Key Takeaways
- IREN is down 20% on a report tying delays at its Childress, Texas, data center to Microsoft’s lower AI spending last quarter.
- Microsoft’s Childress contract should bring in about $1.94 billion a year, roughly half of IREN’s contracted run-rate revenue.
- Microsoft’s CFO blamed late third-party deliveries, and its cloud demand is still growing fast.
- IREN needs to keep the last three phases on track for December.
IREN (IREN) is down 20% today, hours before its fiscal first-quarter report. On Wednesday evening, The Information reported that delays at IREN’s Childress, Texas, site led Microsoft (MSFT) to push back AI spending it had planned for the September quarter.
Investors are questioning how much AI capacity Microsoft wants to rent. The Financial Times reported that Microsoft won’t use an option to more than double its Texas deal with Nscale.
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Half of IREN’s contracted revenue sits at Childress
Microsoft is renting GPU servers in four phases at Childress, called Horizons 1 to 4. Once all four are live, management expects about $1.94 billion a year from the deal, roughly half of the $4 billion of annual run-rate revenue IREN has under contract for 2026.
Microsoft accepted Horizon 1 in August, and the other three phases, about three-quarters of the deal, are due in the December quarter. Miss grace periods that end in early 2027, and IREN can owe delay credits.
Analysts expect IREN’s revenue to nearly quadruple to $2.81 billion in fiscal 2027, and they’re counting on that schedule:
Microsoft still wants the capacity
On last week’s call, Microsoft CFO Amy Hood said “some third-party capacity deliveries we expected in Q1 were delayed.” Microsoft reportedly spent about $5 billion less than planned, but how much of that came from IREN isn’t clear.
Azure revenue grew 48% in the September quarter, and commercial remaining performance obligation rose 73% to $677 billion. Microsoft’s stock is down 3% today.
For CoreWeave (CRWV), down 15%, the question is whether Microsoft is renting less from neoclouds across the board, as the Nscale news suggests, or just waiting on late sites, as Hood described. CoreWeave’s backlog was about $104 billion at June 30, and its Nov. 10 report should show whether its own deliveries are on time.
IREN needs a date for Horizons 2 to 4
On tonight’s 5 p.m. ET call, listen for whether management still expects Microsoft to sign off on all three phases by Dec. 31.
Before today’s drop, IREN traded at 3.1x forward sales, well below its three-year average of 5.2x:
A late site is a much smaller problem than a customer walking away, and that’s what Hood described. If IREN keeps December on the calendar tonight, this selloff looks overdone to me. If any phase slides into 2027, that low multiple looks a lot more deserved.
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