Date: November 6, 2024
- Core Scientific secured a key expansion with CoreWeave, which exercised final options for 232 MW, filling Core’s 500 MW critical IT load commitment for high-performance computing (HPC).
- The company completed a successful $460 million convertible note offering, significantly improving its capital structure, lowering interest rates, and paying off prior high-interest debt.
- Core Scientific reallocated 100 MW of infrastructure initially designated for Bitcoin mining to HPC hosting, increasing total capacity for HPC to approximately 570 MW.
- Site acquisitions are underway: Core leased a data center in Alabama with 11 MW of initial load and potential for an additional 55 MW, as well as a 100 MW expansion in Pecos, Texas for Bitcoin mining.
- Total Q3 revenue reached $95.4 million, with $10.3 million generated from HPC hosting, showing strong diversification.
- The HPC hosting segment delivered a GAAP gross margin of 13%, and non-GAAP gross margins of 17% and 27% excluding certain costs.
- Operating costs for self-mining were optimized, with favorable power costs reduced to $0.038/kWh from $0.045/kWh.
- Core Scientific aims for over 1 GW of HPC capacity by 2027, leveraging existing site expansion and new acquisitions.
- Core Scientific’s Q3 net loss was $455.3 million, driven by non-cash mark-to-market adjustments due to share and warrant price increases.
- Despite revenue growth, Bitcoin mining revenue fell by 18% YoY due to Bitcoin halving, leading to a 62% reduction in mined coins.
- Segment gross margins were challenging: -9% for digital asset self-mining, 13% for HPC hosting, and total operating loss reached $41 million.
- Operating expenses rose 50% YoY to $40.3 million due to higher personnel costs, stock-based compensation, and restructuring costs from HPC hosting expansions.
- Cash-based cost per mined Bitcoin soared to $42,351, a $24,314 increase from last year, due to reduced mining yield and network hash rate growth.
- The equity structure is highly dilutive, with total share count potentially expanding to 474 million shares if warrants and restricted stock units are exercised.
- Future supply chain constraints could affect HPC hosting timelines, with potential delays in sourcing key equipment like generators and switches.
Core Scientific’s strategic pivot toward HPC hosting reflects an understanding of evolving demand, especially with CoreWeave anchoring as a major long-term partner. This expansion into HPC hosting positions Core Scientific to benefit from AI and cloud computing trends, as demand for data center infrastructure accelerates. While the reallocation of Bitcoin mining assets to HPC reflects effective resource prioritization, it also highlights Bitcoin mining’s decreased profitability post-halving. The increase in self-mining costs suggests that margins may remain under pressure unless Bitcoin prices significantly improve.
In the near term, Core Scientific’s revenue stability may increasingly rely on HPC contracts, but the dilutive impact of its financing activities and the large share count expansion could weigh on investor sentiment. Its execution on data center expansion and securing new clients beyond CoreWeave will be key for de-risking customer concentration. With anticipated power expansions and new site acquisitions, the company’s goal of exceeding 1 GW by 2027 seems achievable, assuming supply chain hurdles are managed. Nonetheless, cost-control measures and efficiency improvements will be crucial for maintaining a favorable cash position and ensuring profitable growth in this capital-intensive segment.
A gradual recovery in Bitcoin prices and lower operational costs from upcoming next-generation mining chips could provide some upside for the mining segment by 2025, albeit with lower priority than HPC. Overall, Core Scientific’s dual strategy in HPC and mining offers diverse revenue streams, though it may continue to face high competition and operational challenges within both sectors.