IREN’s (IREN) latest earnings offered a snapshot of a company mid-transition, with shares currently paying the price for that transition. The firm reported weaker-than-expected revenue and earnings as bitcoin BTC$68,713.65 mining took a back seat to its rapidly expanding AI cloud ambitions.

Crushed by record-low margins after the 2024 halving, bitcoin miners are recasting themselves as digital infrastructure players, converting power-hungry mining sites into AI-ready data centers in a bid for more stable, long-term revenue.

One of last year's best-performing stocks, not just in crypto, but for the whole market, IREN has come back to earth a bit since hitting a record high near $77 in November. Down about 20% amid Thursday’s market crash, shares are flat on Friday at $39.77.

IREN has secured $3.6 billion in GPU financing tied to its Microsoft contract, alongside a $1.9 billion customer prepayment, funding that management says will cover roughly 95% of GPU-related capital expenditures as it scales its AI business, a development JPMorgan analysts Reginald Smith and Charles Pearce described as encouraging.

IREN’s fiscal second-quarter revenue fell sequentially as lower average hashrate, fewer coins mined and a quarter-over-quarter drop in bitcoin prices weighed on results, according to the Wall Street bank.

The drag from mining was partly offset by rapid growth in cloud services, where revenue more than doubled from the prior quarter to $17 million. That figure came in above JPMorgan’s $14 million estimate but well short of the Street’s $28 million forecast. Management said all GPUs currently energized are fully contracted, a signal the bank described as encouraging as the company pivots toward AI infrastructure.

Cost controls also helped cushion the quarter. Cash SG&A dropped sharply to $43 million, while power costs declined on lower average hashrate. As a result, adjusted EBITDA reached $75 million, beating the bank's estimate, driven by lower operating and energy expenses. The bank has an underweight rating on the stock.

Investment bank B. Riley raised its price target on IREN to $83 from $74 while reiterating its buy rating, arguing that the recent pullback has created an attractive entry point.

The upgrade comes despite a softer fiscal second quarter, during which adjusted EBITDA of $75.3 million missed expectations. B. Riley said the earnings miss is overshadowed by IREN’s progress on its AI pivot, including $3.6 billion in low-cost GPU financing tied to its Microsoft deal, a $1.9 billion prepayment that covers about 95% of GPU capex, and an expanded power portfolio now exceeding 4.5 gigawatts (GW).

Compass Point analyst Michael Donovan reiterated a buy rating and a $105 price target on IREN, saying the latest earnings show a company better positioned for growth, even though recent results were weaker. He said IREN now has more secure power and a clearer plan to fund its expansion, which matters more than one soft quarter.

Donovan described the fourth quarter as a period of change. Revenue fell to $184.7 million as the company mined less bitcoin while shifting its facilities from older bitcoin-focused machines to newer chips used for artificial intelligence. Even so, the mix of revenue improved as AI-related services began to make up a larger share of the business.

He pointed to the $3.6 billion financing package linked to IREN’s Microsoft project as an important milestone. The funding is larger than originally planned and is structured so that money is drawn as construction moves forward and revenue contracts kick in.

Donovan expects IREN to begin recognizing revenue from Microsoft toward the end of the second quarter of 2026, with revenue increasing in stages after that. By the end of 2026, he sees a path for the business to generate about $3.4 billion in annualized revenue.

Read more: Weak earnings drag IREN, Amazon; bitcoin stocks rebound in pre-market