Iris Energy’s Earnings Call Highlights Record Growth and AI Expansion

Iris Energy Ltd. ((IREN)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call of Iris Energy Ltd. (IREN) was marked by an optimistic sentiment, driven by the company’s strong financial performance and strategic growth initiatives. A significant highlight was the AI cloud contract with Microsoft, which is expected to substantially boost revenue. Despite some increases in operating expenses and costs associated with design enhancements, the overall outlook remains positive, particularly due to the expansion in AI cloud services.

Record-Breaking Revenue Growth

Q1 FY ’26 was a milestone for IREN as it marked the fifth consecutive quarter of record revenues. The company reported a total revenue of $240 million, reflecting a 28% increase quarter-over-quarter and a staggering 355% year-over-year growth. This impressive performance underscores the company’s robust growth trajectory.

Major AI Cloud Contract with Microsoft

IREN announced a landmark $9.7 billion AI cloud contract with Microsoft. This deal is expected to generate approximately $1.94 billion in annual recurring revenue, boasting an 85% project EBITDA margin. Such a significant contract positions IREN as a formidable player in the AI cloud services sector.

GPU Fleet and Infrastructure Expansion

The company revealed plans to scale its GPU fleet from 23,000 to 140,000 GPUs by the end of 2026, which is projected to support $3.4 billion in annualized run rate revenue. This expansion is strategically planned to utilize only 16% of IREN’s secured power capacity, indicating room for further growth.

Strong Financial Performance

IREN’s financial health remains robust, with an adjusted EBITDA of $92 million. This reflects continued margin strength, even in the face of higher payroll tax expenses, showcasing the company’s efficient financial management.

Strategic Positioning in AI Cloud Services

IREN’s vertically integrated model positions it as a preferred partner for hyperscalers, emphasizing scalability and cost efficiency. This strategic positioning is expected to drive further growth in the AI cloud services market.

Higher Operating Expenses

The earnings call highlighted an increase in operating expenses, attributed to higher depreciation and SG&A expenses. The latter was driven by a materially higher share price, leading to accelerated share-based payment expenses.

Incremental Cost Increases

Design enhancements at the Childress data center have led to incremental cost increases. However, these enhancements are anticipated to provide long-term value protection, aligning with the company’s strategic growth objectives.

Forward-Looking Guidance

Looking ahead, IREN’s guidance remains optimistic. The $9.7 billion AI cloud contract with Microsoft is a cornerstone of future revenue, with expectations of generating $1.94 billion in annual recurring revenue. The planned expansion of the GPU fleet is set to support $3.4 billion in annualized run rate revenue, leveraging only a fraction of the company’s secured power capacity, thus paving the way for sustained growth.

In summary, Iris Energy Ltd.’s earnings call painted a picture of strong financial health and strategic foresight. The positive sentiment was underscored by record-breaking revenue growth and a significant AI cloud contract with Microsoft. While there are challenges in the form of increased operating expenses, the company’s strategic initiatives and forward-looking guidance suggest a promising future.