TeraWulf Inc. (NASDAQ:WULF) experienced a notable decline in its share price on Friday, falling 4.5% to $16.82 during afternoon trading. This drop comes despite a significant shift in the company's revenue composition, as high-performance computing (HPC) lease revenue surged to account for over 71% of total turnover. The stock's performance was also measured against its pre-earnings close on August 4, showing a 10.9% decline.
The company's second-quarter results, released earlier this week, revealed a mixed financial picture. While HPC lease revenue experienced a robust 52% quarter-over-quarter increase, reaching $31.9 million, total revenue declined by 6% year-over-year to $44.8 million. This decline was primarily attributed to a substantial drop in digital-asset revenue, which fell 73.1% to $12.8 million. Notably, the new HPC revenue offset 91.8% of the losses from digital-asset mining revenue compared to the previous year.
Financial Performance and Market Reaction
The market's reaction was largely driven by the company's earnings miss. TeraWulf reported a loss per share of $1.94, significantly worse than the anticipated loss of $0.24. The net loss of $939.9 million was heavily influenced by a non-cash warrant fair-value charge of $755.7 million. Revenue also came in slightly below the consensus estimate of approximately $46 million.
Despite these setbacks, the underlying operational metrics show promise. The HPC division reported a margin of 28%, but management highlighted an adjusted margin of 80% when excluding fit-out, pre-revenue, and development costs. The company maintains its long-term margin goal of near 85%.
Operational Milestones and Future Outlook
TeraWulf's strategic pivot towards HPC leasing is evident in its contracted capacity. Of the 839 megawatts (MW) of contracted critical IT load, only 12.2% (102 MW) is currently operational and generating revenue at Lake Mariner. The remaining capacity is in various stages of development, with 336 MW under construction and expected to come online in staggered deliveries during the second half of 2026 and early 2027. The largest portion, 401 MW, is secured under an Anthropic campus lease, with first deliveries anticipated in H2 2027 and full completion by early 2028.
The company's capital expenditure per megawatt at Lake Mariner has increased to $9.1 million, up from the initially financed $8.6 million, a 5.8% rise. However, this remains within the company's guidance range of $8 million to $10 million. Key upcoming milestones include the commissioning of CB4 at Level 3 around mid-August, with rental commencement expected in late September, and CB5 scheduled to begin energizing in early January.
Chief Financial Officer Patrick Fleury noted that the company's profile is "increasingly driven by long-term, contracted HPC revenue." As of the end of June, TeraWulf held approximately $3 billion in cash and restricted cash, with an additional $530 million anticipated from the divestment of its Abernathy joint-venture stake.
Analyst Sentiment and Peer Comparison
Wall Street analysts remain largely optimistic about TeraWulf's prospects. Bernstein, Needham, and Rosenblatt Securities all issued Buy or Outperform ratings on August 6, with price targets ranging from $30 to $36, implying potential upside of 78% to 114% from current levels. The WSJ consensus shows 19 Buy ratings and one Overweight, with a median price target of $36 and a mean of $37.63.
Bernstein analysts, led by Gautam Chhugani, project that the 102 operational megawatts will generate roughly $180 million in annual recurring revenue. They anticipate all 839 contracted MW to be online by the first half of 2028. However, they also raised their estimated development costs to $10 million-$12 million per MW and identified customer concentration as a key downside risk.
In Friday's trading, TeraWulf's performance was mixed relative to peers. It trailed behind IREN Ltd. (NASDAQ:IREN), which gained 3.72%, and Core Scientific Inc. (NASDAQ:CORZ), which edged up 0.45%. Meanwhile, mining-focused firms like CleanSpark (NASDAQ:CLSK), MARA Holdings (NASDAQ:MARA), and Riot Platforms (NASDAQ:RIOT) all declined, with MARA falling 5.21%.
Risks and Considerations
Investors should be aware of several risks. In the second quarter, HPC revenue was generated from just two clients, and the 401 MW Anthropic lease was not yet active. Construction delays, cost overruns, and potential dilution from 73.6 million warrants granted to Google (part of Alphabet Inc., NASDAQ:GOOGL) remain significant concerns. These warrants represent roughly 14.7% of shares outstanding as of June.
The market's 11% post-earnings drop suggests that investors are looking for realized operating profit rather than just contracted megawatts. As TeraWulf continues its transition, the focus will be on execution and meeting delivery timelines. The next test comes with the CB4 commissioning next week, which could provide clarity on the company's ability to deliver on its promises.
