Core Scientific, Inc./tx

Core Scientific, Inc. designs, builds, and operates large-scale, purpose-built data centers that support high-density colocation services and digital asset mining for its own account and, to a lesser extent, for third-party customers. The company's data centers are optimized for power-intensive, mission-critical computing workloads, with a focus on artificial intelligence (AI) and other high-performance computing (HPC) applications. As of December 31, 2025, Core Scientific owned or leased ten data centers across seven U.S. states, representing approximately 1.4 gigawatts (GW) ¹ of gross utility power capacity, or approximately 920 megawatts (MW) ² of total leasable customer power capacity. A portion of these facilities were operational, with the remainder under construction or in various stages of development. The company is actively evaluating opportunities to acquire new sites, including land and power capacity, to expand its data center footprint beyond its current portfolio.

Core Scientific's core business model involves generating revenue through three operating segments: Colocation, Digital Asset Self-Mining, and Digital Asset Hosted Mining. The Colocation segment provides high-density colocation services to third parties for AI/HPC operations, with customers paying fixed and variable payments on a recurring basis, primarily based on electric capacity and power usage. The Digital Asset Self-Mining segment generates revenue from deploying and operating the company's own fleet of specialized computers to earn digital assets, primarily bitcoin, by validating transactions on blockchain networks. The Digital Asset Hosted Mining segment provides hosting services to third parties for digital asset mining, generating recurring revenue through electricity-based consumption contracts, including deployment, monitoring, troubleshooting, optimization, and maintenance of customer equipment. The company derived the majority of its 2025 revenue from earning digital assets for its own account but expects a meaningful amount of revenue from high-density colocation (HDC) in 2026 as billable customer power capacity is delivered. The company intends to convert every megawatt in its portfolio to HDC infrastructure over the next three years, while continuing digital asset mining only to meet existing power commitments or honor a small number of hosting commitments during conversion.

In the Colocation segment, Core Scientific's services support machine learning and artificial intelligence workloads, with leases potentially including all or portions of a data center and office space. Revenue is primarily based on power usage and square footage. The Digital Asset Self-Mining segment's revenue is generated from its fleet of approximately 135,500 ³ self-miners with a hash rate of 15.7 exahash per second (EH/s) ⁴ as of December 31, 2025. This segment's profitability depends on the sale price of bitcoin exceeding the cost of mining, which includes hardware, electrical power, and facility overhead. The Digital Asset Hosted Mining segment provides a full suite of services, including deployment, monitoring, and maintenance, with revenue generally priced based on power capacity and/or consumption over contract terms typically ranging from one to three years. The company does not expect to further expand its Digital Asset Hosted Mining operations in 2026 and future years.

For the fiscal year ended December 31, 2025, total revenue decreased to $319.0 million ⁵ from $510.7 million ⁶ in 2024. This was primarily due to lower digital asset self-mining revenue and digital asset hosted mining revenue, partially offset by higher colocation revenue from incremental billable customer power capacity. Colocation revenue increased to $65.424 million ⁷ in 2025 from $24.378 million ⁸ in 2024, representing 20% ⁹ of total revenue in 2025. Digital asset self-mining revenue decreased to $229.207 million ¹⁰ in 2025 from $408.740 million ¹¹ in 2024, accounting for 72% ¹² of total revenue in 2025. Digital asset hosted mining revenue from customers decreased to $24.388 million ¹³ in 2025 from $77.554 million ¹⁴ in 2024, representing 8% ¹⁵ of total revenue in 2025.

Total cost of revenue decreased to $281.121 million ¹⁶ in 2025 from $389.602 million ¹⁷ in 2024. Gross profit for 2025 was $37.898 million ¹⁸, down from $121.070 million ¹⁹ in 2024, resulting in a consolidated gross margin of 12% ²⁰ in 2025 compared to 24% ²¹ in 2024. Operating loss increased to $245.589 million ²² in 2025 from $142.065 million ²³ in 2024. Net loss was $288.616 million ²⁴ in 2025, compared to $1,437.874 million ²⁵ in 2024. Diluted EPS was $(0.88) ²⁶ in 2025, compared to $(4.87) ²⁷ in 2024. Adjusted EBITDA decreased to $(29.659) million ²⁸ in 2025 from $157.437 million ²⁹ in 2024. Cash and cash equivalents as of December 31, 2025, were $311.378 million ³⁰, down from $836.197 million ³¹ in 2024. Digital assets held were $222.000 million ³² in fair value as of December 31, 2025, compared to $23.893 million ³³ in 2024. Total notes payable, net, as of December 31, 2025, was $1,060.325 million ³⁴, compared to $1,090.280 million ³⁵ in 2024.

The year-over-year decrease in self-mining revenue was driven primarily by a 65% ³⁶ reduction in bitcoin mined, from 6,595 ³⁷ in 2024 to 2,276 ³⁸ in 2025, due to a reduction in the deployed mining fleet, the Bitcoin network's halving in April 2024, and more challenging network conditions. This was partially offset by a 54% ³⁹ increase in the average price of bitcoin, from $65,894 ⁴⁰ in 2024 to $101,639 ⁴¹ in 2025. Colocation gross margin increased from 11% ⁴² in 2024 to 30% ⁴³ in 2025, while Digital Asset Self-Mining gross margin decreased from 23% ⁴⁴ to 5% ⁴⁵. Digital Asset Hosted Mining gross margin remained relatively stable at 32% ⁴⁶ in 2025 compared to 31% ⁴⁷ in 2024.

During 2025, the company incurred $21.6 million ⁴⁸ of advisory, legal, and other professional or consulting fees related to a proposed merger agreement with CoreWeave, Inc., which was terminated on October 30, 2025, following stockholder rejection. The company also fully repaid five higher-interest debt facilities totaling approximately $26.6 million ⁴⁹ in principal, resulting in an aggregate $1.4 million ⁵⁰ loss on debt extinguishment. Capital expenditures increased significantly to $729.0 million ⁵¹ in 2025 from $95.0 million ⁵² in 2024, primarily reflecting investments in colocation expansion. The company recognized impairment charges of $11.4 million ⁵³ in 2025 related to property, plant, and equipment committed to demolition for data center conversions, a decrease from $122.9 million ⁵⁴ in 2024.

Core Scientific's strategy is to grow its revenue and profitability by converting and expanding its large-scale data center infrastructure portfolio to deliver high-density colocation services for artificial intelligence and HPC workloads. The company plans to develop and bring online the infrastructure required to meet existing contractual commitments to its high-density colocation customer, expand its infrastructure portfolio by securing additional land and power at new and existing sites, and sign additional colocation customers to diversify its revenue base. The company intends to convert every megawatt in its portfolio to high-density colocation infrastructure over the next three years.

The company's customer strategy targets hyperscale cloud-based providers, neoclouds, and enterprises that have significant data center infrastructure needs that have not yet been outsourced or will require additional data center space and power to support their growth and increasing reliance on technology infrastructure. The pace of this transition and the timing of related revenue and cash flows depend on customer deployment schedules under existing and future contracts and the timing and cost of converting and commissioning incremental billable customer power capacity.

Conversion capital expenditures and timelines are sensitive to equipment lead times and availability, labor constraints, permitting and interconnection sequencing, and supply chain and logistical challenges. Changes in these inputs can affect when incremental capacity becomes billable and therefore may affect the timing of colocation revenue, cost of services, and related cash flows. The company expects to increase capital expenditures in 2026 relative to 2025 to support its strategic shift to colocation services. As of December 31, 2025, the company was contractually committed to approximately $989.8 million ⁵⁵ of capital expenditures, primarily for infrastructure modifications, equipment procurement, and labor related to data center conversions. Of this amount, $716.8 million ⁵⁶ will be passed through to the company's customer as invoiced, and $30.1 million ⁵⁷ will be funded by the customer as prepaid base license fees for the Colocation segment. These capital expenditures are expected to occur within the next 12 to 24 months. Subsequent to December 31, 2025, and through February 26, 2026, the company contractually committed an additional $418.1 million ⁵⁸ of capital expenditures, with $107.4 million ⁵⁹ of this amount to be passed through to the customer as invoiced.

The company expects to incur future impairments of property, plant, and equipment (PP&E) at the point at which assets become committed to demolition, which generally coincides with the execution of a colocation customer contract and commitment to site redevelopment plans. The company does not anticipate entering into new large-scale bitcoin mining equipment procurement agreements as it continues to shift capital allocation toward HDC infrastructure, expecting future capital expenditures related to mining equipment to decline.

During 2026, the company currently expects to monetize substantially all of its bitcoin holdings, subject to market conditions, to enhance liquidity and fund its planned capital expenditures and other cash requirements. The majority of these sales are anticipated to occur during the first quarter of 2026. However, the timing and amount of any sales will depend on market conditions and liquidity needs and may change. In January 2026, the company entered into a long-term power supply arrangement, obligating it to purchase firm utility power capacity beginning in 2028. In connection with this, a cash deposit of $80 million ⁶⁰ was made into a restricted, interest-bearing escrow account.

Core Scientific faces several material risks, including its dependence on the timely and successful conversion of existing facilities to support high-density colocation customers and the ability to attract new ones, with delays or cost overruns potentially having a material adverse effect on its business, financial condition, and results of operations. The high-density colocation business is currently highly dependent on a single customer, CoreWeave, and any failure to meet their expectations could harm future growth. The increased focus on high-density colocation may not be successful if demand for AI/HPC applications decreases, or if high energy costs, supply chain disruptions, government regulation, and compliance costs increase service costs and reduce profitability. The business is capital intensive, and failure to obtain necessary capital will force delays or termination of expansion efforts. Significant electric power is required, and limited availability or public sentiment regarding high volume electrical use and climate change may limit access to power, decrease available facility sites, and increase costs. Any failure in critical systems, facilities, or services could lead to disruptions, harm reputation, and result in financial penalties and legal liabilities. The company is vulnerable to physical security breaches, which could disrupt operations. A material weakness in internal control over financial reporting has been identified, specifically regarding the accounting for intended demolition of building and infrastructure assets, which resulted in restatements of previously issued financial statements. The cash needs of high-density colocation growth initiatives will limit digital asset holdings, preventing recognition of gains from appreciation. Changes in SEC interpretive positions on digital asset mining firms could have a material adverse effect. U.S. federal and state laws and regulations of digital assets and intermediaries may increase compliance costs and adversely impact the market. Increasing scrutiny and changing expectations regarding ESG policies may impose additional costs or risks. Digital assets, particularly bitcoin, are subject to price volatility, and the "halving" of rewards on the Bitcoin network could negatively impact revenue. If bitcoin rewards and transaction fees are not sufficiently high, miners may reduce or cease expending processing power. The company's compliance and risk management methods might not be effective. Losses of bitcoin due to third-party digital asset services may be uninsured or have limited recovery.

Management's message to shareholders emphasizes a strategic transition towards high-density colocation services for AI and HPC workloads, aiming to leverage existing infrastructure and expertise to provide more stable and predictable revenue streams. The company intends to convert every megawatt in its portfolio to high-density colocation infrastructure over the next three years, while continuing digital asset mining only to meet existing power commitments or honor a small number of hosting commitments during conversion. Management expects to rapidly increase revenue derived from high-density colocation (HDC) in 2026 as capacity gets delivered to existing and future end customers. The company is actively pursuing the acquisition of new sites, including land and power capacity, to expand its data center footprint. Management plans to monetize substantially all bitcoin holdings during 2026, subject to market conditions, to enhance liquidity and fund planned capital expenditures and other cash requirements, with the majority of these sales expected in the first quarter of 2026.