The Hyperscaler Catalyst Arrives: $9.7B Microsoft Deal

It’s happened.

The hyperscaler deal we’ve been anticipating since my last update has finally materialized - and it’s a big one. $IREN just signed a five-year, 200 MW AI Cloud contract with Microsoft, worth $9.7 billion. For long-term holders, this is the confirmation we’ve been waiting for: IREN is no longer “transitioning” from Bitcoin mining to AI Cloud - it is an AI Cloud company.

Why This Deal Matters

This contract represents a thesis-defining moment for shareholders. For years, sceptics argued IREN was “just another miner,” or more recently, that it couldn’t compete with $NBIS (market cap ~$32.8B) or $CRWV (market cap ~$66.2B) due to a lack of “software orchestration.”

Well, it turns out all of that was wrong. As I outlined in my Institutional Awakening update, the missing piece in IREN’s re-rating cycle was a hyperscaler partnership - something that would validate both its model and execution. That catalyst has now arrived.

JP Morgan

The Structure: A $9.7B Microsoft Contract + $5.8B GPU Agreement with Dell

The deal covers 200 MW of AI compute capacity at IREN’s 750 MW Childress, Texas campus, built out in phases through 2026.

To support this, IREN entered a $5.8 billion GPU and infrastructure purchase agreement with Dell. The total deal value with Microsoft is $9.7 billion over five years.

Microsoft has made a 20% prepayment/deposit (approximately $1.94B), which will be credited in years 3-5. This significant prepayment will help fund the initial GPU purchase. The remaining capital expenditure will be funded by cash on hand, Bitcoin mining cash flows, and other additional financing vehicles.

The Economics: One of the Most Profitable AI Builds Globally

At full ramp, the Microsoft contract could deliver around $1.94 billion in average annual recurring revenue (ARR) at an ~85% EBITDA margin, putting it among the most profitable AI infrastructure contracts globally. This build alone scales IREN to roughly 100,000 NVIDIA GB300 GPUs and locks in 3 GW of grid-connected power capacity, enough to support multiple hyperscale clients beyond Microsoft.

🟢 Bullish: This isn’t just a one-off deal - it’s proof of concept. If 200 MW can generate ~$2B in ARR, imagine what happens when even half of IREN’s 3 GW portfolio is monetized at similar economics.

Strategic Context: Speed-to-Market is the Real Story

Some analysts say hyperscalers are outsourcing to reduce balance sheet risk. That’s partially true, but the real driver is time. As one analysis noted, they are "leaving the operational risk and balance sheet risk on others" while limiting their own. Hyperscalers can’t afford to wait 2-3 years for new sites to be permitted, energized, and grid-connected. IREN already has both power capacity and shovel-ready land - the two bottlenecks money can’t buy quickly. So hyperscalers like Microsoft are paying a premium not just to rent compute, but to accelerate their AI timelines.

🟢 Bullish: This is the perfect intersection of IREN’s strengths - execution speed, secured power, and capital discipline - with the market’s most urgent need: instant capacity.

My Take

This contract validates everything we’ve been tracking for over a year: the transition, the capital discipline, and the ability to land enterprise-scale clients. Back in my Institutional Awakening note, I wrote:

“A hyperscaler contract with a player like Oracle could act as a major catalyst, accelerating this process dramatically.” That call aged well. The name turned out to be Microsoft, not Oracle - but the impact is the same. This optimism is shared by analysts; Cantor, for example, reiterated their Overweight rating and raised their price target to $142.00, citing the deal as an anchor tenancy.

🟢 Bullish: This deal marks the beginning of Phase 4 - the Earnings Flywheel. It’s no longer about potential or optionality; it’s about executing and compounding real, high-margin earnings.

I’m increasing my Fair Value estimate from $89 to $98/share, reflecting higher earnings visibility, stronger margins, and now, clear hyperscaler validation.

Risks

This deal is fantastic, but it's not a free lunch. A contract of this magnitude brings incredible validation, but it also brings proportional risk. Investors should look out for the operational and financial hurdles ahead:

• ⚠️ Execution Risk: Scaling 200 MW of AI infrastructure across four phases is complex. Delays in GPU delivery, cooling systems, or power interconnection could affect timing.
• ⚠️ Client Concentration: While Microsoft’s validation is transformative, diversification across multiple hyperscalers or enterprise clients will strengthen recurring revenue stability.
• ⚠️ Capital Discipline: Even though prepayments and internal cash flow mitigate funding risk, any cost overruns or supply delays could pressure near-term liquidity.
• ⚠️ Market Sentiment: The stock has run hard. Any hiccup in buildout progress or slower AI demand could trigger a sharp correction.

The Takeaway

IREN has moved from “aspiring AI miner” to a trusted hyperscale infrastructure partner. The Microsoft contract doesn’t just validate its model - it accelerates it. From here, every new megawatt contracted compounds value across the entire portfolio. This is the Earnings Flywheel phase - and it’s only just beginning.