Bitfarms: Reassessing Value Amid Bitcoin Volatility and Strategic Transition

Bitcoin's dramatic price swings late in 2025 set the stage for Bitfarms' strategic shift. The cryptocurrency peaked at $123,337 on October 8 before plunging 26% to $90,394 by November 30. This extreme volatility underscored the risks inherent in pure Bitcoin mining exposure. In response, Bitfarms secured a $588 million convertible note, signaling a major pivot away from traditional mining operations.

The company's Q3 2025 results reflected this transition phase. Revenue reached $69 million, with Bitcoin mining contributing 520 BTC at a direct cost of $48,200 per BTC. However, declining profitability was evident, as gross margins fell to 35% from 44% in 2024, pressured by higher operational costs. Bitfarms converted the convertible note to settle debt for Panther Creek development, using the capital to reposition Washington and Sharon sites for next-generation GB300 GPU-compatible HPC/AI workloads by late 2026.

While maintaining Bitcoin mining efficiency at 18 W/TH, the shift toward higher-margin HPC/AI infrastructure represents a calculated move to diversify revenue streams. The company's substantial $814 million liquidity position provides crucial runway. Still, execution risks remain significant: the timeline for completing site reconfigurations by late 2026 carries uncertainty, and demand for specialized HPC/AI services may not materialize as expected given the rapidly evolving competitive landscape.

Revenue Surge Masks Growing Pain

Bitfarms delivered a dramatic revenue jump in Q2 2025, with earnings soaring to $78 million, up 87% year-over-year. This surge came despite a troubling decline in profitability, as gross mining margins fell sharply to 45% from 51% in the same period last year. The company's operational efficiencies, measured at 17 watts per terahash, helped contain losses but couldn't offset the broader profit squeeze.

The Argentina shutdown contributed $18 million in cost savings, yet this move also eliminated a portion of the firm's mining capacity. Meanwhile, the firm's shift toward U.S.-based HPC/AI infrastructure-including a $300 million expansion funded by Macquarie-signals a long-term pivot toward higher-margin operations. Liquidity remains robust at $230 million, including $85 million in cash and $145 million in Bitcoin. Still, adjusted EBITDA of $14 million represents just 18% of revenue, raising questions about whether this growth model can sustainably translate volume into lasting profitability.

The high Bitcoin price environment has clearly lifted revenues, but thinning margins suggest underlying cost pressures are mounting. While energy efficiency gains and strategic repurposing of assets offer hope, the firm's ability to convert this revenue momentum into healthy margins remains unproven. Investors should watch whether the $300 million HPC/AI push delivers scalable returns without further eroding profitability.

Governance Weaknesses and Liquidity Shield

Bitfarms Ltd.'s audited 2024 financial statements revealed significant internal control deficiencies, directly causing restatements of its 2023 results. These material weaknesses centered on misclassified cash flows from digital asset sales and improper accounting treatment for warrant liabilities. Management explicitly acknowledged flaws in its processes for evaluating complex financial instruments, undermining the accuracy of its 2023 financial reporting. This credibility gap raises questions about the robustness of the company's governance framework for financial oversight.

Reflecting a contrasting financial position, Bitfarms maintained a strong liquidity buffer as of November 2025. This substantial cash position provides a crucial cushion against near-term pressures and potential operational disruptions stemming from the governance issues. However, the transition to resolving the underlying control deficiencies carries inherent execution risks. Successfully overhauling internal controls and restoring investor confidence requires flawless implementation, which is not guaranteed. The significant liquidity acts as a safety net but does not eliminate the fundamental challenge of rebuilding financial reporting credibility after the restatements necessitated by the 2024 control failures.

Valuation Gap and Catalysts

Bitfarms trades at a significant valuation gap versus peers despite its aggressive pivot beyond Bitcoin mining. Marathon Digital, a pure-play miner, commands a premium valuation with an enterprise value to EBITDA (EV/EBITDA) ratio of 16.71x, despite its stock currently trading below intrinsic value. In stark contrast, Riot Platforms, also a mining-focused company, trades at a much lower EV/EBITDA of 17.0x despite reporting negative earnings (-$152M net income, -$105M EBIT), highlighting profitability challenges that persist even with 34% revenue growth. This comparison underscores Bitfarms' current relative valuation weakness.

A key near-term catalyst for Bitfarms is the $588 million in convertible notes secured in Q3 2025 according to the company's announcement. This substantial liquidity buffer provides the financial flexibility to execute its strategic shift. The funds are explicitly earmarked for converting debt related to the Panther Creek development and, crucially, repositioning its Washington and Sharon sites for GB300 GPU-compatible high-performance computing (HPC)/AI workloads targeted for late 2026. This $814 million cash position is essential for funding the transition away from Bitcoin mining, where gross margins have already declined to 35% from 44% in 2024, partly due to rising operational costs.

However, the path to unlocking significant upside potential hinges entirely on the success of this transition. While the move into higher-margin AI infrastructure represents a compelling growth story, it introduces substantial execution risk and market uncertainty. Successfully converting legacy mining sites to accommodate GB300 GPUs and securing meaningful, stable AI/HPC contracts by late 2026 is far from guaranteed. The company's ability to command premium rates for AI services versus its current mining margins remains unproven. Until this transition demonstrates consistent revenue generation and improved profitability, Bitfarms' valuation will likely remain pressured relative to both pure miners and its own stated AI potential, offering only conditional upside contingent on overcoming significant technical and commercial hurdles.