IREN (IREN) Swaps Bitcoin Rigs For Microsoft’s (MSFT) GPU Contracts

IRON (NASDAQ: IREN) has transitioned from Bitcoin mining to AI cloud infrastructure. In Q4, revenue from AI cloud services more than doubled to $70.5 million. The company secured $4 billion in contracted revenue for its 2026 capacity, with $1 billion already generating cash. IREN delivered its first liquid-cooled data center to Microsoft in August 2026, signaling its shift to AI infrastructure.

Recent three-year contracts for AI cloud services are priced above $20 million per megawatt of IT load, with discussions for new capacity reaching $25 million per megawatt. Prepayments for these deals cover 45% to 55% of GPU capital spending. IREN raised $6.5 billion in GPU financing, including $3.6 billion in investment-grade funding at a 6% interest rate tied to Microsoft, and $2.8 billion in non-investment-grade equipment financing at a 9% fixed rate.

The company has secured 5 gigawatts of grid connections for its future sites, which are expected to reach 300 megawatts of IT load by 2026. IREN's AI and Fireworks AI divisions both renewed and expanded their contracts, demonstrating repeat business. The company's AI cloud business has required significant spending, leading to a net loss of $684 million in Q4, primarily due to $450.4 million in noncash impairments from decommissioning mining hardware.

Cash SG&A is expected to increase by $40 million to $50 million in the first quarter of fiscal 2027, and headcount nearly tripled in fiscal year 2026. IREN is still investing $25 billion to $30 billion in capital expenditures for fiscal 2027, a timeline that could be affected by construction schedules and GPU delivery timelines.

Despite the heavy losses, the company's bullish growth prospects are supported by contracted revenue, aggressive financing terms, and an end-to-end stack of AI infrastructure assets. However, the bear case hinges on the company's heavy net loss, a sizable capital plan, and potential delays in construction and financing.