DMG Blockchain Solutions is a buy, this analyst says

Roth Capital Markets analyst Darren Aftahi reiterated a “Buy” rating and C$0.85 target for DMG Blockchain Solutions (DMG Blockchain Solutions Stock Quote, Chart, News, Analysts, Financials TSXV:DMGI) in an Aug. 26 report, pointing to the company’s positioning in sovereign AI infrastructure.

Vancouver-based DMG is a Canadian data centre operator and blockchain platform focused on Bitcoin mining and related services. It runs a carbon-neutral facility in Christina Lake, B.C., and offers institutional software tools under its Core+ platform, including custody services, a mining pool and other crypto products. The company follows a September fiscal year.

Aftahi said DMG is advancing discussions with Canadian defence agencies on the potential deployment of 2MW of prefabricated data centres, supported by an execution partner to manage supply chains and clearances.

“While timing is uncertain, an initial government contract (even small) would be a critical proof point, enabling scale to larger projects like the 30MW Malahat JV,” he said. “With a potential niche as a front-runner in Canadian sovereign AI, DMGI could diversify beyond mining and access lower-cost financing, which we believe could rerate shares if execution momentum builds.”

He added that progress is being made on the company’s HPC/AI strategy, though financing would be required to execute at scale. DMG’s Malahat JV could provide a unique angle for lower-cost debt financing, while its Core+ platform is taking a more consolidated approach with smaller customers.

“While we would not see a major announcement near-term, we believe exiting the year there may be a more solidified path for DMGI into providing HPC/AI services to the Canadian government,” he said.

For the fiscal third quarter of 2025, DMG reported revenue of $11.6-million and Adjusted EBITDA of $5.2-million, compared with expectations of $11.8-million and $400,000. Mining revenue rose 12% year over year and 8% sequentially.

“Mining performance was impacted by lower uptime from contamination in hydro tanks related to manufacturer defects and lower performance from air-cooled miners due to higher ambient temperatures,” Aftahi said.

Gross margins on self-mining were about 43%, in line with expectations, with implied power costs of $51,000 per bitcoin, 11% better than expected and 10% better quarter over quarter. Operating expenses were 15% lower at $2.5-million, while Adjusted EBITDA exceeded expectations by $4.9-million. DMGI ended the quarter with $61.8-million in cash and equivalents, including 341 bitcoin. It earned about $18-million from operations and sold $15-million more bitcoin than mined.

Aftahi said his model is mostly unchanged. He expects DMG to add 0.6 EH/s by fiscal year-end, reaching 2.2 EH/s, with a 3 EH/s target still in place for the end of calendar 2025, though he takes a more conservative view into early 2026.

“We believe the largest moving piece remains its HPC/AI strategy for sovereign AI, as to one, what a contract could look like, two, financing the build, three, timing of the contract, and four, potential scale,” he said. “As these boxes are checked, enhanced visibility should help remove some of the fluidity from our model and DMGI’s business.”

Aftahi projects DMG will generate $8.6-million in Adjusted EBITDA on $45.3-million of revenue in fiscal 2025, up from his prior forecast of $2.5-million on $45.7-million. He said results will decline to $4.7-million on $53.6-million of revenue in fiscal 2026, compared with his previous estimate of $3.0-million on $55.5-million.

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