IREN: From Mining To Data Centers

Summary IREN Limited uniquely combines high-margin Bitcoin mining with a strategic shift into green AI data centers, driving impressive 128% YoY growth. Ultra-low energy costs (3.3¢/kWh) provide a major competitive advantage in mining, fueling cash flow for aggressive data center expansion. Valuation appears high on a PS basis, but rapid revenue growth and future data center projects make IREN undervalued long-term. Despite risks from Bitcoin volatility and project delays, I view IREN as a strong buy and am increasing my portfolio allocation. Investment Thesis: IREN Limited (NASDAQ: IREN) is, in my opinion, the best stock that combines two current core businesses. -Bitcoin hype -Increasing demand for data centers IREN benefits from the current high Bitcoin prices through cheap mining, which they sustainably invest in green data centers and can thus demonstrate a growth of 128% YoY with a PS ratio of only 9.78. YCharts From Mining to Datacenter IREN has long been a very effective Bitcoin miner with a profit margin of 67% per Bitcoin mined in the last quarter. They achieve this through low electricity costs of only 3.3¢/kWh through renewable energy compared to other providers who are twice as expensive at 8¢/kWh. In my opinion, this leads to a currently very strong competitive advantage and this will also be a reason why IREN will be so effective in the data center sector in terms of margin and profit as they also rely on green energy here. Currently comes: -2-5% of the Revenue from the AI cloud data center business -95% of the Revenue from the Bitcoin mining business This shows that the transformation has only just begun but in my opinion will be really relevant in the long term as this will make the difference between IREN becoming a very valuable company. Let's first look at the Bitcoin mining business where IREN mined 728 Bitcoins in July with a capacity of an incredible 50 EH/s already reached in the middle of this year. An incredible increase with an annual growth rate of 361%. This only ensures a profit of an incredible $66 million in July because of Bitcoin Mining. YCharts At the end of Q1 2025 the Bitcoin price was at $82k and all mining costs were $40k which shows a 100% return and is the reason why Iren is expanding so strongly in this area as the margins are perfect and they are building up cash with the mining of bitcoin to invest in the data centers. For example, in 2025 they had cash of $400 million earned e.g. through the mining business and reinvested in the data center area (Horizon 1) Iren has therefore ordered 2,400 NVIDIA Blackwell GPUs to support its next phase of growth. The plan is to commission a 75 MW liquid-cooled data center by the fourth quarter of 2025 (project: Horizon 1). Management assumes that this facility will generate annual revenue of USD 75 to 100 million once it is up and running, thus further diversifying the mining business, and in my opinion shows the shift from mining companies to green data centers. The project is nevertheless dependent on the delivery of the 2400 GPUS, which may be delayed due to the shortage. Thus, I currently see a successful transition from mining to green data centers, which have an enormous demand and diversify the business sustainably. I also think it is very good to exploit the advantage of cheap mining and then invest the cash effectively. Fundamentals: At first glance, Iren looks historically overvalued according to the PS Ratio, as we currently have a PS Ratio of 9.78 . This is also above the sector average of 3.27. However, this view is very one-sided, as we have to look at the growth on the other side YCharts If we look at the current growth rates in the Bitcoin and AI/data center segment, Iren is valued very favorably. The company is currently growing 128% YoY and in segments like AI they have 33% growth QoQ and here they are still missing the revenue from the future Horizon 1 project until the end of 2026. If we assume a conservative 50% revenue growth over the next three years, we get a PS ratio of 3.37 which is well below the historical average. Now the question arises under which factors could Iren achieve this growth? YCharts The determinants are: 1: Rising bitcoin prices Iren benefits over-proportionally from rising bitcoin prices when mining as the cost per bitcoin mined is currently $40,000 and the margin is determined by the selling price. This then also directly determines the sales growth and profit that is then invested in data centers. Since we are currently in a bull run with steadily increasing volumes, I doubt that we will become unprofitable even in the event of a stronger correction. Otherwise, I could imagine Iren holding the coins until higher prices. IR 2: Expansion in data centers The surplus from Bitcoin sales will be invested entirely in the green data center area to build Horizon 1 and 2 with a target capacity of 300MW in 12 months, in my opinion to keep up with the competition. The data centers alone are expected to generate a projected revenue of $1.2 billion , which would be $4.5 per share and would already lead to an extremely favorable P/S ratio with the mining business and thus an undervaluation. At the current time, IREN has a forecast EPS of $0.14 in 2025, which will then be increased to $1.24 in 2026. An increase of 800% and this is just the beginning. Rising Bitcoin prices, the expansion into the AI business and the high investments in Horizon 1, for example, have reduced profits. Key figures such as PE or PEG ratio are therefore not suitable at the current time, which is why I have focused on PS ratio. Analyst Ratings: Other analyses also support my bullish outlook of 5 Buy/ 3 Hold with an average price target of +8%, which I consider to be very pessimistic due to the growth and the current valuation. TipRanks Technicals: The stock price of Iren is very bullish from a current perspective, we have a lot of positive momentum underpinned by two important support lines. In addition, we have a lot of volume in the current price range, which is very positive as this shows many willing buyers who are currently buying the stock. In addition, the trend has not yet ended and the RSI of 69 is still perfectly in order and only shows the direction of a past high position. So I do not see an overreaction here but a very bullish chart. Tradingview Bullish Risks The main risk to my thesis is the current unprofitability, which could be get worse by the mining business disappearing if BTC were to experience a strong bear market and slip below $40k. However, I think this is unlikely as the company would accumulate the coins and then sell them after bitcoin has risen again. In addition, the expansion of Horizon 1 and 2 could be delayed, causing sales and thus the valuation to fall later than expected. However, I see these risks as manageable as the company is reasonably valued and has plenty of growth potential. Conclusion: I am currently very convinced that IREN is making a sustainable shift from the mining business to the data center sector and see the mining business as a good opportunity to expand and build up cash. For this reason, I have also started to include IREN in my portfolio with a current size of 2% and a target weighting of 5%. Due to the low valuation in the long term and the current growth, I see Iren as a strong buy candidate.