Iris Energy Shares Pull Back Following Significant Rally

Shares of Iris Energy (IREN) retreated on Thursday, declining approximately 5% to close at $43.62. This move lower came after the stock reached an intraday high of $46.63. The pullback prompts investors to evaluate whether the company's valuation remains sustainable after a staggering 300% surge over the past twelve months.

The Australian firm, which has pivoted from Bitcoin mining to providing artificial intelligence infrastructure, now trades at a significant premium. Its current valuation stands at 24 times revenue, a stark contrast to the industry average of 3.1. With a market capitalization of roughly $14.3 billion, the market is pricing in substantial future growth.

This high expectation is also reflected in the company's price-to-earnings ratio, which sits between 23 and 25. While this multiple underscores bullish growth projections, it also introduces vulnerability to potential setbacks or delays. From a technical perspective, the stock is currently trading below its 50-day moving average of $47.98, indicating near-term weakness.

A Massive Microsoft Deal Fuels the Strategy

The cornerstone of Iris Energy's strategic shift is a landmark $9.7 billion agreement with Microsoft, signed in November 2025, to supply AI cloud services. This five-year contract is projected to generate annualized revenue of about $1.94 billion upon full implementation.

To meet the required capacity, the company has placed GPU orders with Dell valued at $5.8 billion. This investment will drive a major expansion of its computing fleet, which is planned to grow from 23,000 units currently to 140,000 by the end of 2026. The ultimate goal for this AI cloud segment is to achieve $3.4 billion in annualized revenue.

Substantial Capital Raises Fund the Plan:
- October 2025: $1.0 billion raised via zero-coupon convertible notes
- December 2025: An additional $2.3 billion from new convertible notes
- December 2025: $1.6 billion equity raise priced at $41.12 per share

Should investors sell immediately? Or is it worth buying IREN?

These strategic financings have bolstered the company's total liquidity position to approximately $6.8 billion.

Secured Power Capacity Provides a Strategic Edge

In the power-intensive market for AI data centers, Iris Energy holds a key competitive advantage: it controls approved grid connections for 2,750 megawatts in West Texas. A major 2-gigawatt hub in Sweetwater is scheduled to become operational in April 2026.

The company's planned fleet of 140,000 GPUs is estimated to require about 460 megawatts. This represents only 16% of its secured power capacity, leaving a considerable buffer to support further growth initiatives beyond 2026.

Analyst Opinions Remain Divided

The investment community shows a lack of consensus on the stock's outlook. Among 19 analysts covering Iris Energy, twelve recommend buying, five suggest holding, and two advise selling. The average price target is $67.64, but the range of estimates is wide. Roth Capital sees fair value at $94, while HC Wainwright's target is $56. Goldman Sachs initiated coverage with a neutral rating and a $39 target, which is below the current trading price.

These divergent views highlight uncertainty surrounding the timeline and profitability of the company's aggressive expansion. For the first quarter of fiscal 2026, Iris Energy reported a 355% year-over-year revenue increase to $240.3 million. Net income swung dramatically from a loss of $51.7 million to a profit of $384.6 million.

However, reaching the targeted $3.4 billion revenue run-rate is contingent on several critical factors, including timely construction progress, GPU deliveries, and power provisioning across multiple sites. Upcoming quarterly results will be closely watched for evidence that this ambitious plan remains on track.