The AI Bet Is Paying Off for TeraWulf and Its Big Buildout Is Just Getting Started

TeraWulf stock has fallen this week amid concerns over the artificial-intelligence trade.

Key Points

TeraWulf reports third-quarter revenue of $76.2 million, beating Wall Street estimates of $62.5 million.
The company’s high-performance computing lease revenue rises to $62.9 million in the third quarter, accounting for about 83% of total revenue.
TeraWulf’s total expenses more than double to $164.45 million in the third quarter from $75.25 million a year ago.

TeraWulf , the former Bitcoin miner turned data-center operator, offered weary investors some proof that the artificial-intelligence infrastructure payoff wasn’t just a distant promise. And for the company, that momentum is just getting started.

Revenue for the company’s high-performance computing lease was $62.9 million in the third quarter, accounting for about 83% of total revenue. That figure totaled $31.9 million in the second quarter, rising 52% from the first quarter. Wall Street had anticipated revenue of $49.6 million for the segment in the third quarter.

Shares of TeraWulf jumped 11% to $11.20 in premarket trading Friday, clawing back ground after Thursday’s brutal tech selloff knocked the stock down about 14% to close at $10.08.

TeraWulf posted a loss of 3 cents a share in the third quarter, narrower than analysts’ calls for a loss of 18 cents, according to FactSet. Revenue for the third quarter totaled $76.2 million, beating Wall Street’s estimate of $62.5 million.

TeraWulf, which has shifted its operations to developing AI data centers from Bitcoin mining, signed a 20-year lease with Anthropic in July valued at about $19 billion in contracted revenue.

Aside from the Anthropic deal, TeraWulf said Friday it has expanded its Lake Mariner facility on budget, with new capacity coming online in the fourth quarter. It also reaffirmed its target to contract an additional 250 megawatts to 500 megawatts of critical IT capacity every year.

TeraWulf needs significant financing to build out its data centers, sparking investor concerns that the company may need to issue additional shares to cover its construction costs, diluting existing shareholders.

Morgan Stanley analyst Stephen Byrd, however, doesn’t appear too concerned. In October, he reiterated his Overweight rating on TeraWulf stock and $65 target, implying a nearly 545% upsid e from Thursday’s closing price of $10.08.

But it’s no secret that the buildout has been expensive: TeraWulf’s total expenses more than doubled to $164.45 million in the third quarter from $75.25 million a year ago. The figure, however, marked a sharp decline from the second quarter, when expenses totaled roughly $185 million.

TeraWulf’s stock gain offered welcome relief after shares dropped about 6% this week, including Friday’s premarket move.

Its latest quarterly earnings also piled onto the good news from peer Iren Energy, which reported its fiscal first-quarter earnings after the closing bell Thursday. Iren’s quarterly AI revenue increased 182% from the fiscal fourth quarter, boosting investor confidence in the payoff of the data-center buildout. Shares of Iren climbed about 18% in premarket trading Friday.

Analysts have an average Buy rating and an average price target of $30.72 for TeraWulf, suggesting about a 205% upside from Thursday’s close, according to FactSet data.

Write to Mariapaula Gonzalez at mariapaula.gonzalez@barrons.com

参与讨论