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Can IREN's Vertically Integrated AI Cloud Platform Lift Profitability?
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Key Takeaways
IREN's vertically integrated AI cloud aims for higher margins than colocation center models.
IREN expects an 85% EBITDA margin from its Microsoft AI cloud contract after colocation charges.
IREN controls roughly 3 GW of power, while its 140,000-GPU expansion uses only about 16% of capacity.
IREN Limited’s (IREN - Free Report) vertically integrated AI cloud platform is structurally designed to generate higher margins than traditional colocation-based models. By owning the power procurement, substation development, data center construction and GPU deployment, the company reduces third-party colocation costs and counterparty risk, leading to a lower and more predictable cost structure.
This margin advantage is evident in IREN’s flagship Microsoft AI cloud contract, which management expects to deliver an estimated 85% project EBITDA margin even after an internal colocation charge of roughly $130 per kW per month. Long-term commitments and phased deployments further increase disciplined capital spending consistent with revenue growth and high utilization.
Vertical integration allows for faster commissioning and tighter operational controls, which helps reduce idle capacity and accelerate revenue recognition. Control over construction timelines, cooling design and power delivery improves uptime and utilization compared to outsourced data center models, strengthening operating leverage as GPU clusters scale.
The Power portfolio adds meaningful valuation support for IREN. The company controls approximately 3 GW of secured grid-connected power, while its planned 140,000-GPU expansion utilizes only about 16% of that capacity, supporting structurally lower costs, margin durability and long-term cash flow visibility in AI infrastructure.
Financial performance already supports this thesis. In the first quarter of fiscal 2026, IREN generated $92 million in adjusted EBITDA on $240 million of revenues, reflecting improving profitability as the AI cloud becomes a larger revenue contributor. This trend is further validated by the Zacks Consensus Estimate, forecasting over 100% revenue growth in both fiscal 2026 and 2027.
How Competitors Stack Up Against IREN’s Integrated AI Model
TeraWulf (WULF - Free Report) is the closest rival to IREN in building a vertically integrated AI cloud. WULF has moved quickly into HPC leasing, securing about 520 MW of long-term, credit-backed capacity using low-carbon power and large data center campuses. This provides WULF with strong scale and visibility today, while IREN retains more balance-sheet flexibility and upside as AI demand evolves.
CleanSpark (CLSK - Free Report) is more of a long-term challenger to IREN than an immediate AI rival. CLSK’s strength comes from its large U.S. power and land base, disciplined capital strategy and operational scale. CLSK’s AI strategy is still developing, which leaves IREN in the lead now, but its large power footprint could become a key advantage as AI demand rises.
IREN’s Price Performance, Valuation & Estimates
Shares of IREN have surged 189.3% in the past six months, outperforming the broader Zacks Finance sector’s return of 7.2% and the Zacks Financial Miscellaneous Services industry’s decline of 18.1%.
IREN’s Six-Month Price Performance
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 7.3X compared with the industry’s 3.02X.
IREN’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for IREN’s fiscal 2026 earnings is pegged at 64 cents per share, down by 19% over the past 30 days, but marking a substantial year-over-year increase.
Image: Bigstock
Can IREN's Vertically Integrated AI Cloud Platform Lift Profitability?
Key Takeaways
IREN Limited’s (IREN - Free Report) vertically integrated AI cloud platform is structurally designed to generate higher margins than traditional colocation-based models. By owning the power procurement, substation development, data center construction and GPU deployment, the company reduces third-party colocation costs and counterparty risk, leading to a lower and more predictable cost structure.
This margin advantage is evident in IREN’s flagship Microsoft AI cloud contract, which management expects to deliver an estimated 85% project EBITDA margin even after an internal colocation charge of roughly $130 per kW per month. Long-term commitments and phased deployments further increase disciplined capital spending consistent with revenue growth and high utilization.
Vertical integration allows for faster commissioning and tighter operational controls, which helps reduce idle capacity and accelerate revenue recognition. Control over construction timelines, cooling design and power delivery improves uptime and utilization compared to outsourced data center models, strengthening operating leverage as GPU clusters scale.
The Power portfolio adds meaningful valuation support for IREN. The company controls approximately 3 GW of secured grid-connected power, while its planned 140,000-GPU expansion utilizes only about 16% of that capacity, supporting structurally lower costs, margin durability and long-term cash flow visibility in AI infrastructure.
Financial performance already supports this thesis. In the first quarter of fiscal 2026, IREN generated $92 million in adjusted EBITDA on $240 million of revenues, reflecting improving profitability as the AI cloud becomes a larger revenue contributor. This trend is further validated by the Zacks Consensus Estimate, forecasting over 100% revenue growth in both fiscal 2026 and 2027.
How Competitors Stack Up Against IREN’s Integrated AI Model
TeraWulf (WULF - Free Report) is the closest rival to IREN in building a vertically integrated AI cloud. WULF has moved quickly into HPC leasing, securing about 520 MW of long-term, credit-backed capacity using low-carbon power and large data center campuses. This provides WULF with strong scale and visibility today, while IREN retains more balance-sheet flexibility and upside as AI demand evolves.
CleanSpark (CLSK - Free Report) is more of a long-term challenger to IREN than an immediate AI rival. CLSK’s strength comes from its large U.S. power and land base, disciplined capital strategy and operational scale. CLSK’s AI strategy is still developing, which leaves IREN in the lead now, but its large power footprint could become a key advantage as AI demand rises.
IREN’s Price Performance, Valuation & Estimates
Shares of IREN have surged 189.3% in the past six months, outperforming the broader Zacks Finance sector’s return of 7.2% and the Zacks Financial Miscellaneous Services industry’s decline of 18.1%.
IREN’s Six-Month Price Performance
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 7.3X compared with the industry’s 3.02X.
IREN’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for IREN’s fiscal 2026 earnings is pegged at 64 cents per share, down by 19% over the past 30 days, but marking a substantial year-over-year increase.
Image Source: Zacks Investment Research
IREN currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.