Summary IREN Limited is a rapidly growing dual data center business with a unique blend of Bitcoin mining and AI/HPC hosting operations. IREN's vertical integration, secured 2.9GW power capacity, and strong financing position it well for future growth, despite recent share price volatility. Valuation suggests significant upside potential if execution matches guidance, with a forward P/S ratio becoming attractive by 2027. After a 40% dip, I initiate IREN at a Strong Buy, citing improved risk-reward, but note elevated risks tied to execution, competition, and macroeconomic conditions. Introduction IREN Limited ( IREN ) has been one of the hottest stocks in the market since its 1,300%+ rally from April lows to November highs. Since November 5, however, shares have been in a somewhat steep downtrend, declining approximately 40% from their all-time high. Since IREN is a stock that has been on my watch list for quite some time now, I figured it was time to dive deeper and evaluate whether said drop is an investment opportunity or not. IREN is a rapidly growing dual data center business that has both Bitcoin mining and AI/HPC hosting operations while owning the infrastructure. They have secured 2.9GW of power capacity. The recent drop can be seen as a slight reset in sentiment, as fears of a popping AI bubble , which first takes a hit on sharply risen, highly valued, and currently unprofitable stocks with more uncertainty and reliance on future developments such as IREN. This finally gives new investors an opportunity to start building a first position in the company, as the risk-reward profile has improved. Their recently posted Q1 FY2026 results underscore this, as many authors on Seeking Alpha as well as other news outlets have already covered them. The image below will therefore be enough coverage on that topic from me today. IREN IR The Good IREN is vertically integrated with roughly 2.9 GW of secured power, more than any peer in the AI-pivoting data-center space. Because they own their data centers end-to-end, including land, substations, cooling, and shells, they avoid landlord markups and can shift capacity between Bitcoin mining and AI hosting as economics change. Another unique advantage for IREN is their capability of superior financing for their project buildouts. They have $1.8B in cash on their balance sheet, positive operating cash flows, and the Microsoft prepayment (and future ones in other deals) can be employed before taking on further debt or diluting shareholders. IREN IR Their Bitcoin mining has strong unit economics, at least at current prices, having an all-in cost to mine around $40k when Bitcoin trades above $90k. A real risk I do see is Bitcoin having a very bad 2026, as cycle theory (which it has so far followed and is yet to break) suggests. In that case, I could see prices closing in on IREN's cost to mine, which would erode any earnings and cash flows to use for their buildouts. In that case, however, it is still handy to have the flexible data center structure so they can allocate more compute to AI hosting, and even if some mining operations continue, they would 1) not generate large losses, as I believe it is highly unlikely for Bitcoin to drop below $30k again, and 2) have the possibility to still be profitable in the long run with rising Bitcoin prices (if they hold onto some of the coins). Due to owning the whole stack and likely boasting longer-term customer relationships, I expect IREN's future margins to top those of its data center peers, as the MSFT deal at an anticipated 85% EBITDA margin exemplifies. IREN IR One negative aspect, though, is that IREN is not a leader in AI cloud and is far behind CRWV and NBIS, as a rating by SemiAnalysis (November 2025) has IREN as underperforming, whereas its peers are at the top. SemiAnalysis Another key investment thesis component is further deals that will be announced in the future. I do not believe that we have seen the height of this market and that we will have many more contracts on the way. This is also confirmed by a recent conversation between Sundar Pichai and Elon Musk on X. X Valuation On a P/S ratio, IREN trades at 18, which is an elevated multiple on an absolute basis and also much higher than CoreWeave ( CRWV ) at 7.5, though much lower than Nebius Group N.V. ( NBIS ) at 55. Data by YCharts IREN anticipates $3.4B in ARR by the end of 2026. That means they will earn $3.4B / 4 = $850M in Q4 CY2026 (their Q2 FY2027). At 50% QoQ growth due to their contract ramp, the previous quarters could look something like this: Q3 = 850 / 1.50 = $567MQ2 = 567 / 1.50 = $378MQ1 = 378 / 1.50 = $252M ... leading to total 2026 revenues of $2.05B, or a forward P/S ratio of 6.4. Assuming YoY growth of 80% from there leaves us with $3.7B in revenue in CY2027. This mostly ignores Bitcoin mining revenue, but as the company is transitioning and we want a margin of safety, let's value IREN solely based on their AI revenues. That means that in 2027, IREN would trade at a P/S ratio of 3.5 if the price did not move one inch from today. In contrast, CRWV trades at a 2027 P/S ratio of 2 and NBIS at around 4, which makes all of them seem undervalued. If data center growth is not expected to slow down before 2030 and considering the recent rapid growth of all major data center players, I do believe that IREN will continue to grow beyond 2027, though not at a pace of 80%+. Still, that should lead to them being valued like a growth stock, and if solid margins can manifest (or are foreseeable) until then, they surely deserve a P/S of at least 7. This implies upside potential of 100% in our valuation over a two-year horizon. Risks Despite the share price drop, IREN remains a higher-risk investment. Key caveats start with their high beta and cyclicality in an already record-highly valued market. In the short term, high valuations cannot accurately forecast results, but in the longer term they can do so well, meaning that dedicated, high-quality company stock picking at reasonable prices will be key. If we see a broader selloff, a recession, or risk-off environment, key winners like IREN would be the ones to drop the most, though that then might become a great buying opportunity. Another significant factor is execution risk from already priced in future revenues. IREN's growth depends on timely completion of large, complex liquid cooling data center projects such as Horizon 1, Horizon 2, and Sweetwater. Delays, cost overruns, or technical challenges could impact operating capacity and revenue realization, but also financing. Continued dilution and/or too much debt at too high interest rates worsen investors future returns by making every share less valuable and increasing risks of bankruptcy. Lastly, growing competition in such a rapidly expanding market is to be expected. A more competitive environment can foster lower prices that customers can be charged, leading to lower revenues and margins. Conclusion Since a lot of the valuation today is based on future execution, buildouts, and revenues, IREN's risks are elevated. Still, after this 40% dip, the risk-reward profile has improved and leaves upside potential if execution matches guidance, which makes me initiate IREN at a Strong Buy rating. This rating is subject to short-term change, as it depends a lot on macroeconomic developments and the broader state of the market with respect to the AI trade. In that given case, I might provide updates in the comments. Rating: Initiate Strong Buy.
