Iren Won't Have To Raise Capital For Much Longer Aft…

Iren’s reliance on financing may soon come to an end

Iren has raised billions of dollars in recent years, primarily through the sale of its corporate bonds, to fund the build-outs of its AI data centers. Investors knew that taking on heavy debt was the cost of business, since Iren isn’t making much money yet relative to what’s actually needed to build the data centers it’s leasing to clients.

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NASDAQ: IREN

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However, as Iren turns more of its existing assets into realized revenue, it may be less reliant on financing in the future. The Horizon 1 deal will bring in roughly $500 million in annual recurring revenue for the next five years.

Iren CEO Dan Roberts said the company is working to deliver Horizon sites 2, 3, and 4 later this year. Once all of those sites are ready, the Horizon sites will produce a combined $1.94 billion annually over the next five years.

Granted, those figures do not account for a 20% prepayment on the site. That turns the $9.7 billion, five-year deal into $7.76 billion over five years, which averages to roughly $1.55 billion per year.

Those revenues alone won’t cover all of Iren’s data center build-out costs, but they will make Iren less reliant on debt financing. However, Microsoft isn’t its only customer. The company d in July that it had signed $2.8 billion in new customer contracts, and management raised its 2026 annual recurring revenue target to over $4 billion. Notably, prepayments for those deals were as high as 45%.

While such prepayments do cut into the annual recurring revenues received during the initial phases of those contracts, they do provide extra capital that Iren can use to build more data centers and obtain more resources without tapping into debt.

Iren is earning $1.94 billion per year from 200 megawatts

Those are the terms for the Microsoft deal, and it represents a small slice of Iren’s capacity. It has 5.8 gigawatts of total capacity that is under development, so it can support 28 additional contracts the Microsoft one.

Granted, the company has already been securing customers for some of its megawatts, so it doesn’t have all of them available to offer. Furthermore, some of its data center sites will take years to complete. Iren is aiming for 480 megawatts of gross AI cloud capacity by the end of this year and expects to almost triple that figure by the end of 2027.

Iren does not need revenue from all 5.8 gigawatts to become less reliant on financing. The company earned only $144.8 million in its fiscal 2026 third quarter. Its projected $4 billion in annual recurring revenue indicates that at least one quarter in 2027 will produce $1 billion in total sales.

Once the growth arrives, Iren will eventually be in a position to expand its margins and fund its data centers with its own cash flow. Investors shouldn’t expect that to happen this year, but it may start to take shape in 2027 or 2028.

The value of compute continues to rise

Not only is Iren starting to make money from its Microsoft deal, but its remaining inventory also continues to gain value. Rival neocloud Nebius (NBIS +8.88%) held its first-ever capacity auction, and the winning customer paid a 15% premium compared to any price Nebius had charged before.

Nebius also commanded prices of $40 million to $50 million per megawatt in recent deals, despite an average yield of just above $20 million per megawatt.

These results show that the AI capacity Iren is building is growing in value. That makes Roberts and the Iren team look a lot smarter for not rushing to make deals. Higher annual contract values will help with margins, and can provide Iren with a realistic path to reduce its reliance on financing for future AI expansion projects.