IREN Secures $9.7bn AI Cloud Contract with Microsoft

Investment Analysis Clubs Saul’s Investing Discussions
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This morning IREN announced a $9.7 billion 5 year cloud contract with Microsoft with a 20% prepayment. The stock is up more than 20% in premarket trading.

IREN Limited (NASDAQ: IREN) (“IREN”) today announced it has signed a multi-year GPU cloud services contract with Microsoft.

Under the agreement, IREN will provide Microsoft with access to NVIDIA GB300 GPUs over a five-year term, with a total contract value of approximately $9.7 billion, including a 20% prepayment. IREN has also entered into an agreement with Dell Technologies to purchase the GPUs and ancillary equipment for approximately $5.8 billion.1

The GPUs are expected to be deployed in phases through 2026 at IREN’s 750MW Childress, Texas campus, in conjunction with the delivery of new liquid-cooled data centers that will collectively support 200MW of critical IT load (Horizon 1–4).

IREN expects to fund the capital expenditures associated with the contract through a combination of existing cash, customer prepayments, operating cashflows and additional financing initiatives.

-mekong

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A deal with >60% of current market cap (prior to bump after announcement).

The stock has absorbed 30% of that 60% as of premarket movements.

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What’s interesting about this to me is that, unlike Nebius or Coreweave, Iren doesn’t pound its chest claiming “AI software infrastructure” advantages, yet seems to get the same deal as both those Neo-Cloud companies with Microsoft.

Microsoft is the 800-lb gorilla here, selling AI cloud services on its own software infrastucture (Azure). Everyone else is taking on the Capex and effort to build, run, and maintain the necessary data centers, while Microsoft is content to lease from multiple vendors who together can build faster and maybe more economically.

I think this is just dandy for Iren, as that’s what their business model is all about - being efficient at building out and running data centers with low-cost power. But, I’m worried about the Neo-Clouds - they claim to be better than the legacy cloud providers like Microsoft in terms of AI software, but in the end they’re really just providing data centers to the legacy cloud providers. Which are, by definition, their competition. How is that a good business model?

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