10-Q: TeraWulf Q3 2025: HPC Growth Surges Amidst Bitcoin Mining Shift

TeraWulf reports significant revenue growth driven by its new HPC leasing segment and strategic capital raises, despite a substantial net loss primarily due to non-cash warrant and derivative liabilities.

Summary

• Total revenue increased by $23.5 million to $50.6 million for the three months ended September 30, 2025, and by $27.5 million to $132.6 million for the nine months ended September 30, 2025, compared to the prior year periods.
• HPC lease revenue commenced in July 2025, contributing $7.2 million for both the three and nine months ended September 30, 2025.
• Reported a net loss of $455.05 million for the three months ended September 30, 2025, and $534.84 million for the nine months, primarily due to a $424.64 million non-cash loss from the change in fair value of warrant and derivative liabilities.
• Cash and cash equivalents significantly increased to $711.32 million as of September 30, 2025, from $274.07 million at December 31, 2024.
• Operational hashrate increased to 8.5 EH/s as of September 30, 2025, with improved miner efficiency of 17.5 j/th.
• The cash cost to mine one bitcoin increased to $44,729 for the three months ended September 30, 2025, and $51,523 for the nine months, up from $30,499 and $21,396 respectively in the prior year.
• Secured $3.2 billion in 7.75% Senior Secured Notes due 2030 and $1.025 billion in 0.000% Convertible Senior Notes due 2032 in October 2025, post-period end.
• Entered into a new joint venture with Fluidstack CS I Inc. to develop and operate the Abernathy HPC Campus in Texas.
• Acquired Beowulf E&D for $54.6 million, integrating 94 employees and terminating a related-party services agreement.
• Increased authorized common stock from 600 million to 950 million shares on September 30, 2025.

Sentiment

Score: 6

Explanation: While the company reported a substantial net loss primarily due to non-cash fair value adjustments of warrants and derivatives, its strategic pivot to high-performance computing (HPC) is gaining significant traction with new revenue streams, substantial capital raises, and key partnerships. The operational efficiency in bitcoin mining has improved, though the cost per bitcoin has increased due to market dynamics. The long-term growth strategy in HPC, backed by significant financing and Tier-1 counterparties, presents a positive outlook despite the current accounting losses.

Positives

• Total revenue increased by 87% to $50.6 million for the three months ended September 30, 2025, and by 26% to $132.6 million for the nine months ended September 30, 2025, driven by higher bitcoin prices and the new HPC segment.
• Successfully launched HPC leasing operations, generating $7.2 million in revenue in its first quarter (three months ended September 30, 2025) and securing 522.5 MW of HPC leasing agreements.
• Cash and cash equivalents grew substantially to $711.3 million as of September 30, 2025, from $274.1 million at December 31, 2024.
• Improved miner energy efficiency to an average of 17.5 j/th as of September 30, 2025, from 23.2 j/th in the prior year.
• Secured significant financing post-period end, including $3.2 billion in Senior Secured Notes and $1.025 billion in Convertible Senior Notes, to fund HPC expansion.
• Established a new joint venture for the Abernathy HPC Campus in Texas, diversifying geographic footprint and expanding HPC capabilities.
• Google LLC provides a financial backstop for certain Fluidstack HPC Leases, strengthening the credit profile of contracted revenues.
• Acquisition of Beowulf E&D integrates specialized workforce and supports long-term growth strategy, particularly for HPC operations.
• Participation in demand response programs generated $7.4 million in the three months ended September 30, 2025, and $13.3 million for the nine months, reducing cost of revenue.

Negatives

• Reported a substantial net loss of $455.05 million for the three months ended September 30, 2025, and $534.84 million for the nine months ended September 30, 2025, primarily due to a non-cash $424.64 million loss from the change in fair value of warrant and derivative liabilities.
• Operating loss increased to $24.67 million for the three months ended September 30, 2025, and $99.89 million for the nine months, compared to $15.71 million and $24.79 million in the prior year periods.
• Cash used in operating activities was $(35.01) million for the nine months ended September 30, 2025, a significant decrease from $18.30 million provided in the the nine months ended September 30, 2024.
• The cash cost to mine one bitcoin increased significantly to $44,729 for the three months ended September 30, 2025, and $51,523 for the nine months, up from $30,499 and $21,396 respectively in the prior year.
• Bitcoin mined decreased to 377 in the three months ended September 30, 2025, from 555 in the three months ended September 30, 2024, and to 1,234 for the nine months from 2,305 in the prior year, due to the April 2024 halving and increased network difficulty.
• Accumulated deficit significantly widened to $867.11 million as of September 30, 2025, from $332.28 million at December 31, 2024.
• Total liabilities increased substantially to $2.21 billion as of September 30, 2025, from $543.07 million at December 31, 2024, largely due to new convertible notes and warrant liabilities.
• Accelerated depreciation of $7.8 million was recorded in the three months ended September 30, 2025, related to the planned decommissioning of a miner building and related miners to support HPC operations.
• Loss on disposals of property, plant, and equipment, net was $1.99 million in the three months ended September 30, 2025, and $5.82 million for the nine months, from selling 8,910 and 11,828 miners respectively.
• Loss on fair value of digital assets, net was $0.338 million for the three months ended September 30, 2025, and $0.355 million for the nine months ended September 30, 2025.

Risks

• The ability to mine bitcoin profitably is uncertain due to volatile bitcoin prices, mining difficulty, global hashrate, and energy costs.
• Failure to attract additional customers to lease high-performance computing (HPC) data centers could impact revenue diversification.
• Changes in applicable laws, regulations, and/or permits affecting operations or industries could adversely impact the business.
• Challenges in timely and cost-effectively executing business objectives, including bitcoin mining and HPC data center development projects.
• Failure to obtain adequate financing on a timely basis or acceptable terms for expansion or existing operations.
• Adverse geopolitical or economic conditions, including high inflation, new tariffs, and restrictive trade regulations.
• Potential for cybercrime, money-laundering, malware infections, phishing, equipment malfunction, physical disaster, data security breaches, computer malfunction, or sabotage.
• Availability and cost of power, as well as electrical infrastructure equipment, are critical to maintaining and growing the business.
• Operational and financial risks associated with the Lake Mariner Datacenter and the Abernathy HPC Campus, including financing project-related costs.
• A significant decline in the market value of bitcoin would adversely affect financial statements and results of operations.
• Energy prices are highly volatile and sensitive to weather conditions, which can increase regional power demand and costs.
• The rapid evolution of next-generation mining rigs necessitates continuous evaluation of depreciation schedules and asset useful lives.
• Significant judgment is required in estimating asset useful lives, undiscounted cash flows, and asset fair values, and changes could lead to material impairments.
• Uncertainty in income tax positions and the determination of valuation allowances for deferred tax assets.
• Business combinations involve significant estimates and assumptions, particularly for asset valuation and contingent consideration.
• Goodwill is subject to impairment testing annually or more frequently if circumstances indicate its carrying value may not be recoverable.

Future Outlook

The company's business strategy is centered on developing, owning, and operating large-scale, power-advantaged digital infrastructure for hyperscale and enterprise HPC workloads, aiming for durable, infrastructure-style cash flows and future growth. It plans to deliver an additional 50 MW of HPC leasing capacity under existing agreements and has a platform pipeline supporting 250 MW to 500 MW of additional contracted IT load per year. Bitcoin mining will remain a complementary component, leveraging existing infrastructure as a flexible load, but HPC is the primary growth driver and capital allocation priority. The company anticipates subsequent events and developments will cause its views to change and does not undertake to update forward-looking statements except as required by law.

Management Comments

• Our strategy is predicated on controlling infrastructure at utility scale, enabling us to serve Tier-1 counterparties through long-term hosting arrangements.
• This dual-purpose strategy enhances operational efficiency, diversifies revenue streams, and strengthens our position in the evolving digital economy.
• The April 2024 halving intensified competition among miners and underscores the importance of our access to low-cost power and vertically integrated business model. These advantages are increasingly critical to sustaining profitability in the post-halving environment.
• We believe we operate a highly efficient mining fleet, optimized to maximize output while minimizing energy consumption.
• Our management and operations teams continuously monitor market conditions to determine when and for how long to curtail operations. If curtailment is not mandated under demand response programs, we make real-time decisions to curtail mining whenever power prices exceed the value of the fixed bitcoin reward.
• We are confident that our expertise in power infrastructure and digital asset mining can be favorably applied to the design, development, and operation of large-scale datacenters.
• Management continuously evaluates factors such as future energy market conditions, operating costs, maintenance practices and capital investment needs to ensure depreciation assumptions remain reasonable.

Industry Context

The company is strategically pivoting towards high-performance computing (HPC) workloads, aligning with the rapidly growing demand for AI, machine learning, and cloud computing. This diversification is crucial in a post-Bitcoin halving environment where mining profitability is increasingly challenged by higher network difficulty and reduced block rewards. By leveraging its low-cost, low-carbon energy infrastructure, the company aims to become a premier hosting provider, positioning itself at the intersection of energy and digital compute infrastructure. The Google backstop for HPC leases highlights the increasing involvement of major tech players in securing high-density compute capacity, indicating strong industry demand and a move towards more stable, long-term revenue streams compared to the volatile nature of pure bitcoin mining.

Comparison to Industry Standards

• The company's miner efficiency of 17.5 j/th as of September 30, 2025, is a strong competitive metric in the bitcoin mining industry, indicating a relatively efficient fleet compared to older generation miners.
• The fixed-rate power contract of 2.0 cents per kilowatt hour (kWh) for a five-year term at the Nautilus Cryptomine Facility (prior to sale) was highly competitive, significantly lower than average industrial electricity rates in the U.S. (which can range from 6-12 cents/kWh or higher).
• The company's strategy to secure long-term datacenter leases (10 to 25-year base terms) with Tier-1 counterparties like Core42 (a G42 company) and Fluidstack, supported by investment-grade credit enhancement from Google, positions it favorably against competitors relying solely on spot market bitcoin mining or less secure hosting arrangements. This model aims for more stable, infrastructure-style cash flows, a trend seen in mature data center operators.
• The Lake Mariner Campus's potential for 500 MW and up to 750 MW with transmission upgrades positions it as a large-scale facility, comparable to major data center campuses developed by hyperscalers or large colocation providers.
• The Abernathy HPC Campus joint venture with Fluidstack CS I Inc., an affiliate of a leading AI cloud platform, demonstrates a strategic partnership model common in the high-growth AI infrastructure sector, where specialized expertise and capital are pooled for large-scale deployments.

Management Changes

Corporate Governance

Legal Proceedings

• Not a party to any material legal proceedings and is not aware of any pending or threatened claims.

Related Party Transactions

• Acquisition of 100% of Beowulf E&D from Beowulf E&D Holdings Inc., a related party due to control by a member of company management, for approximately $54.6 million on May 21, 2025.
• Entered into a Transition Services Agreement (TSA) with certain affiliates of the Seller (related parties) for two years, with a liability of $1.3 million recorded at fair value.
• Terminated the existing Administrative and Infrastructure Services Agreement with Beowulf E&D upon acquisition.
• Entered into a New Ground Lease (October 2024) and Cayuga Lease (August 12, 2025) with related party counterparties (controlled by a member of Company management).
• Acquired NY Lease and MD Lease (office leases) with related party counterparties as part of the Beowulf E&D acquisition.
• October Private Placement (October 2022) included $3.5 million in investments by entities controlled by members of Company management.

Stakeholder Impact

• Shareholders face potential dilution from convertible notes and warrants, but also potential for long-term value creation from HPC growth. The share repurchase program could provide some support, and increased authorized shares could facilitate future capital raises or acquisitions.
• Employees benefit from the transition of 94 Beowulf E&D employees to TeraWulf, indicating integration and potential for new opportunities in HPC. Stock-based compensation remains a significant part of remuneration.
• HPC customers, such as Core42 and Fluidstack, benefit from long-term datacenter lease agreements and Google's backstop, ensuring stable and reliable HPC infrastructure.
• Creditors see a significant increase in debt from new convertible notes and secured notes, providing capital for growth. Google's pledge of warrants as security for the 2030 Secured Notes enhances credit protection.
• Suppliers are likely to benefit from increased capital expenditures for HPC buildout, driving demand for equipment and construction services.

Next Steps

• Deliver an additional 50 MW of HPC leasing capacity under datacenter lease agreements with Core42.
• Complete construction and deliver premises for Fluidstack Leases in three phases in 2026 at the Lake Mariner Datacenter Expansion.
• Continue development and operation of the Abernathy HPC Campus through the joint venture with Fluidstack CS I Inc.
• TeraWulf Member to make equity contributions to the Abernathy Joint Venture, adjusting its equity ownership up to 51%.
• Amortize the $515.5 million asset from Google Warrants over the life of the Fluidstack HPC Leases.
• Amortize initial direct costs of $57.5 million for HPC lease commissions over the life of the respective HPC leases.
• Continue to evaluate factors such as future energy market conditions, operating costs, maintenance practices, and capital investment needs to ensure depreciation assumptions remain reasonable.
• Potentially exercise purchase option for equipment under the Equipment Lease after the 50th anniversary of the Effective Date.

Key Dates

Recommendation

The company is undergoing a significant strategic transformation, pivoting heavily into the high-performance computing (HPC) sector while maintaining its bitcoin mining operations. The substantial net loss is primarily an accounting artifact from the fair value adjustment of warrants and derivatives, not indicative of operational cash burn. The company has successfully raised significant capital post-period end and secured major HPC contracts with Tier-1 counterparties, backed by Google, which de-risks future revenue streams. However, the increased cost of bitcoin mining and the substantial increase in debt and liabilities warrant caution. The long-term potential in HPC is strong, but the execution risk and the impact of dilution from convertible instruments need to be carefully monitored. A 'hold' recommendation allows investors to observe the successful execution of the HPC strategy and its impact on profitability and cash flow before making further commitments.

Keywords

HPC leasing, Bitcoin mining, Data center, Digital infrastructure, Low-carbon energy, Convertible notes, Warrants, Lake Mariner Campus, Abernathy HPC Campus, Cryptocurrency, AI infrastructure, GPU workloads, SEC filing, Financial results, Capital raise