Bitcoin Adoption And Renewable Power Will Transform Data Centers

Key Takeaways

• Core Scientific leverages low-risk, capital-light contracts and first-mover advantages to achieve outsized margins and rapid, recurring revenue growth in AI datacenter markets.
  
• Strategic power partnerships and a hybrid business model ensure persistent cost advantages, sustainability, and diversified earnings from both digital asset and compute market expansion.
  
• Heavy reliance on a single customer and ongoing transition risks expose the company to earnings volatility, overcapacity, and operational challenges amid evolving regulatory and market dynamics.

Catalysts

Provides digital asset mining services in the United States.

• Analysts broadly agree the CoreWeave contract will drive substantial revenue, but this view likely understates its impact: with CoreWeave funding nearly all CapEx, Core Scientific faces exceptionally low risk and could scale EBITDA and free cash flow far beyond datacenter industry norms due to minimal capital needs and stable, take-or-pay fixed payments across a 12-year term.
  
• Analyst consensus expects gradual customer diversification to reduce revenue concentration, but the accelerating pipeline of hyperscale and large enterprise deals-several already approaching 50-100 megawatts-suggests Core Scientific could rapidly outpace projections, creating recurring, higher-margin revenue streams that materially lift gross and net margins well ahead of schedule.
  
• The ongoing, industry-wide shift toward power-intensive AI workloads, combined with Core Scientific's first-mover advantage and purpose-built, high-density data centers, positions the company to dominate this exponentially growing segment-driving long-term topline growth and enabling premium pricing versus legacy operators.
  
• Core Scientific's long-standing partnerships with utilities and proactive expansion into regions with abundant renewable energy provide strategic access to lower-cost, greener power, resulting in persistent cost advantages, margin expansion, and resilience against regulatory and supply chain shocks.
  
• Amid accelerating institutional adoption of Bitcoin, rising network difficulty favors scale players; Core Scientific's hybrid model enables it to both capitalize on hosting demand and expand self-mining, magnifying future earnings growth and ensuring diversified upside as both digital asset and compute markets mature.

Core Scientific Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Core Scientific compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Core Scientific's revenue will grow by 71.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -170.8% today to 34.9% in 3 years time.
• The bullish analysts expect earnings to reach $613.3 million (and earnings per share of $1.25) by about August 2028, up from $-595.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 18.3x on those 2028 earnings, up from -7.2x today. This future PE is lower than the current PE for the US Software industry at 36.7x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.18%, as per the Simply Wall St company report.

Core Scientific Future Earnings Per Share Growth

Risks

• High concentration of revenue with CoreWeave, the company's foundational customer, means that any downturn or contractual change with CoreWeave-such as non-renewal, payment disputes, or shifts in demand-could significantly affect both revenue stability and earnings.
  
• The company's legacy bitcoin mining business continues to account for a portion of its financial exposure, and ongoing declines in bitcoin production and revenues associated with the transition to datacenter colocation could introduce earnings volatility and affect profitability during the multi-year transition.
  
• Aggressive growth plans into high-density AI colocation are subject to potential overcapacity or rapid changes in AI infrastructure trends, increasing the risk that sustained customer demand does not materialize as forecasted, which could suppress future revenue and result in underutilized assets.
  
• Capital intensity and the need for ongoing site and technology upgrades create long-term risks around maintaining operational efficiency and competitive cost structures; any underinvestment due to liquidity constraints or rising costs could cause declining net margins relative to better-capitalized competitors.
  
• Potential regulatory and sustainability pressures around datacenter energy usage-especially with new environmental legislation or electricity price shocks-could increase operating expenses or slow project approvals, negatively impacting margins and constraining revenue growth.

Valuation

• The assumed bullish price target for Core Scientific is $23.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Core Scientific's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $23.0, and the most bearish reporting a price target of just $15.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $1.8 billion, earnings will come to $613.3 million, and it would be trading on a PE ratio of 18.3x, assuming you use a discount rate of 9.2%.
  
• Given the current share price of $14.08, the bullish analyst price target of $23.0 is 38.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.