IREN's AI Revenue Claims Diverge from Bitcoin-Dependent Financial Realities

What happened

Recent Oracle-related rumors have contributed to volatility in AI stocks like IREN, with added pressure from declining Bitcoin prices potentially hurting mining revenue. A Motley Fool article posits that IREN's projected $3.4 billion in annual AI recurring revenue will soon eclipse Bitcoin mining, downplaying near-term crypto headwinds. However, DeepValue's analysis shows Bitcoin mining still drives over 95% of FY25 revenue, while AI Cloud Services generated only $16 million, revealing a vast gap between aspiration and current operations. The company's earnings are flattered by unrealized gains, with underlying cash flow volatile, a $990 million convertible debt burden, and negative interest coverage, offering thin downside protection. Consequently, IREN's stock, up 150% in 12 months, appears priced for a best-case AI pivot that remains unproven amid persistent Bitcoin dependency and execution risks.

Implication

The disconnect between projected AI revenue and actual performance underscores the speculative premium embedded in IREN's valuation, increasing downside risk if growth stalls. Continued Bitcoin dominance means earnings are highly sensitive to crypto price swings, network difficulty, and regulatory shifts, with limited diversification. Without multi-year, creditworthy AI contracts, the company's pivot lacks visibility, exacerbating uncertainty in an already competitive landscape. Financial leverage from convertibles could pressure cash flow if Bitcoin economics weaken or AI adoption delays, potentially forcing dilutive equity issuance. Thus, value-oriented investors should consider reducing exposure until IREN demonstrates sustained AI revenue scale, positive interest coverage, and a credible path to debt management.

Thesis delta

The article's bullish AI projection does not shift the core POTENTIAL SELL thesis; IREN remains overvalued with earnings driven by Bitcoin and unproven AI growth, reinforcing the need for concrete evidence of contracted revenue and cash generation. Investors should await signs of AI segment scaling and balance sheet improvement before reassessing, as current fundamentals do not support a more favorable stance.