IREN's $9.7B AI Deal and Earnings Surge Can't Stop 12% Stock Slide

IREN Limited (IREN) stock plunged 12.37% following its Q1 FY26 earnings report, despite securing a landmark $9.7 billion AI cloud contract with Microsoft and posting record revenue and net income. The company's shares closed at $66.96, reflecting investor caution over capital-intensive expansion plans and near-term execution risks, according to a Parameter report.

IREN's Q1 revenue surged 355% year-over-year to $240.3 million, driven by a strategic pivot from Bitcoin mining to AI cloud services. Net income reached $384.6 million, a dramatic turnaround from a $51.7 million loss in the prior-year period. Adjusted EBITDA hit $91.7 million, while total EBITDA soared to $662.7 million, bolstered by gains from prepaid forwards and capped calls tied to convertible notes, as reported by Parameter. The results underscore IREN's transformation into a vertically integrated AI infrastructure provider, leveraging its renewable-powered data centers and 3GW secured power portfolio, according to a Pulse2 article.

The Microsoft contract, spanning five years, grants the tech giant access to 10% of IREN's computing capacity and includes a 20% prepayment, expected to generate $1.9 billion in annualized revenue. IREN also signed multi-year deals with Together AI, Fluidstack, and Fireworks AI, aiming to boost its AI cloud annualized run rate to $500 million by Q1 2026 and $3.4 billion by year-end 2026, as noted by Parameter. The company plans to deploy 140,000 GPUs across U.S. and Canadian facilities, positioning itself as a major player in large-scale GPU clusters for AI training and inference, the Pulse2 article added.

The expansion includes liquid-cooled data centers at its 750MW Childress, Texas campus, with phased deployments through 2026. The British Columbia site is transitioning 160MW of capacity from Bitcoin mining to GPUs by year-end, while the 2GW Sweetwater Hub aims to energize two substations between 2026 and 2027, per Parameter. The company's balance sheet remains robust, with $1.8 billion in cash and equivalents, and $1.0 billion in zero-coupon convertible notes issued in October 2025 to fund growth, as Parameter also reported.

Despite these positives, investors remain wary of rising operating expenses, execution risks tied to large-scale projects, and dependency on key contracts like the Microsoft deal, according to an Investing.com transcript. Daniel Roberts, IREN's Co-CEO, emphasized the company's disciplined execution and long-term vision, stating, "We control the entire stack from the substation all the way down to the GPU" (Investing.com transcript). However, analysts note that converting signed AI contracts into recurring revenue will depend on timely GPU deployments and infrastructure milestones, according to a TS2 Tech article.

The stock's decline highlights broader market skepticism about the sustainability of IREN's rapid growth trajectory. While the Microsoft partnership validates its AI infrastructure model, the company's ability to maintain profitability amid aggressive capital expenditures remains a critical watchpoint, noted in a Yahoo Finance piece.