Author: Qudus Adebara (Wane Investment House)
Executive Summary
IREN Ltd (IREN) delivered a transformational Q1 FY2026 performance, marked by rapid revenue acceleration and a strategic pivot toward large-scale AI cloud infrastructure. Revenue surged 28% QoQ to USD 240 million, representing a 355% YoY increase, driven by strong scaling in core operations and early momentum from AI-related activities.
The quarter was further defined by the announcement of a $9.7 billion long-term AI cloud contract with Microsoft, expected to generate approximately $1.94 billion in annual recurring revenue (ARR) and deliver an estimated 85% EBITDA margin. Once GPU expansion is fully deployed, management expects annualized run-rate revenue of c. USD 3.4 billion, positioning IREN as a major hyperscale AI infrastructure provider.
Despite higher operating expenses linked to accelerated capacity build-out, IREN reported net income of USD 384.6 million, largely supported by significant unrealized gains on financial instruments. The balance sheet strengthened materially, with cash rising to USD 1.8 billion, providing strong liquidity to fund aggressive expansion plans.
Financial Highlights – Statement of Profit or Loss (USD million)
USD million Q1 2026 Q1 2025 YoY Change
Total Revenue 240.3 52.8 +355%
Gross Profit 159.6 20.9 +664%
Operating Income (60.1) (39.3) -52.93%
Profit Before Tax 575.3 (50.4) 1,241.47%
Net Income 384.6 (51.7) 843.91%
Revenue per Share (USD) 0.89 0.28 +218%
Diluted EPS (USD) 1.08 (0.27) 500%
Revenue Performance
IREN recorded its fifth consecutive quarter of revenue growth, underpinned by:
Key Growth Drivers
- Rapid scaling of Bitcoin mining operations, benefitting from higher installed capacity and improved operational efficiency.
- Early-stage contribution from AI Cloud Services, which more than doubled YoY and represents a strategic long-term growth engine.
- Vertically integrated infrastructure model, allowing IREN to control costs and accelerate deployment from substation to GPU without third-party dependency.
The revenue trajectory underscores IREN’s transition from a crypto-focused miner to a diversified AI and high-performance computing (HPC) infrastructure platform.
Profitability and Margins
Gross Profit
Gross profit expanded sharply to USD 159.6 million, reflecting strong operating leverage from revenue scale. Gross margin remained robust despite higher energy and infrastructure costs.
Operating Expenses
Operating expenses rose materially due to:
- Higher depreciation and amortisation from accelerated data centre and GPU investments.
- Elevated SG&A, partly driven by payroll tax effects linked to share price appreciation.
- Incremental costs associated with expansion at flagship sites such as Childress.
As a result, operating income remained negative, though this reflects intentional front-loaded investment rather than structural weakness.
EBITDA
Adjusted EBITDA of USD 92 million highlights the strong underlying cash profitability of operations, particularly as AI cloud economics begin to scale.
Microsoft AI Cloud Contract – Strategic Inflection Point
- Contract Value: USD 9.7 billion
- Estimated ARR: USD 1.94 billion
- Projected EBITDA Margin: ~85%
- GPU Fleet Expansion: From 23,000 GPUs to 140,000 GPUs by end-2026
- CapEx Support: 20% upfront prepayment from Microsoft materially de-risks funding
This contract fundamentally repositions IREN from a capacity-driven miner to a long-duration, contracted AI infrastructure provider with hyperscaler-grade counterparties.
Balance Sheet Overview (USD million)
USD million Q1 2026 Q1 2025 YoY Change
Total Assets 4,267.4 1,281.2 +233%
Cash & Equivalents 1,032.3 98.6 +947%
Total Debt 965.6 2.6 37,138.46%
Net Debt (66.6) (96.0) +30.63%
Total Equity 2,876.2 1,129.5 +155%
Book Value / Share (USD) 10.17 5.73 +77%
Interpretation
- Strong liquidity position supports aggressive GPU and data centre expansion.
- Net cash balance sheet preserved despite rising leverage.
- Equity expansion reflects capital raises and retained profitability.
Cash Flow Highlights (USD million)
USD million Q1 2026 Q1 2025
Operating Cash Flow 142.4 (3.9)
Capital Expenditure (280.6) (383.4)
Free Cash Flow (121.2) (289.9)
Net Change in Cash 467.7 (306.0)
- Operating cash flow turned solidly positive, reflecting scale benefits.
- Free cash flow remains negative due to growth CapEx, consistent with expansion phase.
- Financing inflows (USD 625m equity issuance) materially strengthened liquidity.
Key Ratios & Indicators
Metric Q1 2026
Revenue Growth (YoY) +355%
Adjusted EBITDA Margin Strong
Net Income USD 384.6m
Cash per Share USD 3.65
Net Debt Net Cash
GPU Fleet Target 140k by FY2026
Strengths
- Exceptional revenue growth and scalability.
- Landmark Microsoft contract with long-term visibility and high margins.
- Vertically integrated, renewable-powered infrastructure model.
- Strong balance sheet and liquidity buffer.
Weaknesses
- Rising operating expenses from rapid expansion.
- Continued reliance on Bitcoin mining for near-term revenue mix.
- Execution complexity at scale.
Opportunities
- Expansion into AI cloud, HPC, and colocation services.
- Growing global demand for renewable-powered data centres.
- Technological differentiation via liquid cooling and bespoke GPU infrastructure.
Threats
- Execution and delivery risk on Microsoft contract.
- Funding requirements for large-scale GPU deployment.
- Regulatory and cryptocurrency market volatility.
Outlook
IREN enters FY2026 at a strategic inflection point. The Microsoft AI cloud contract provides multi-year revenue visibility, margin expansion, and validation of IREN’s infrastructure model. While near-term earnings will remain volatile due to expansion costs, the medium-term outlook is highly compelling as GPU capacity comes online and AI cloud revenues scale.
Analyst View
“IREN’s Q1 2026 results mark a decisive shift from cyclical crypto mining toward contracted, hyperscale AI infrastructure. The Microsoft contract fundamentally changes the company’s earnings profile, visibility, and valuation framework. Execution remains key, but the strategic upside is substantial.”
Conclusion
IREN Ltd delivered a standout Q1 2026 performance, combining explosive revenue growth, a strengthened balance sheet, and a transformative AI cloud contract. While operational costs are rising in the short term, the company is laying the foundation for multi-billion-dollar, high-margin recurring revenues, positioning IREN as a emerging global player in renewable-powered AI and HPC infrastructure.
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