Can IREN's Rising AI Cloud Revenues Offset Bitcoin Mining Weakness?

IREN Limited IREN is continuing its transition from Bitcoin mining toward AI cloud infrastructure as demand for GPU capacity remains strong. During the third quarter of fiscal 2026, IREN’s AI cloud services revenues increased 94.2% on a sequential basis to $33.6 million. Management attributed the growth to be driven by rising GPU deployments and increasing customer demand for AI infrastructure. The company believes AI cloud represents a larger long-term opportunity than Bitcoin mining.Bitcoin mining revenues declined 33.6% sequentially in the third quarter to $111.2 million. Management attributed the decline to lower Bitcoin prices and the ongoing removal of mining hardware ahead of GPU installations. The company is slowly exiting its Bitcoin mining business and is converting several of its existing Bitcoin mining facilities in Texas and British Columbia into AI cloud infrastructure. This bodes well for IREN’s prospects since retrofitting existing air-cooled mining infrastructure is cheaper and faster than constructing new liquid-cooled AI data centers from the ground up.IREN’s AI cloud business is expanding rapidly. IREN exited the third quarter with $3.1 billion in annual recurring revenues under contract and maintained its target of reaching $3.7 billion ARR by the end of calendar 2026. Further, IREN is targeting 480 megawatts of AI cloud capacity and 150,000 GPUs by the end of 2026. The above-mentioned targets seem achievable as all of IREN's operational AI cloud capacity is fully contracted, and the company continues to see demand for near-term GPU infrastructure exceed available supply.Another positive is IREN’s recent NVIDIA partnership, where the company signed a $3.4 billion, five-year AI cloud contract with NVIDIA during the third quarter, which is expected to support future growth in AI cloud revenues. As more GPU capacity comes online, AI cloud revenues are expected to become a larger part of IREN’s overall business and help the company offset the weakness arising due to the exit from its Bitcoin mining business.IREN Stock Faces Stiff CompetitionIREN faces intense competition from Applied Digital APLD and TeraWulf WULF in the AI infrastructure space.In January 2026, Applied Digital announced that it had started construction on Delta Forge 1, a large AI data center campus in a southern U.S. state. Delta Forge 1 is designed to support up to 430 megawatts (MW) of total utility power in its initial phase. This can support up to 300 MW of critical IT load. The goal is to turn available power into usable, high-density AI capacity for large customers.In February 2026, TeraWulf announced the expansion of its digital and power infrastructure portfolio through the acquisition of two existing sites in Kentucky and Maryland. Together, these two acquisitions add about 1.5 GW of power capacity to the company’s portfolio. With these additions, TeraWulf’s total platform size increases to about 2.8 GW across five sites. These acquisitions support TeraWulf’s strategy of reusing existing energy infrastructure to meet growing power and computing demand.IREN’s Price Performance, Valuation & EstimatesShares of IREN have returned 26.4% in the year-to-date period against the Zacks Financial Miscellaneous Services industry’s decline of 9.2%.IREN YTD Price Return PerformanceImage Source: Zacks Investment ResearchIREN shares are overvalued, as suggested by the Value Score of F. In terms of forward price/sales, IREN is trading at 6.54X compared with the industry’s 2.99X.IREN Forward 12 Months (P/S) ValuationImage Source: Zacks Investment ResearchThe Zacks Consensus Estimate for IREN’s fiscal 2026 earnings is pegged at 25 cents per share, revised 29 cents downward over the past 30 days, but marking a substantial year-over-year increase.Image Source: Zacks Investment ResearchCurrently, IREN carries a Zacks Rank #4 (Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Radical New Technology Could Hand Investors Huge GainsQuantum Computing is the next technological revolution, and it could be even more advanced than AI.While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power.Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.See Top Quantum Stocks Now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks