Galaxy: Strong Crypto Backdrop Drives Gross Profit Surge, Data Center Progress Encouraging

Galaxy’s Q3 was the best quarter in company history, per management, with the company seeing record crypto trading volumes, facilitating the sale of 80,000 Bitcoin worth more than $9 billion for a major client. Initial Data Center revenue was recorded in Q3 of just $2.7 million, though management explained that Data Center would be immaterial to results until the first half of 2026 when the first phase at Helios is delivered to CoreWeave.

Management had some interesting comments about being tied to CoreWeave when it comes to future financing and the economic opportunities around diversifying to possible hyperscale customers, as well as why they will not pursue a GPUaaS model like IREN. Management also teased a “big update” in Q2 next year for the newly-launched consumer-facing platform GalaxyOne.

Adjusted Gross Profit Surges in Q3

Galaxy reported revenue of $29.2 billion in Q3, though as we had explained in our initial analysis, Galaxy Bridges Crypto and Asset Management with AI Data Centers, this reflects gross principal trading (Digital Asset sales) that are subsequently offset by transaction expenses.

As such, adjusted gross profit is a better metric for investors to track, as it strips out the inflated appearance of the top line from Digital Asset sales, which were $28.8 billion in Q3 with transaction fees of $28.3 billion. The reported revenue figure does provide clues into the health of Galaxy’s crypto business, as Digital Asset sales surged nearly 231% QoQ, including the 80K Bitcoin trade, but even backing that out, this still would represent north of 100% QoQ growth.

Galaxy reported record adjusted gross profit in Q3, driven by the sharp uptick in Digital Assets and an improvement in adjusted gross margin in the segment, as well as strong performance in Treasury & Corporate. Data Center did contribute ~$2.7 million in adjusted gross profit in the quarter, though it will not become a more material driver until 2026 when revenue ramps as the first phase of Helios is delivered to CoreWeave.

Adjusted gross profit was $728.4 million this quarter, up more than 143% QoQ and 976% YoY. Adjusted gross margin was 2.5%, down from 3.3% in Q2 due to the much higher revenue base ($29.2 billion versus $9.1 billion).

Brief Updates on Digital Assets, Data Center

Galaxy provided some insights into its Digital Assets business, which saw its strongest monthly performance in July, bolstered by that 80K Bitcoin sale. Management said that this momentum carried through the remainder of the quarter, with a meaningful 140% QoQ increase in trading volumes, growth in its client base and increased institutional engagement.

Assets under management and under stake also saw strong QoQ growth, reaching a combined $15.4 billion, with $8.8 billion AUM and $6.6 billion AUS, up from $8.9 billion at the end of Q2. Sequentially, this represented growth of ~$3 billion in AUM and ~$3.5 billion in AUS. Galaxy explained that this level of AUM/AUS would represent more than $40 million in annual recurring revenue from fees, as management expects a majority of the new growth in AUM to be long-lasting, high-fee paying assets.

Galaxy also launched its first consumer-facing platform GalaxyOne in the quarter, with four initial product offerings: Premium Yield, offering 8% yield on cash for accredited investors; GalaxyOne Cash, an FDIC-insured high-yield cash account; GalaxyOne Crypto, support trading and transfers of select crypto products, and GalaxyOne Brokerage, support commission-free equities trading. This boosts Galaxy’s competitiveness with Coinbase and Robinhood in the realm of consumer-facing equity and crypto platforms.

Data Center Progress & Funding

Galaxy’s delivery of 800MW of contracted power to CoreWeave at Helios remains on track and on time, with the first 133MW phase set to be delivered in the first half of 2026, the second 260MW in 2027 and the third and final 133MW in 2028. Galaxy owns a 345kV substation at the campus, capable of supporting 900MW of capacity, with an adjacent 345kV substation owned by Wind Energy Transmission of Texas (WETT) under development to help meet future power needs.

Galaxy noted that it is also in queue with a handful of other interested parties for more power in Texas, and hinted that 800MW will not be their total powered footprint, with an additional 2.7GW under study at Helios, though the future pipeline may remain limited beyond that.

In Q3, Galaxy secured a $1.4 billion, three-year project financing facility to fund the $1.7 billion build-out of the first phase. Management stated that they have been drawing on the facility pretty regularly and on a straight-line basis, and by the end of the quarter the company had drawn ~$430 million so far, taking its total debt outstanding to $1.15 billion. Additionally, Galaxy closed a $460 million PIPE deal for the data center side, with the $325 million in net proceeds going to further fund the expansion of Helios beyond the first phase.

The project financing draw provides a rough idea of how much capital Galaxy will need through 2028 to support the entire 800MW capacity for CoreWeave. Assuming further financing needs come at similar terms and construction at similar costs, Galaxy may need to finance $4.2 billion in total, with $2.8 billion for the second phase. Galaxy now has $1.9 billion in cash and stablecoins on its balance sheet, up ~$700 million sequentially, providing ample room for self-funding the equity to secure financing for the upcoming phases.

Net Income and EPS

Driven by the surge in adjusted gross profit, Galaxy reported a very strong $505.1 million in net income in Q3, up a whopping 1,546% QoQ. Net margin on the reported revenue figure was 1.7%, up from 0.3% in Q2 and up from (0.4%) in the year ago quarter.

This translated to $1.01 in GAAP EPS, or $1.12 in adjusted EPS, or ~5x higher than consensus estimates for $0.21 in the quarter. However, it is important to note that this figure should not be annualized as it is likely to be reliant on the health of the crypto industry and trading volumes, which can vary wildly from quarter to quarter.

Adjusted EBITDA was $629.4 million, nearly 3x the $211.4 million generated in Q2. Adjusted EBITDA margin was 2.2%, down slightly from 2.3% in the prior quarter.

Earnings Q&A:

More Context and Clarity on Helios Build-out

Management provided an important update on the construction progress for the first phase of Helios, confirming that it remains on schedule, with the first data hall to be powered on in December of this year before reaching full operational status in the first half of 2026.

CIO Chris Ferraro explained that 70% of Galaxy’s concrete and civil work is complete and that equipment deliveries and installation is underway. He added that Galaxy is “now placing chillers and putting together the piping system that will form the backbone of our advanced liquid cooling design, an essential component to support next-gen GPUs at industry-leading cabinet densities. Our e-houses, which contain the critical electrical infrastructure have started to ship from the integrators and medium-voltage switchgear and transformers are already being set on their pads.”

With this progress, Galaxy expects the building to be sealed from weather within the next few weeks, allowing work on the interior to proceed regardless of outdoor weather. The next major milestone on deck is powering on the first data hall in early December, then shifting to preparing the hall for service.

For the second and third phases, management provided a quick update, stating that they are “proactively securing long lead time items like backup diesel generators and medium-voltage switchgear early, locking in cost certainty and delivery time lines.” This is important as it will help de-risk the build-out from an infrastructural viewpoint and mitigate potential impacts from equipment delays.

Update on Power

Considering that Galaxy has already contracted out all 800MW of its approved power, management provided a deeper look into power delays and connection requests in ERCOT’s grid.

Ferraro explained that “ERCOT's interim process and the level of scrutiny applied to large loads requesting to interconnect to the system has led to delays in additional capacity approvals” across Texas, as the state’s grid has been overwhelmed over the last 12 months and ERCOT does not want to take on projects that would risk destabilizing the grid.

Piper Sandler’s Patrick Moley questioned about approval timelines, considering Galaxy has a substantial 2.7GW awaiting approval, to which management responded that they will not have an exact timeline for approval until it happens and that “predicting the date is probably a fool's game.” However, they believe that signs from ERCOT, WETT and their utility partner AEP approving and finalizing studies at a faster pace give them a higher degree of confidence in approval for capacity coming online in late 2028 to 2029.

Management had mentioned that WETT’s Pitchfork 345kV substation is expected to “deliver an additional 3 gigawatts of power capacity with 2 synchronous condensers adjacent to the Helios campus starting in 2028,” which would support the entirety of the campus’ remaining buildout with some buffer room. Galaxy stated that there are “increasing proactive reach outs to us from very large customers in addition to our current partner, CoreWeave, who all want to know when are we getting approval for how much and over what time period,” so getting approval for the entire 2.7GW of additional capacity will unlock a tremendous opportunity to meet future demand.

Looking beyond Helios, management implied that there may not be much more in the pipeline until prices come down: “Markets for some of these companies without contracts, without customers, the market is pricing in a tremendous amount of optimism. And so that feeds through to the price of projects. And so in the short run, I don't think you're going to see us reaching out and buying a whole lot more power at these prices.” Considering the capital intensity of simultaneous multi-GW build-outs, this is a smart move as it would prevent Galaxy from overstretching its cash with too many builds.

CoreWeave’s Credit Quality as Anchor Tenant

Another interesting discussion circled around to CoreWeave as Galaxy’s primary anchor tenant, the economics of being this closely linked to CoreWeave and the transition to a multi-tenant site at full capacity.

When questioned about the potentiality of refinancing the project financing facility to unlock some capital, CIO Chris Ferraro explained that their ability to refinance this debt and raise future debt at attractive rates is linked rather directly to CoreWeave’s credit profile:

“The views of CoreWeave's credit profile, which lenders are very focused on, in addition to Galaxy's credit profile are changing and getting better by the day on both fronts. And so the ultimate outcome is really going to be a function of where we and CoreWeave and the markets are then.” He added that if rates were in the high single-digits and if Galaxy and CoreWeave remain successful, financing rates may more lower.

However, CEO Mike Novogratz seemed to contradict this, stating that the market is in a period of “trying to understand what CoreWeave's credit quality is today and what it should be on the forward. And that's going to be a big, big determinant of their ability to get better lease rates, their ability to get financing, [and the] ability for us as the landlord to finance our projects. And so where that goes, how the market evolves is thinking on CoreWeave is something we're very focused on and something that's a little unknown today.”

This is quite an important quote, as Galaxy’s financials and ability to secure future financing at attractive rates is inextricably linked to CoreWeave’s financial health. As we discussed in our free newsletter on CoreWeave, the neocloud is facing a wall of capex in Q4 and may continue to turn to the debt market to fund its expansion, likely weakening its credit profile. This could then hamper Galaxy’s ability to find attractive financing for its upcoming projects.

Considering CoreWeave is Galaxy’s only AI tenant for the time being, it raised a crucial point about diversifying the customer base in the future to a multi-tenant structure as Helios expands beyond 800MW. Novogratz stated that there is a “real decision to be made as to whether on a net economic basis, whether a lower-yielding lease from a higher credit quality tenant, net balances out to a better economic equation for us as we think about broadening the portfolio.”

What he is implying here is that an investment-grade hyperscaler will be able to secure a lower-yield lease, carrying a lower annualized opportunity to Galaxy, but because the creditworthiness of the hyperscaler exceeds that of CoreWeaves, Galaxy’s associated costs and funding will be more attractive and translate to a better return on investment (long-term revenue minus funding costs and interest expenses on debt).

Shying Away from GPU-as-a-Service

Unlike IREN, Galaxy is not going to prioritize or even attempt to shift towards renting GPUs out as a service, opting instead to take deals like the one it signed with CoreWeave. Galaxy said this is because they do not have the same software + hardware advantage that CoreWeave and others may have where they have a strong value-add proposition on top of the bare metal, and it is not something they have invested in.

Management also chalked this decision up to a lack of understanding over the useful life of GPUs, preferring to invest instead in long-lived infrastructure where their expertise is more suited:

“We’re not confident in what useful life of GPUs are ultimately going to be, and the cycles of GPU efficiency are pretty nascent still. And so we like very much investing in long-lived infrastructure that we understand useful life of, and we don't quite yet understand what the useful life of GPUs are. And so the business model around return on capital on GPUs, particularly if you haven't added real expertise in real value add, I think is a really challenging thing to decide to do. So we're not thinking about it.”

GalaxyOne: Expect “Big Update” in Q2 2026

Considering how recent the launch of GalaxyOne was, the impact on growth is likely to be minimal in the near-term as Galaxy works to build out the product suite. Management expects it to take a handful of quarters to get momentum on the platform, and tentatively expects to have a “big update” for investors in Q2 2026.

Galaxy teased that it has a “really ambitious” road map over the next six to 18 months to transform GalaxyOne into a “one-stop serves all wallet,” with the aim to add products and offerings that help high net worth consumers invest and store wealth, and reallocate across equities, bonds, digital assets and more. The platform also would open up an ability for cross-platform collaboration between trading, asset management and staking, and serve as a new outlet for Galaxy to continue growing its AUM/AUS and increase its fee-based ARR rather substantially.

Conclusion

There is a lot to like from Galaxy’s Q3 report, with adjusted gross profit surging from a strong crypto backdrop while data center updates show continued progress towards start of service for CoreWeave in 2026. Management remains focused on building out Helios and is encouraged by signs from utility partners and regulators about receiving approval for additional power to expand the campus later this decade.

Damien Robbins, Equity Analyst at I/O Fund contributed to this analysis.

Please note: The I/O Fund conducts research and draws conclusions for the Fund’s positions. We then share that information with our readers. This is not a guarantee of a stock’s performance. Please consult your personal financial advisor before buying any stock in the companies mentioned in this analysis.

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