IREN Stock Trading at a P/S of 24.12X: Should You Buy, Sell or Hold?

IREN Limited IREN shares are currently overvalued. In terms of the trailing twelve months price/sales (P/S) ratio, IREN is trading at 24.12X, significantly higher than the Financial Miscellaneous Services industry’s 3.14X and the Zacks Finance sector’s 7.22X.However, at such a high valuation, investors need to determine whether IREN’s long-term fundamentals are strong enough to support further upside. Let’s take a deeper look.Price/Sales Ratio (TTM)Image Source: Zacks Investment ResearchExpanding the AI Cloud Pipeline Enhances Long-Term ProspectsIREN Limited has established a highly scalable AI Cloud expansion pipeline that materially strengthens its long-term growth profile. The company intends to scale its GPU fleet from approximately 23,000 units to around 140,000 GPUs by the end of 2026, supporting a targeted $3.4 billion in AI Cloud annualized run-rate revenue (ARR). A $9.7 billion, five-year AI Cloud contract with Microsoft anchors this strategy and is expected to contribute about $1.9 billion in ARR once fully ramped. Phased deployments through 2026 and a 20% customer prepayment enhance execution visibility while reducing near-term funding risk.Beyond the Microsoft contract, IREN’s pipeline is diversified across multiple sites and customer segments. The company expects about $500 million in ARR from its existing 23,000 GPU base, with a further $1.0 billion in potential ARR from a planned 40,000 GPU expansion at the Mackenzie and Canal Flats campuses. These projects leverage existing infrastructure and ASIC-to-GPU conversions, enabling capital-efficient scaling. Importantly, scaling to 140,000 GPUs is expected to require only around 460 MW, or roughly 16% of IREN’s approximately 3 GW of secured grid-connected power, leaving meaningful capacity for long-term growth beyond 2026.IREN’s AI Cloud pipeline is further strengthened by significant site optionality and future-ready infrastructure. At Childress, accelerated development of Horizons 1-4 and design work for Horizons 5-10 support potential conversion of the full 750 MW campus to liquid-cooled AI deployments. The 2 GW Sweetwater hub, with initial substation energization targeted for April 2026, provides a scalable platform.Positive Estimate Revisions Build OptimismEarnings expectations for IREN reflect a clear upward trajectory, underscoring improving confidence in the company’s long-term outlook. The Zacks Consensus Estimate for IREN’s fiscal 2026 earnings is pegged at 79 cents per share, unchanged over the past 30 days but representing a sharp year-over-year improvement from just 4 cents.Momentum strengthens further in fiscal 2027. The consensus mark for earnings of $1.00 per share implies year-over-year growth of 27.63% and has surged nearly threefold over the past 30 days.Image Source: Zacks Investment ResearchIREN Stock Outperforms Industry, Sector & PeersIREN Limited’s shares have skyrocketed 336.8% over the past year, significantly outperforming the industry’s decline of 8.6% and the broader sector’s growth of 18.9%.The stock has also outpaced major AI data center and cloud peers such as Applied Digital APLD, Cipher Mining CIFR and CleanSpark CLSK. Over the same period, Applied Digital and Cipher Mining surged 247.6% and 247.3%, respectively, while CleanSpark gained a comparatively lower 18.8%.This peer group shares a common strategic direction by transitioning from crypto mining to AI and HPC infrastructure. While Applied Digital and Cipher Mining have made visible progress in securing AI-focused capacity and contracts, CleanSpark remains earlier in its transition.IREN shares have been riding on investor optimism around the successful execution of its high-growth AI strategy and expanding pipeline. Revenue visibility is provided by long-term hyperscaler contracts with its vertically integrated data center model in an increasingly capacity-constrained market.Stock’s PerformanceImage Source: Zacks Investment ResearchWhile the growth opportunity is significant, high capital intensity remains a key long-term challenge for IREN as it scales its AI Cloud business. The Microsoft AI Cloud deal alone requires $5.8 billion in GPU capital expenditures, highlighting the large upfront investment burden. Even after 20% customer prepayments, IREN will need to raise buildout funds through a mix of cash, operating cash flow, GPU-backed financing, equity, convertible notes and corporate debt.Operational risk continues to put pressure on profitability visibility, with IREN still in the early stages of building its AI cloud and HPC and operating in a rapidly evolving market. Achieving the targeted AI cloud ARR of $3.4 billion by the end of 2026 depends on timely construction, powering, GPU delivery and commissioning across multiple sites.Technically, IREN Limited trades below its 50-day moving average, reflecting bearish momentum and pointing to limited upside potential in the near term.Conclusion: Hold Position Remains JustifiedIREN Limited benefits from an expanding AI Cloud pipeline, an improving earnings outlook and long-term hyperscaler contracts that support a structurally strong growth narrative. However, high capital intensity, ongoing funding needs, execution risk and near-term technical weakness continue to limit short-term upside visibility. Given the company’s modest growth prospects relative to its valuation, the stock appears significantly stretched, increasing risk for investors. Balancing powerful growth drivers against elevated risks, maintaining a hold stance would be ideal.IREN currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.#1 Semiconductor Stock to Buy (Not NVDA)The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Applied Digital Corporation (APLD): Free Stock Analysis Report Cleanspark, Inc. (CLSK): Free Stock Analysis Report Cipher Mining Inc. (CIFR): Free Stock Analysis Report IREN Limited (IREN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks