Summary IREN Limited has secured major AI infrastructure contracts totaling $9.7 billion with Microsoft and others, targeting $3.4 billion in annualized AI cloud revenue by the end of 2026. However, the company generated only $7 million in AI infrastructure revenue last quarter, making the scale-up to multi-billion-dollar revenue highly challenging with significant execution risks. Bitcoin mining still represents 95% of total revenue, exposing IREN to cryptocurrency volatility while the AI infrastructure business remains unproven at scale. With a $14 billion market cap against $689 million TTM revenue and deeply negative free cash flow, the optimistic growth scenario appears already priced in, resulting in a "Hold" rating. IREN Limited ( IREN ) is on fire with a 400% rally over the last year. Such big optimism is explained by the company's AI infrastructure exposure and expected massive revenue growth in this domain. The company's differentiation strategy is quite interesting, which includes utilizing spare data center capacity to mine Bitcoin ( BTC-USD ) as well. However, I think that potential exponential AI infrastructure business growth might be challenging to achieve given no expertise in scaling up that fast. With just around $7 million in the latest quarterly AI infrastructure sales, I think that there are several execution risks on the horizon. Of course, if they manage to deliver on their obligations under these large contracts, the stock has the potential to soar further. However, I think that this optimism is already priced in due to the company's almost $14 billion market cap and the current TTM revenue far below a billion. All in all, I prefer to wait on the sidelines and assign a "Hold" rating to this stock. Fundamentals IREN Limited is an AI infrastructure company. IREN's important differentiator is that apart from generating revenue from its data centers' capacity, it also earns on mining the Bitcoin. The company currently operates six data centers across North America with a total capacity of 2,910 MW , and also has a large expansion pipeline focused on expanding its Texas capacity. Moreover, there are additional buildouts at other existing sites. Data by YCharts Since IREN operates in two rapidly growing industries like AI infrastructure and digital assets, it is no wonder that its revenue has been growing exponentially over the last few years. The company is profitable, and we can see from the above chart that its EBITDA has been growing approximately at the same pace as revenue until mid-2025. In mid-2025, revenue growth started accelerating, and EBITDA growth was lagging. I am not going to say that it is a red flag because heavy investments in growth are vital for accelerating topline expansion. However, the EBITDA dynamic compared to revenue is the one I would prefer to follow because if profitability [in absolute numbers] does not align with the revenue growth pace, there might be some flaws in the business model. Data by YCharts Despite being profitable from the income statement standpoint, IREN's free cash flow [FCF] is deeply negative because of the capital intensive nature of its business. Data centers aren't cheap, and IREN's net capital expenditure on the TTM basis is $1.2 billion , almost two times higher than the company's TTM revenue of around $690 million . Seeking Alpha The company's revenue soared during FQ1 2026 [ended September 30, 2025] by 349% on a YoY basis. The comparative figure of just $54 million was quite low, which partially explains such a massive percentage change. However, revenue growth was impressive on a QoQ basis as well, a 29% sequential growth. The company reported its earnings on November 6, and IREN has plunged by around 36% since then. One of the primary reasons that triggered the sell-off was a large non-GAAP EPS miss. Author's compilation Another warning sign, in my opinion, is the fact that IREN's aggressive sequential revenue growth is expected to pause in the next quarter. Wall Street analysts expect FQ2 2026 revenue to be $233 million, which will be lower by around 5% sequentially. Of course, it will be a huge YoY revenue increase compared to $120 million in FQ2 2025. Nevertheless, a sequential revenue decline after rapid QoQ growth over a few previous quarters is not something that investors usually like. Moreover, AI infrastructure does not look like a seasonal business. I think that the biggest problem at the moment is that AI infrastructure represents just a tiny portion of IREN's total revenue. In FQ1 2026, revenue from Bitcoin mining jumped to $233 million , which is around 95% of the total. There is still one month left in the current quarter, but based on the notably declined Bitcoin price in October-November, it is highly likely that the average BTC-USD price during FQ2 2026 will be notably lower than the average price in FQ1 2026. Therefore, it is no wonder that IREN's revenue is expected to dip sequentially in FQ2 2026. However, the estimated QoQ decline of 5% might be too optimistic given the fact that Bitcoin is currently around 16% cheaper than it was on October 1, 2025. Since Bitcoin mining represents 95% of IREN's sales, it is highly likely that a 16% BTC-USD price decline would affect consolidated revenues significantly. Seeking Alpha IREN's idea of differentiating its AI infrastructure approach by allocating part of its computing capacity for Bitcoin mining is very interesting in theory. Being flexible in reallocating computing power depending on external trends could have been a powerful differentiator if revenues were more or less evenly split between these two areas. However, IREN's AI infrastructure footprint is still too small, with just $7+ million in revenue in FQ1 2026. Furthermore, the potential crypto winter in the foreseeable future can potentially convert IREN's Bitcoin-mining division from an asset into a burden. It has been about a year since President Trump won the election, and the lion's portion of Trump-related rallies has vanished. It might be a controversial question, but I think that the victory of the President who aims to make the U.S. the world's crypto capital is one of the biggest possible catalysts for Bitcoin. Of course it is not impossible, but I do not think that there will be a comparable bullish catalyst for BTC-USD in the near future. I am not saying that Bitcoin will certainly go down further, because nobody can figure out its fair value like we can do for stocks. While there are some positive catalysts for BTC-USD, like institutional adoption and ETF inflow, there are certainly negatives as well. The momentum for BTC-USD looks flawed as it is currently quite far from the last 52-week peak of $126k. Moreover, the U.S. unemployment rate is ticking upward while the country's consumer confidence is declining . Meanwhile, actual inflation is still above the 2% historical average, while interest rates remain high despite the recent rate cuts. If the U.S. unemployment climbs further with people having less residual income to invest in BTC-USD, it will undermine the price due to lower demand. On the other hand, the company's AI infrastructure revenue is expected to soar from almost zero to billions. First and foremost, there is a massive $9.7 billion multi-year AI infrastructure deal with Microsoft. Having a deal like that is certainly a significant positive factor. If IREN successfully delivers on all its obligations to Microsoft, it might be a game changer in terms of the company's reputation as an AI infrastructure player. Overall, the company targets $3.4 billion in annualized AI cloud revenue by the end of 2026 since there are also deals with Together AI, Fluidstack, Fireworks AI. With all these contracts, IREN's AI infrastructure business might thrive. However, it is important to keep in mind that in the previous quarter, this business's revenue was just a few million dollars. Thus, achieving a multi-billion AI infrastructure revenue will mean scaling up exponentially, which means extremely high execution risks. Moreover, let's not forget that meeting all this AI infrastructure demand will mean massive additional capital investments for IREN, which will require raising additional capital. Valuation uncertainty as a two-edged sword IREN soared by around 400% over the last twelve months, which brought its market cap to almost $14 billion. Such a market cap is a quite generous valuation for a company with around $689 million in TTM revenue . Besides IREN's high P/S ratio, other multiples are also significantly higher than the sector median. Therefore, IREN is very generously valued in absolute terms. Seeking Alpha However, there is another important valuation criterion as the forward P/E ratio setup. Wall Street analysts believe that IREN's P/E ratio will be contracting rapidly over the next few years, which is a bullish setup in theory. However, let's not forget that this growth will significantly depend on the Bitcoin mining business. Since Bitcoin is extremely volatile and its price forecast is not something that can be reliably projected, I think that the forward P/E ratio trajectory forecast can change significantly as well. Seeking Alpha A forward P/E ratio forecast of around 17 for FY2028 might look compelling for some growth investors. For a company that has the potential to capitalize on AI infrastructure tailwinds, such a forward P/E ratio does not look very high. Therefore, the forward P/E ratio trajectory might work against my neutral thesis. Bottom line To conclude, I think that IREN is a "hold." The forward P/E ratio setup looks attractive and might work against my cautious stance, but it is important to keep in mind the nature of the AI infrastructure business. Achieving ambitious revenue and EPS growth forecasts will require the company to invest substantial amounts in data centers, meaning that there is no guarantee that the EPS and free cash flow dynamic will converge.
