Shares of TeraWulf Inc. (NASDAQ:WULF) closed Friday at $17.08, down 3.0% on the session and 3.3% for the week, as investors weighed the company's aggressive expansion into AI infrastructure against its current financial performance. The stock's weekly decline reflects growing scrutiny of the capital-intensive buildout, which is more than three times the size of its existing revenue-generating capacity.
Q2 Results: Leasing Gains Offset by Digital Asset Decline
TeraWulf's second-quarter earnings report, released earlier this week, highlighted a strategic shift toward high-performance computing (HPC) leasing. HPC lease revenue reached $31.9 million, representing 71% of total sales, while digital-asset revenue plummeted 73.1% to $12.8 million. Overall revenue fell 6.0% year-over-year to $44.8 million, down from $47.6 million in the prior-year quarter.
The company posted a net loss of $939.9 million, or $1.94 per share, largely due to a non-cash warrant revaluation of $755.7 million, which accounted for roughly 80% of the loss. Adjusted EBITDA remained negative at -$18.3 million, a sharp reversal from the +$14.5 million reported in Q2 2025.
Expansion Plans: 336 MW Under Construction
The central focus for investors is the 336 megawatts (MW) of critical IT capacity currently under construction, compared to 102 MW that are already generating revenue. Completing this expansion would bring TeraWulf's total operational capacity to over 400 MW. Management estimates the cost to build at $8 million to $10 million per critical IT megawatt, translating to a preliminary gross total of $2.69 billion to $3.36 billion for the 336-MW buildout.
As of the end of the quarter, TeraWulf held $2.62 billion in available cash, covering 78% to 97% of the estimated total cost. Including restricted cash, the total was $3.03 billion, covering 90% to 113% of the estimated range. However, the half-year cash flow statement reveals significant pressure: investing activities consumed $1.61 billion, operating activities used $154 million, and financing activities provided $1.07 billion, resulting in a net decline of $694 million in cash and restricted cash.
Valuation Concerns and Analyst Sentiment
Despite the expansion, TeraWulf's current market capitalization of approximately $8.30 billion implies a steep valuation. Annualized Q2 HPC revenue was just $127.7 million, putting the basic price-to-sales multiple near 65 times. This lofty valuation is tied to future contracts, notably Anthropic's 20-year lease covering approximately 401 MW and generating about $19 billion in upfront revenue, with the potential to rise to $33 billion if extension options are exercised.
Wall Street remains bullish, with FactSet data showing 19 Buy ratings and one Overweight, and no Holds or Sells. The average price target stands at $37.63, implying roughly 120% upside from Friday's close. Analysts appear to prioritize contracted megawatts over near-term earnings, making each commissioning milestone a potential catalyst for the stock.
Peer Performance and Risks
In the broader AI infrastructure space, peers showed mixed results. IREN Limited (NASDAQ:IREN) surged 12.0% for the week, while Cipher Digital Inc. (NASDAQ:CIFR) tumbled 23.0%, and Core Scientific Inc. (NASDAQ:CORZ) gained 1.4%. TeraWulf's underperformance relative to IREN and CORZ underscores investor caution around its execution risks.
Key risks include potential delays in construction, power supply, interconnection, or customer deployment, which could push back rental payments. Financing terms are another concern, with debt principal standing at approximately $5.73 billion. Additionally, Alphabet Inc. (NASDAQ:GOOGL) holds 73.58 million warrants with an exercise price of one cent, which could dilute shareholders if exercised.
No corporate events are scheduled for the coming week, shifting attention to analyst estimate revisions and the commissioning of the CB-4 facility. TeraWulf anticipates phased deliveries and rental activities throughout the second half of 2026, which will be critical to validating its growth story.
