10-Q: CleanSpark Reports Q1 Loss Amid Bitcoin Price Drop, Expands into AI/HPC

CleanSpark reported a significant net loss in Q1 2026 due to a decline in bitcoin's fair value, despite increased mining revenue and strategic expansion into AI and high-performance computing.

Summary

• Reported a net loss of $378.7 million for the three months ended December 31, 2025, a significant reversal from a net income of $246.8 million in the prior year period.
• Bitcoin mining revenue increased by 12% to $181.2 million, up from $162.3 million in the same period last year, driven by a higher average bitcoin price despite fewer bitcoin mined.
• Operating hashrate grew to 47.1 EH/s as of December 31, 2025, from 39.1 EH/s a year prior, with 245,199 miners in service.
• The company issued $1.15 billion in 0% convertible senior notes due 2032 in November 2025, using $460 million of the proceeds to repurchase common stock.
• Acquired property in Sealy, Texas, on October 27, 2025, for $65.7 million to support the development of a next-generation data center campus, marking entry into the Texas market and expanding power portfolio for AI/HPC.
• Experienced a $246.8 million loss on the fair value of bitcoin, net, compared to a $218.2 million gain in the prior year, primarily due to bitcoin's price falling from approximately $114,100 on September 30, 2025, to $87,500 on December 31, 2025.
• Cash and cash equivalents significantly increased to $458.1 million as of December 31, 2025, from $43.0 million on September 30, 2025.
• Total liabilities increased to $1.94 billion from $1.01 billion, largely due to the new convertible notes.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a challenging quarter financially due to the significant net loss driven by bitcoin price volatility, despite strategic operational growth and diversification efforts. The large capital raise and share repurchase are notable but the immediate financial results are negative.

Positives

• Bitcoin mining revenue increased by 12% to $181.2 million for the quarter ended December 31, 2025, compared to $162.3 million in the prior year.
• Operating hashrate increased to 47.1 EH/s as of December 31, 2025, from 39.1 EH/s a year prior, demonstrating operational expansion.
• Average operating energy efficiency improved to 16.8 W/TH as of December 31, 2025, from 17.6 W/TH in the prior year.
• Successful issuance of $1.15 billion in 0% convertible senior notes due 2032, strengthening long-term capital structure.
• Strategic acquisition of property in Sealy, Texas, and long-term power supply agreements totaling 285 MW, marking entry into the Texas market and expanding capacity for AI/HPC development.
• Significant increase in cash and cash equivalents to $458.1 million as of December 31, 2025, from $43.0 million on September 30, 2025.
• Launched an institutional-grade in-house trading function for Digital Asset Management (DAM) to enhance liquidity and generate incremental income from bitcoin holdings.
• Net cash provided by investing activities was $79.6 million for the three months ended December 31, 2025, a positive shift from $255.9 million used in the prior year, driven by proceeds from bitcoin sales.

Negatives

• Reported a net loss of $378.7 million for the three months ended December 31, 2025, compared to a net income of $246.8 million in the prior year period.
• Experienced a $246.8 million loss on the fair value of bitcoin, net, primarily due to bitcoin's price decline from approximately $114,100 to $87,500 during the quarter.
• Loss on bitcoin collateral was $103.6 million for the quarter, compared to a gain of $42.5 million in the prior year.
• Cost of revenues (exclusive of depreciation and amortization) increased by 36% to $95.6 million, primarily due to higher energy costs.
• Average cost of mining one bitcoin (direct energy cost) increased to $52,518 in Q1 2025 from $34,011 in Q1 2024.
• Energy expense as a percentage of bitcoin mining revenue increased to 52.7% from 40.4% in the prior year.
• Total bitcoin mined decreased to 1,817 in Q1 2025 from 1,945 in Q1 2024, despite an increase in miners in operation.
• Total liabilities significantly increased to $1.94 billion from $1.01 billion, primarily due to the issuance of new convertible notes.
• Net cash used in operating activities increased to $161.1 million from $119.5 million in the prior year period.
• Significant increase in stock-based compensation expense to $11.1 million from $3.0 million in the prior year.
• Accrued indirect tax contingency expenses of $3.16 million and impairment expense of $1.4 million were recognized in the current quarter.

Risks

• High volatility in the value of bitcoin and other digital assets.
• Rapidly changing regulatory and legal environment for digital assets and related operations.
• Challenges in executing the evolving business model and strategy, particularly diversification into high-performance computing (HPC) and artificial intelligence (AI) solutions and data centers.
• Limited experience in new markets, including HPC and AI services, leading to increased competition.
• Difficulty in successfully integrating newly acquired operations, such as the Texas acquisition completed in October 2025.
• Uncertainty regarding the completion of a definitive agreement to fully establish a partnership with Submer Technologies in the AI market.
• Potential for materially increased tariff liability (approximately $185 million, not including statutory interest) in respect of miners purchased since 2024 due to U.S. importation tariffs, which the company disputes.
• Ability to maintain profitability in the future, especially given fluctuating bitcoin prices and operational costs.
• Availability of financing opportunities and risks associated with broader economic conditions.
• Economic dependency on regulated terms of service and power rates, which can be volatile.
• Dependency on continued growth in blockchain and bitcoin usage.
• Ability to keep pace with rapid technology changes and competitive conditions in both bitcoin mining and AI/HPC.
• Exposure to security and cybersecurity threats and hacks.
• Reliance on a single third-party mining pool service provider (Foundry Digital) for all mining revenue payouts.
• Dependency on third parties to maintain cold and hot wallets holding bitcoin.
• Impact of changes to bitcoin mining difficulty on revenue.
• Reliance on a limited number of key employees.
• Risks related to changes in network and infrastructure.
• Ability to repay the 2030 Notes and 2032 Notes upon their maturity.
• Impact of bitcoin's halving events on mining rewards.
• Risks associated with the in-house function to trade bitcoin for its own account and hedge bitcoin holdings.
• Ongoing class action lawsuit (Hasthantra v. CleanSpark, Inc. et al.) alleging material misstatements and omissions related to an acquisition and bitcoin mining expansion.
• Ongoing shareholder derivative actions (Consolidated Smith Derivative Actions) alleging breach of fiduciary duty, unjust enrichment, and corporate waste.
• U.S. importation tariffs (potential $185,000k liability).

Future Outlook

CleanSpark plans to continue increasing its computing power through 2025 and beyond by expanding infrastructure at its owned sites in Tennessee, Georgia, Mississippi, and Wyoming, while also pursuing regional expansion opportunities and strategic acquisitions. The company is actively developing portions of its sites and power pipeline for AI, HPC, and other advanced data-center hosting applications, evaluating existing properties for conversion or dual-use development, and advancing design and permitting for greenfield data-center sites. Management expects to continue its Digital Asset Management (DAM) Spot+ and yield strategies at measured levels relative to its total bitcoin balance and operating requirements.

Management Comments

• "We intend to continue our growth in these regions and are actively developing plans for additional capacity in these states and other regions."
• "We expect to continue increasing our computing power through 2025 and beyond as we expand infrastructure at our owned sites in Tennessee, Georgia, Mississippi, and Wyoming, while also pursuing regional expansion opportunities and evaluating strategic acquisition targets."
• "In April 2025, we launched an institutional-grade in-house trading function as we shift to a balanced approach between monetizing new production and building long-term holdings, and we plan to continue to integrate these strategies into our regular treasury management activities."
• "Management views DAM activities as an integrated component of its treasury strategy and liquidity management, rather than as speculative trading."
• "The Company expects to continue its Spot+ and yield strategies at measured levels relative to its total bitcoin balance and operating requirements."

Industry Context

StockSavvy.ai notes that CleanSpark's strategic pivot towards AI and HPC hosting leverages its existing data center infrastructure, positioning it to capitalize on the growing demand for high-performance computing beyond traditional bitcoin mining. This diversification is a common trend among energy-intensive data center operators seeking to mitigate the volatility and regulatory risks inherent in the cryptocurrency sector. The company's increased hashrate and improved energy efficiency are positive within the competitive bitcoin mining landscape, but the significant impact of bitcoin price fluctuations on its net income highlights the ongoing market price risk faced by all industry participants. The rising cost of mining one bitcoin and higher energy expenses reflect broader inflationary pressures and increased network difficulty affecting the entire mining industry.

Comparison to Industry Standards

• CleanSpark's operating hashrate of 47.1 EH/s as of December 31, 2025, represents approximately 4.46% of the total global hashrate of 1,056.0 EH/s, indicating a significant, though not dominant, market share in bitcoin mining.
• The average operating energy efficiency of 16.8 W/TH is competitive within the industry, with leading-edge miners typically operating below 20 W/TH. For example, Bitmain's S19 XP series operates around 21.5 J/TH, and newer models aim for lower.
• The average cost of mining one bitcoin (direct energy cost) at $52,518 for Q1 2025 is a critical metric. This compares to an average revenue of $99,510 per bitcoin mined, indicating a direct energy cost margin of approximately 47.2%. This margin is sensitive to both bitcoin price and energy costs, which at $0.056 per kWh, are higher than some industry leaders who secure power at $0.02-$0.04 per kWh, but lower than others.
• The company's expansion into AI/HPC hosting aligns with peers like Riot Platforms and Marathon Digital Holdings, who are also exploring or investing in similar diversification strategies to leverage their power infrastructure.
• The issuance of 0% convertible notes is a common financing strategy for growth companies, allowing for capital raising with deferred interest payments, similar to structures seen with other tech and growth-oriented firms.

Legal Proceedings

• Hasthantra v. CleanSpark, Inc. et al.: A class action lawsuit alleging material misstatements and omissions related to the acquisition of ATL Data Centers LLC and anticipated bitcoin mining expansion. The court granted class certification on September 24, 2025, and expert discovery is ongoing. The company believes the claims are without merit.
• Consolidated Smith Derivative Actions: Four consolidated shareholder derivative actions alleging breach of fiduciary duty, unjust enrichment, and corporate waste against current and former officers and directors. The case is stayed pending the Court's ruling on the Special Litigation Committee's motion to dismiss, following an evidentiary hearing on November 5, 2025. The company believes the claims are without merit.
• U.S. Importation Tariffs: The company is disputing invoices from the U.S. Customs and Border Protection agency asserting Chinese origin import tariffs on certain miners imported from April 2024 through June 2024, with a potential liability of approximately $185 million plus interest if allegations are successfully defended.

Stakeholder Impact

• Shareholders: Experienced a significant net loss and diluted EPS decline, but also saw a large share repurchase program. The issuance of convertible notes could lead to future dilution if converted.
• Employees: Payroll expenses increased, with a substantial rise in non-cash stock-based compensation, indicating continued investment in human capital.
• Customers: Continued reliance on Foundry Digital as the sole mining pool operator.
• Suppliers: Shift in primary miner supplier from Bitmain Technologies to 16287042 Canada Inc. for the current quarter.
• Creditors: New $1.15 billion convertible notes significantly increased long-term debt, impacting the company's leverage profile.
• Communities: Expansion into new regions like Texas and South Dakota for data center development will impact local communities through job creation and infrastructure development.

Next Steps

• Continue increasing computing power through 2025 and beyond.
• Expand infrastructure at owned sites in Tennessee, Georgia, Mississippi, and Wyoming.
• Pursue regional expansion opportunities and evaluate strategic acquisition targets.
• Develop portions of sites and power pipeline for AI, HPC, and other advanced data-center hosting and leasing applications.
• Evaluate existing properties for potential conversion or dual-use development to support AI and HPC tenants.
• Advance design and permitting activities for greenfield data-center sites.
• Continue Spot+ and yield strategies at measured levels relative to total bitcoin balance and operating requirements.
• Expert discovery is ongoing in the Hasthantra v. CleanSpark, Inc. et al. class action lawsuit, with depositions scheduled to conclude in late 2025.
• The Court's ruling on the SLC's motion to dismiss is pending in the Consolidated Smith Derivative Actions.
• The Company expects to adopt ASU 2023-09 (Improvements to Income Tax Disclosures) in its annual report for the fiscal year ending September 30, 2026.

Key Dates

Recommendation

CleanSpark's Q1 2026 results show a substantial net loss primarily driven by the non-cash fair value adjustment of bitcoin, which declined significantly during the quarter. While operational metrics like hashrate and energy efficiency improved, and the strategic expansion into AI/HPC is a positive long-term diversification, the immediate financial performance is concerning. The large convertible note issuance provides liquidity and funds a significant share repurchase, which could support the stock price in the short term. However, the increased debt, ongoing legal challenges, and the inherent volatility of the crypto market, coupled with rising mining costs, suggest a 'hold' recommendation. Investors should monitor the execution of the AI/HPC strategy and bitcoin price stability.

Keywords

Bitcoin Mining, Cryptocurrency, Data Center, AI Hosting, HPC Services, CleanSpark, CLSK, SEC Filing, 10-Q, Financial Results, Hashrate, Convertible Notes, Share Repurchase, Texas Acquisition, Digital Asset Management, Energy Efficiency, Blockchain