IREN: Hyperscaler Cloud Deals Will Drive Long Term AI Infrastructure Expansion

The analyst price target for IREN has nudged higher by approximately $0.50 to reflect analysts' view that recent AI cloud and hyperscaler related partnerships, improved sector positioning, and validation from large customers support a modestly higher fair value despite lingering execution and financing risks.

Analyst Commentary

Recent Street research highlights a wide dispersion of views on IREN, with several bullish analysts markedly increasing price targets on the back of AI cloud momentum, while bearish analysts emphasize execution and financing risks tied to the company’s aggressive expansion strategy.

Bullish Takeaways

• Bullish analysts view IREN’s transition from traditional bitcoin mining toward a vertically integrated AI cloud and high performance compute model as a key driver of long term multiple expansion and a justification for materially higher valuation targets.
• Partnerships with major technology players, including a hyperscaler backed deal at Childress, are seen as important validation of IREN’s data center capabilities and as an early step toward a broader pipeline of AI cloud and data center contracts.
• Control of large scale, low cost power and land positions is framed as a scarce strategic asset that supports durable pricing power, positions IREN favorably versus other GPU cloud providers, and underpins the case for continued re rating as demand for AI infrastructure grows.
• The ramp in GPU purchases and the focus on building out a dedicated AI cloud vertical are viewed as expanding IREN’s future recurring revenue base, with some bullish analysts arguing that the stock still trades at a meaningful discount to neocloud peers on a contracted megawatt basis.

Bearish Takeaways

• Bearish analysts point to underwhelming recent earnings relative to heightened expectations, arguing that the current valuation already discounts a steep AI driven growth trajectory that may prove difficult to deliver.
• There is concern that IREN’s aggressive capital spending on GPUs and data centers increases financing needs and balance sheet risk, creating potential dilution or higher cost of capital if market conditions tighten.
• Some skeptics highlight the company’s elevated 2026 AI cloud revenue targets as vulnerable to delays in customer onboarding, potential project slippage, or slower ramp in utilization, which could lead to negative estimate revisions.
• Execution risk around scaling complex AI data center operations, competing with better capitalized AI infrastructure peers, and managing regulatory and power market changes is cited as a key overhang that may cap near term valuation upside.

What's in the News

• IREN signed a five year GPU cloud services contract with Microsoft valued at approximately $9.7 billion, funding the buildout of 200MW of liquid cooled data centers at its 750MW Childress, Texas campus. The contract is supported by a $5.8 billion GPU and equipment purchase agreement with Dell Technologies (Key Developments).
• The company has expanded AI Cloud capacity to 23k GPUs through a $674 million procurement of NVIDIA B300, B200, GB300 and AMD MI350X hardware. It is targeting more than $500 million in AI Cloud annualized run rate revenue by the end of first quarter 2026 (Key Developments).
• Additional multi year cloud services contracts have been signed with leading AI companies for NVIDIA Blackwell GPU deployments. These contracts secure roughly $225 million in contracted AI Cloud ARR tied to 11k GPUs expected to be operating by the end of 2025 (Key Developments).
• IREN completed follow on equity offerings totaling more than $2.6 billion in gross proceeds through a registered direct offering and at the market program, materially increasing balance sheet capacity for AI infrastructure investments (Key Developments).
• KPMG LLP was appointed as IREN’s new independent registered public accounting firm, replacing RCGT. The prior report from RCGT had included an explanatory paragraph about substantial doubt regarding the company’s ability to continue as a going concern for fiscal 2024 (Key Developments).

Valuation Changes

• Fair Value has risen slightly, increasing from 81.38 to 81.85, reflecting a modest uplift in the intrinsic value estimate.
• Discount Rate has edged higher, moving from 8.12% to 8.18%, implying a marginally higher required return and risk premium.
• Revenue Growth assumptions are effectively unchanged at about 72.37%, indicating no material revision to top line expansion expectations.
• Net Profit Margin has fallen meaningfully, declining from 21.03% to 18.84%, signaling a more conservative outlook on long term profitability.
• Future P/E has increased from 48.14x to 54.13x, suggesting a higher valuation multiple being applied to forward earnings despite the lower margin profile.