IREN Limited Q1 FY2026 earnings call

• Announced a $9.7 billion AI cloud contract with Microsoft, which validates IREN's position as a trusted AI cloud service provider and opens access to global hyperscalers. The contract is expected to generate ~$1.94 billion in annual recurring revenue and involves deploying NVIDIA GB300 GPUs across 200 megawatts of data centers at Childress campus. • Plan to scale GPU fleet from 23,000 GPUs to 140,000 by end of 2026, with this expansion expected to support ~$3.4 billion in annualized run rate revenue. This includes deploying 40,000 additional GPUs across Mackenzie and Canal Flats campuses, leveraging existing data centers in a capital-efficient manner. • Emphasizes vertical integration, controlling the entire stack from substation to GPU, which provides scalability, cost efficiency, and superior customer service. Childress data centers are being accelerated with design enhancements to meet hyperscale requirements, including Tier 3 equivalent standards and flexible rack densities. • Sweetwater data center hub in West Texas is a significant platform asset with up to 2 gigawatts of gross capacity, with Sweetwater 1 energization on schedule.

In Q1 FY '26, IREN delivered a fifth consecutive quarterly revenue increase. Revenue reached $240 million, and adjusted EBITDA was $92 million. The company's vertically integrated AI cloud platform is a key driver, with the recent $9.7 billion AI cloud contract with Microsoft being a significant milestone.

• Plan to scale GPU fleet to 140,000 by end of 2026, aiming for ~$3.4 billion in annualized run rate revenue once fully deployed. • The $9.7 billion Microsoft contract is expected to deliver ~$1.9 billion in annual revenue with an estimated 85% project EBITDA margin. The company is targeting circa $2.5 billion through additional leverage secured against GPUs and contracted cash flows, with upside potential. • Focus on deepening access to capital markets and diversifying funding sources, with recent fundraising initiatives including $1 million in 0 coupon convertible notes and $200 million in GPU financing.

• Counterparty risk associated with colocation providers, but vertical integration mitigates some of this. • Market dynamics affecting pricing of cloud services, though strong demand is observed. • Execution risk in scaling the GPU fleet and completing data center construction projects on schedule.

Q: Nick Giles from B. Riley Securities asked about the commercial perspective of the Microsoft deal and return profile.

A: Daniel Roberts and Anthony Lewis discussed the strategic value of validating IREN's ability to service a large tech company, and outlined returns with unlevered IRRs in low double digits and levered IRRs in 25%-30% range, with upside potential based on leverage and residual value.

Q: Paul Golding from Macquarie inquired about pricing dynamics and interest in Sweetwater.

A: Kent Draper mentioned strong demand across offerings, including air-cooled servers in Canada and liquid-cooled capacity for Microsoft, and noted strong interest in Sweetwater with initial energization in April 2026.

Q: Brett Knoblauch from Cantor Fitzgerald asked about GPU allocation and CapEx efficiency.

A: Kent Draper explained the majority of the $5.8 billion order from Dell is for GPUs with some networking equipment, and the CapEx for Canadian data centers is efficient with minimal conversion costs and option to add redundancy if needed.

Q: Darren Aftahi from ROTH Capital Partners asked about Microsoft negotiations and Childress interest.

A: Daniel Roberts stated conversations evolved to focus on the cloud deal, and there's appetite for larger cloud structures at Childress beyond the initial 200 megawatts.

Q: John Todaro from Needham asked about penalties and CapEx.

A: Daniel Roberts mentioned contractual tolerances and good track record for delivery, and Kent Draper explained additional costs in Horizon campus related to networking for super clusters.

Q: Stephen Glagola from JonesTrading inquired about BC GPUs and demand.

A: Kent Draper provided update on GPU contracting, with 12,000+ GPUs contracted, and strong demand from various customer classes including AI natives and enterprise inference users.

Q: Joseph Vafi from Canaccord Genuity asked about risk comparison between cloud and colo deals.

A: Daniel Roberts argued cloud deal has better risk profile compared to colo deals, with better returns and downside protection through optionality.

Q: Michael Donovan from Compass Point asked about cloud software stack and Sweetwater fiber loop.

A: Kent Draper stated most customers prefer bare metal, and the direct fiber loop between Sweetwater 1 and 2 adds optionality for customers seeking scale.