IREN Stock Drops 6% Despite Surging AI Cloud Revenue: Should You Buy?

Key Takeaways

• Shares of IREN declined approximately 6% during premarket hours following adjusted EBITDA of $19.2M that fell short of Wall Street’s $34.9M consensus
• Q4 total revenue reached $137.2M, missing the $157.14M analyst estimate, though AI cloud revenue soared 110% quarter-over-quarter to $70.5M
• IREN’s fiscal 2026 annual recurring revenue target of $4 billion is now completely contracted, rising from $3.4B reported in July
• A new long-term AI cloud agreement with a frontier AI lab was announced, while the company secured $6.5B in GPU financing across three months
• H.C. Wainwright maintained its Buy recommendation with a $90 target, viewing the earnings-driven decline as an attractive entry point

Shares of IREN tumbled roughly 6% to $38.20 during Friday’s premarket session following the release of fiscal Q4 earnings that revealed an adjusted EBITDA shortfall. The stock closed Thursday at $40.53, representing a 47% decline from its 52-week peak of $76.87, while maintaining a 76% gain year-over-year.

IREN Limited, IREN

For the fourth quarter, IREN reported revenue of $137.2 million, falling short of the Street’s $157.14M projection. The company’s adjusted EBITDA registered at $19.2 million, significantly trailing analyst expectations of $34.9 million.

However, the results weren’t entirely disappointing.

Revenue from AI cloud services reached $70.5 million during the quarter, marking a 110% sequential increase from the previous quarter’s $33.6 million. This level of quarter-over-quarter expansion is particularly noteworthy.

IREN concluded the quarter with approximately $500 million in annual recurring revenue, which subsequently increased to $1 billion following Microsoft’s acceptance of Horizon 1.

Company Secures Full Contracting for ARR Goal

Management announced that its annual recurring revenue objective of $4 billion for fiscal 2026 has been completely contracted, marking an increase from the $3.4 billion disclosed during its July earnings call.

The upward revision stems from a newly inked multi-year partnership with an undisclosed frontier AI laboratory, supplemented by additional client acquisitions and contract renewals and extensions from current partners.

Notably, the $4B projection doesn’t include approximately $700 million in ARR from a NVIDIA agreement anticipated to commence in 2027.

The company is forecasting ARR exceeding $4 billion by the December quarter, with Wall Street projecting fiscal 2027 revenue growth of 117%.

Wall Street Analysts Remain Bullish

Following the earnings release, H.C. Wainwright reaffirmed its Buy rating while maintaining a $90 price target, characterizing the post-earnings weakness as an opportune moment for investors.

The $90 price objective implies approximately 122% potential upside from Thursday’s closing price.

B. Riley’s Nick Giles characterized the quarterly results as “a commercial and financing validation” in anticipation of the upcoming revenue acceleration toward $4 billion ARR and continued contracting for capacity in 2027 and 2028.

Citizens JMP Securities also maintained its Market Outperform stance with an $80 target price, highlighting strength in the AI cloud services segment.

From a capital perspective, IREN successfully secured $6.5 billion in GPU financing throughout the previous three-month period. This capital, when combined with customer advance payments, provides coverage exceeding 100% of the GPU capital expenditures associated with achieving the $4B ARR milestone.

Management’s capital expenditure outlook for fiscal 2027 stands at $25 billion to $30 billion.

Three-year contract pricing has appreciated roughly 125% since November. Recently signed agreements surpass $20 million in annual revenue per IT megawatt, with ongoing negotiations trending around $25 million per IT megawatt.

Over the trailing twelve-month period, IREN delivered 41% revenue expansion.

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