Back to top

Image: Bigstock

Can IREN Sustain Growth Amid Its Rapidly Mounting Capex Burden?

Read MoreHide Full Article

Key Takeaways

  • IREN is rapidly scaling AI cloud operations with plans for 140,000 GPUs and major site upgrades by 2026.
  • IREN's capital requirements are rising, with multibillion-dollar capex far outpacing operating cash flow.
  • IREN is leaning on external funding as revenue is projected to climb 116.4% in 2026 on rising AI demand.

IREN Limited’s (IREN - Free Report) shift toward AI cloud infrastructure boosts long-term prospects while sharply increasing capital intensity. The company has highlighted massive capital needs that will significantly impact its long-term financial trajectory.

IREN plans to deploy 140,000 GPUs by 2026 and upgrade multiple sites with liquid cooling, Tier-3 standards and high-density rack infrastructure. These initiatives span several years and involve multibillion-dollar investments. The Microsoft partnership alone requires $5.8 billion in GPU capital expenditure, while extensive build-outs at Childress (750 MW), British Columbia and the 2 GW Sweetwater hub further increase spending needs.

This rapid scaling has pushed capex far beyond internally generated cash. In the first quarter of fiscal 2026, IREN reported a strong operating cash flow of $142.4 million; however, investing outflows totalled $280.9 million. Heavy spending on property and equipment ($180.3 million) and GPU prepayments (over $100 million) underscores the persistent capital strain. To bridge the gap, the company increasingly depends on external financing, including Microsoft prepayments, GPU funding facilities and $1.0 billion in convertible note issuance.

Despite these challenges, the growth potential is attractive. The Zacks Consensus Estimate forecasts 116.4% revenue growth in 2026, reaching $1.10 billion — an indication that rising AI demand may ultimately justify the upfront investment. With specific implementation, current capital expenditure growth can develop into a strong foundation for future AI cloud profitability.

How IREN Compares With Key Industry Rivals

CleanSpark (CLSK - Free Report) and Applied Digital (APLD - Free Report) are key competitors making significant CapEx investments in AI infrastructure & High-Performance Computing (HPC).

CleanSpark is using its energy, land and management expertise to build AI/HPC-ready campuses with liquid-cooled, GPU-optimized infrastructure. Unlike IREN, CleanSpark stands out for its rapid commercial implementation, strong fiscal year 2025 revenue growth, a large contracted power pipeline and $1.15 billion in targeted capital activities. The company benefits from proven site development and energy management, although leverage and integration risks remain. Overall, CleanSpark's diversified, infrastructure-first strategy contrasts with IREN's concentrated AI hardware approach.

Applied Digital has repositioned itself from crypto hosting to purpose-built AI and HPC data centers, competing directly with IREN for hyperscaler and enterprise GPU workloads. The company designs and operates AI/HPC-first campuses like Polaris Forge, which offer high power density, liquid cooling and scalable layouts. Backed by long-term leases, including a 15-year, $11 billion CoreWeave contract, Applied Digital has distinguished itself from the start with a hyperscaler-focused, energy-efficient infrastructure.

IREN’s Price Performance, Valuation & Estimates

Shares of IREN have soared 188.5% in the past year, outperforming the broader Zacks Finance sector’s return of 13.7% and the Zacks Financial Miscellaneous Services industry’s decline of 12%.

IREN’s One-Year Price Performance

Zacks Investment Research
Image Source: Zacks Investment Research

IREN shares are overvalued, as suggested by the Value Score of F. In terms of forward price/sales, IREN is trading at 6.78X compared with the industry’s 3.36X.

IREN’s Valuation

Zacks Investment Research
Image Source: Zacks Investment Research

The Zacks Consensus Estimate for IREN’s fiscal 2026 earnings is pegged at 79 cents per share, marking a sharp year-over-year improvement from just 4 cents. However, the fiscal 2027 earnings estimate of 34 cents indicates a year-over-year decline of 56.33%. Notably, consensus estimates for both fiscal 2026 and 2027 have remained unchanged over the past 30 days, indicating stable near-term expectations.

Zacks Investment Research
Image Source: Zacks Investment Research

IREN currently has a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Applied Digital Corporation (APLD) - free report >>

Cleanspark, Inc. (CLSK) - free report >>

IREN Limited (IREN) - free report >>

Published in