Analyst loves this data center stock

Roth Capital Markets analyst Darren Aftahi reiterated a “Buy” rating and US$94.00 12-month price target on IREN Limited (IREN Limited Stock Quote, Chart, News, Analysts, Financials NASDAQ:IREN) in a Feb. 6 sales analysis, saying the recent pullback has created an attractive long-term entry point despite the absence of a new customer announcement.

Based in Australia, IREN operates institutional-grade, 100% renewable-powered data centres across North America, generating revenue through Bitcoin mining and AI Cloud hosting. The company runs more than 300 MW of energized capacity with more than 4.5 GW of long-term development potential.

Aftahi said the selloff appeared driven by short-term investor disappointment around a “deal or no deal” narrative, rather than a deterioration in fundamentals. He noted that no near-term transaction was expected ahead of the first Horizon 1 AI data centre for Microsoft being energized, which he expects in the second quarter.

He said IREN’s expanding power portfolio is a key strategic asset, now totalling roughly 4.5 gigawatts following confirmation that Sweetwater’s 2.0GW site is fully energized and permitted, alongside the addition of a new 1.6GW site in Oklahoma. Aftahi said the scale and geographic diversity of the portfolio positions IREN as a long-term compounder in AI infrastructure, with flexibility to pursue selective high-performance computing colocation alongside its core AI Cloud strategy.

Aftahi also said improved financing visibility is an underappreciated positive. He said IREN has now financed or secured prepayments for approximately 95% of the GPU capital expenditures tied to its Microsoft contract, representing roughly US$3.6-billion of a total US$5.8-billion GPU investment through a delayed-draw loan at rates below 6%. He said this meaningfully alleviates prior investor concerns around funding risk and allows management to focus on execution.

Demand trends remain supportive, in his view, with longer contract tenors, prepayments, and strong customer preference for air-cooled deployments. Aftahi said IREN remains on track to achieve its US$3.4-billion AI Cloud annual recurring revenue target by year-end 2026, noting the company is already roughly two-thirds contracted.

Second-quarter fiscal 2026 results were largely viewed as transitional, with bitcoin mining results declining as power is reallocated toward AI Cloud. Bitcoin production fell about 13% sequentially, while bitcoin revenue declined roughly 11%. AI Cloud revenue of approximately US$17.3-million came in below expectations, which Aftahi attributed to the timing of GPU deployments and said should result in a more back-end-loaded ARR ramp.

Adjusted EBITDA of about US$75.3-million was modestly below estimates, reflecting slightly higher operating costs, while cost per bitcoin remained competitive at roughly US$34,400. IREN ended the quarter with approximately US$3.26-billion in cash and US$3.69-billion in debt, largely related to its convertible notes.

Following model updates, Aftahi trimmed near-term bitcoin assumptions to reflect the ongoing site transition but maintained a long-term bitcoin price assumption of US$100,000. He now models fiscal third-quarter 2026 AI Cloud ARR of roughly US$202-million and expects IREN to exit calendar 2026 with adjusted EBITDA margins approaching the mid-70% range, with EBIT turning positive in the second half of fiscal 2027.

Aftahi said IREN should generate approximately US$451-million in Adjusted EBITDA on revenue of about US$956-million in fiscal 2026, with those figures improving to roughly US$2.07-billion in Adjusted EBITDA on revenue of about US$2.71-billion in fiscal 2027.

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