300% to $2 billion (note that this is not the year-end ARR target, as 2026 is a ramp-up year).

Between 2027, IREN is expected to grow at a CAGR of 55% in to a revenue of $17.2 billion by 2031.

For 2027 itself, Wall Street is conservative relative to IREN’s own ARR target ($2.9 billion vs $3.7 billion), which is baking in execution and supply chain risks. WS’s estimate is a reasonable base case for assessing IREN’s value.

IREN’s current NTM EV/Sales, based on the $2 billion revenue estimate, is 10.5x. At an NTM growth rate of 300% (which of course won’t happen every year) or a CAGR of 55% by 2031, the valuation is more than reasonable.

Valuation Scenarios

The valuation essentially comes down to: what do we expect IREN’s revenue to reach in a year’s time, and what’s the appropriate multiple for it?

Wall Street’s own target is a 14x multiple, implying a $74 target in a year’s time. At the same valuation multiple, if IREN is on track to meet its ARR target, we can bake in an additional 30% growth rate to reach a $96 target.

If we can continue with the $2 billion revenue projection from Wall Street but apply a more aggressive valuation multiple - let’s say 18x for 55% CAGR, which is still very reasonable and in line with our historical 2-year average - the base case price target reaches $95, with the bull case target reaching $125 if IREN reaches its ARR target.

Of course, if we get a massive round of QE, which doesn’t seem likely given the latest inflation concerns, IREN’s valuation multiples could expand further.

Between November and March, IREN drew down by nearly 60%. However, it has recovered the majority of the selloff.

IREN is an incredibly volatile stock, which requires careful risk monitoring and position sizing.

Combined with our fundamentals and valuation assessment, here is what I think is a favourable long-side play for IREN.

Since the March low, IREN has successfully climbed above the 50-day and 200-day MAs. Moreover, it has broken out of the resistance line since the November high, with a retest in the past week.

If one entered today, they could target the 1.382 inverse extension of wave 4 (i.e. the inverse extension of the Nov - Mar drawdown) at $107. This is within our baseline - bullish valuation scenario above.

Once we enter above the 1.236 extension at $94 (nearly exactly in line with our baseline valuation), we could set a trailing stop in case IREN fails to reach the higher target.

On the stop loss side, I like a stop slightly below the 200-day MA, around $39. This is also right below the high-volume profile in the price region (the blue bars on the right), which should provide strong support. Falling through that support, we need to exit and re-assess.

Position sizing:

I would link my position sizing on how much I’m willing to lose if wrong. If this threshold is no bigger than 1%, then losing 28% on this trade only makes sense if the position size is about 3.5% of my portfolio. This is my personal preference and not investment advice.

IREN is at the nascent stage of a global AI infrastructure buildout. It has already locked in high-revenue contracts with Microsoft and Nvidia, which can propel it to a leading position in AI infrastructure-as-a-service. Of course, the revenue only rolls in if IREN executes according to plan. Therefore, we should always bear in mind the execution risk or supply-side delays in this process.

IREN can really only be valued using forward EV/Sales at this stage. The valuation depends on how quickly it can meet the revenue targets and on the broader investor appetite for awarding high valuation multiples to high-growth companies.