Key Takeaways
- IREN fell 4% on Nov. 2 after Cipher Digital missed revenue estimates, then jumped 10% the next morning as AI data center stocks rebounded.
- On its call, Cipher said change orders and higher construction costs would have cut its yield on cost to about 13% from roughly 15% if it hadn’t renegotiated its lease.
- IREN plans $25 billion to $30 billion of capex this fiscal year, and much of it is GPUs from Dell for its Microsoft contract. It has already said new deployments will cost 15% to 20% more.
- IREN can handle higher costs as long as lenders and customers keep paying for most of the build, so the funding gap and the share count matter most in Thursday’s report.
IREN (IREN) fell 4% on Monday after Cipher Digital (CIFR) missed revenue estimates. Then it jumped 10% on Tuesday morning as AI data center stocks bounced back.
For IREN, the most important number in Cipher’s report is a cost. IREN reports its fiscal first quarter on Thursday, Nov. 5, after the close, and its own build is far bigger. Two companies have a stake in the results. Microsoft (MSFT) signed the $9.7 billion, five-year contract at the center of IREN’s AI cloud. Dell Technologies (DELL) sells IREN the GPUs that contract runs on.
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Cipher’s costs ran over
Cipher’s third-quarter revenue was $26.7 million, short of estimates because its bitcoin mining revenue shrank. Keefe Bruyette cut its price targets across the group the same day.
The bigger news came on the call. At Cipher’s Barber Lake campus, the tenant changed its requirements during construction, which ran up about $409 million of change orders. Cipher agreed to pay $359 million of that itself in exchange for a 10-year lease extension. Without that deal, Cipher said, the change orders, inflation and rising labor costs would have pushed its cost to $12.3 million per IT megawatt, up from the $10.4 million it financed. Its yield on cost would have fallen to about 13% from roughly 15%.
Management said on the call that when tenants make “very substantial change orders, that has knock-on effects to cost and schedule.”
Short seller Jim Chanos replied to an X post quoting the call, and his reply ended: “Hard to believe.”
IREN builds for its own cloud, so it pays the whole bill, GPUs included. And it has already said the bill is going up. On its August call, management said it expects data center and GPU costs for new deployments to run 15% to 20% higher this fiscal year.
The Street still expects a steep ramp
Analysts expect IREN’s revenue to roughly quadruple, from $707 million in fiscal 2026 to $2.81 billion in the year ending June 2027, and then reach $7.41 billion the year after:
Nothing in Cipher’s report changes the contracts IREN has signed, so I don’t see a reason for those estimates to fall on Cipher’s news alone. A slip in IREN’s own schedule would be another matter.
Investors are a lot less sure. At Monday’s close, IREN traded at 3.1x forward sales. Its average over the past three years is 5.2x, and it peaked near 17x in November 2025:
The spending is running ahead of the cash
IREN’s capex rose every quarter of fiscal 2026, from $281 million in the September 2025 quarter to $1.98 billion in the June quarter. Its cash from operations stayed under $150 million a quarter until June:
June’s $1.81 billion of operating cash flow came almost entirely from a $1.72 billion rise in deferred revenue, as customers paid in advance for capacity.
Management guides fiscal 2027 capex of $25 billion to $30 billion. That’s more than three times June’s pace, every quarter. Analysts expect free cash flow of negative $21.4 billion for the year.
Microsoft and Dell have a stake in Thursday
Microsoft has its own reason to watch IREN’s schedule. On Microsoft’s fiscal first-quarter call on Oct. 28, CFO Amy Hood said capex came in at $45.2 billion “as some third-party capacity deliveries we expected in Q1 were delayed.” Azure revenue grew 48% in the quarter, so Microsoft wants that capacity as fast as builders can deliver it. IREN’s first Microsoft phase, Horizon 1, was accepted in August, a quarter later than management first indicated. Horizons 2 to 4 are targeted for the December quarter, with grace periods into early 2027 and delay credits if they run late. Thursday is IREN’s chance to show they’re on time.
Dell’s stake is the GPUs. IREN agreed to buy about $5.8 billion of GPUs and equipment from Dell for the Microsoft contract. Dell booked $60.9 billion of AI server orders in its quarter ended July 31 and finished with a record $95 billion backlog. Part of IREN’s capex is Dell’s revenue. If IREN’s GPU payments stay on schedule, that suggests neocloud buyers can still take delivery and pay, ahead of Dell’s own report on Nov. 24.
What Thursday has to show
I’ll be watching three things:
- Capex against the guide. September-quarter spending on pace for $25 billion to $30 billion, with the guide unchanged. A higher guide with no new contracts behind it would look a lot like Cipher’s problem.
- The funding gap. In August, IREN had about $14 billion of cash, committed GPU financing and prepayments, and it was aiming for about $8 billion more of GPU financing and prepayments. That leaves $3 billion to $8 billion to find. Management said talks on financing for its data centers were under way, and none had closed.
- The share count. It was 394.06 million on Aug. 14. A big jump by Sept. 30 would mean shareholders paid for more of the build.
Of course, higher spending isn’t automatically bad news. In August, management said it was in late-stage talks on a big share of its 2027 capacity. If capex goes up to serve new contracts, investors should welcome it. And as this week showed, the stock can move on the sector’s day as easily as on its own numbers.
The way I see it, IREN warned investors in August that costs would run 15% to 20% higher. A cost increase on its own shouldn’t sink a stock at 3.1x forward sales. Thursday’s real test is the financing. If debt and customer prepayments keep covering the build, the stock looks cheap against its own history. If shares cover more of the gap, less of that revenue growth reaches shareholders.
Of course, one quarter won’t settle a build this size. IREN has three more quarters of capex to show it can pay for.
So what is IREN stock actually worth?
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