$IREN’s Cash Puzzle Is Really About Timing, Not Demand
A few thoughts about $IREN Ltd(IREN)$ cash situation:
$IREN finally received that pre-payment from $Microsoft(MSFT)$ around $1.8B.
While this is good, it came much later than I would have expected, as the contract with $MSFT was signed in November 2025, so they got the money 2 quarters later.
$NBIS signed their deal with $MSFT in September and got the first payments already next quarter. They were able to scale faster because they are using a colocation partner whose facility was further along in construction when the contract was signed than $IREN.
This is the advantage of the $NBIS model, they are scaling faster. However, they have to pay more for it, as the colocation partner has a margin, while $IREN owns the building and doesn't need to cover the landlords margin.
Furthermore, $NBIS got a 40% prepayment, while $IREN got 20%. As a result, Nebius deferred revenue balance is $6B vs $1.8B for Iren.
However, this was before $IREN proved itself. That was their first large-scale AI data center project, as such, $MSFT didn't want to hand over the cash before seeing if $IREN could do it.
In the most recent earnings release $IREN confirmed that they are also now seeking pre-payments of 45-50% from new customers.
+ If they finance 90% of GPU costs, then basically pre-payments and GPU financing could cover most, if not all, of the buildout costs of a data center.
You are probably thinking, well, if the terms are so good, why is Iren diluting like crazy, issuing convertible notes and selling $2B of stock this quarter?
Well, this is as, from a cash-flow perspective, these pre-payments actually don't cover the capex associated with building the data centers that will serve them, more like funding the next ones.
To be in a position where customers are even willing to give you pre-payments, you need to spend billions of dollars to acquire the land and construct the building.
This is why $IREN is selling stock now, as they need to get to the stage where customers are comfortable paying up early.
Then, when the pre-payments come in, they basically cover what has already been spent, or more like fund the next stages to get pre-payments from other customers.
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