Riot had a lackluster report with no new surprises to speak of. In terms of timing, the initial 112MW build-to-suit data centers will not be complete until early 2027 despite being energized much earlier. For Riot, the timing issue is centered around design and construction rather than available power.
We’ve done some back-of-the-napkin math in our previous analysis to put a value around $792 million in average annual revenue for the 600MW for a total of $8 billion over ten years, with the understanding the beginning stages will begin at a much smaller size as capacity ramps and end much larger than the averaged figure of $792M.
Analyst estimates are currently for $805M next year, and Bitcoin operations are producing $160.8 million this quarter (this is lumpy of course). There’s certainly a path to where Riot sees strong upward revenue revisions when the 600MW is energized and delivered. Analysts have estimates for Q1 FY27 at $181M, which would theoretically create upside when the AI data center story materializes if we assume Bitcoin continues to offers the low end with a $200M run rate.
The upside in analyst estimates is more apparent on the bottom line with our back-of-the-napkin math suggesting net operating income of $673 million annually. Last year, Riot reported net operating income of $92.3 and has reported $5 million in NOI year-to-date (currently this is largely dependent on Bitcoin). Analyst estimates call for a decline in EPS of (43%) for FY2026 and net losses in FY2027. Therefore, if/when management truly delivers the 600MW in the next 1-2 years, it should drive a significant rebound on the bottom line.
What we must grapple with is the timing for this rebound as other Miners are executing more quickly. The AI market is moving like a freight train, and Q1 FY2027 seems awfully far away. The opportunity cost with stocks is tricky, as Riot could announce a deal with a hyperscaler at any time, yet so could its many peers – in fact, they’ve been doing so at a fast clip such as Applied Digital, TeraWulf, and more.
Below, we look at Riot and if the opportunity cost of remaining in the stock makes sense or not.
First 112MW to Enter Construction in Q1 2026
While Riot announced this quarter that it has initiated its data center strategy with development of the first 112MW of IT capacity at Corsicana, construction on these first two 56MW buildings is not expected to commence until Q1 2026.
Riot says that completion of the core and shell will enable it “to deliver full build-to-suit data centers in 2027,” hinting that any deals secured with tenants may not contribute meaningful lease revenue until then. Compare this to other miners such as TeraWulf, Applied Digital or Core Scientific, who will already be delivering hundreds of MW of capacity by the end of 2026 and who have deals in place with visible revenue ramps.
The reason this is important is because miners’ value lies within timing – this is a race for power and how quickly they can deliver data center power to customers. Currently, Riot is slower to execute on the construction side as the language here suggests that the power will be available without a need for further regulatory approvals, rather the build and design phase is the delay: “We have also further progressed on the ongoing infrastructure development at Corsicana, including the 600-megawatt substation expansion, where the first 400-megawatt auto transformer of this expansion development is now on site being installed and remains on track for energization in Q1 next year and the Core & Shell development of the first 2 buildings of our Phase 1 development plan, which will allow us to deliver full build-to-suit data centers in 2027.”
Later it was stated the Core & Shell development was the more time intensive aspect: “The first phase of construction of the Core & Shell is the most time-intensive but capital-light portion of the build-out with total expected development cost of $214 million, representing approximately $1.9 million per IT megawatt for the first 2 buildings.”
In total, Riot is aiming to develop 672MW of IT capacity at Corsicana across two separate phases, with this 112MW build part of its first 504MW phase across eight separate buildings. Riot did not provide an update on when it expects to complete this in full, rather stated the pace of development would be dictated by tenant demand.
For the first 112MW, Riot expects to spend ~$214 million on capex across the next six quarters, translating to ~$1.9 million per MW for the core and shell. Note that this does not include substation capex or land acquisitions, which are expected to be $18 million in Q4, taking total spend on both to ~$138.6 million for the full year.
Riot’s 1.86GW Offers Rebound on Bottom Line – But When?
Riot has 1.86GW of power permitted and readily available for use, with the company aiming to transition this entirely over to data center capacity when economically feasible. Riot lags peers with a smaller power pipeline than peers in the Miner Universe, with Applied Digital recently disclosing its active power pipeline tripling in two quarters to 4.3GW. Additionally, Galaxy has up to 3.5GW available, IREN has 2.9GW and Cipher has 2.4GW in its pipeline.
Similar to the numbers above, we had done some calculations on what the roughly 2GW is worth for Riot and came up with the following: “For Riot’s combined Corsicana and Rockdale facilities offering 1.7GW of available power, and assuming both are fully converted to AI with a 1.3 PUE for ~1.3GW of critical IT load, the two could be worth more than $23 billion for a 10-year deal structured at similar terms, or average annual revenue of $2.34 billion.”
When we look at 2030 analyst estimates, it seems to be pricing in most of the 2GW with estimates for $2.5B, up from $660M today. Therefore, I’m asserting that most of this has been priced in and there are better deals on the market – with the information I have today.
Brief Financial Update
Riot beat on the top and bottom line in Q3 with revenue up 112.5% YoY to $180.2 million, driven by 138% growth in Bitcoin mining revenue to $160.8 million. Engineering revenue was $19.1 million, up 51.1% YoY, while Engineering backlog rose 135.4% YoY and 34.5% QoQ to $159.6 million, with 90% originating from the data center sector. GAAP EPS was $0.26, ahead of estimates for $0.13.
For our perspective, the most important aspect for Riot boils down to cash and capex, as the company has not yet secured a data center tenant deal and for the moment will be fronting the capex for the powered shell itself.
Riot reported $330.8 million in cash and equivalents in Q3, while holding 19,287 Bitcoin worth nearly $2.1 billion (including 3,300 BTC held as collateral). Debt was $839.7 million, with $253.2 million current.
Capex is projected to be $153 million in Q4, with $131.6 million going to miner purchases and miner infrastructure, and the remaining going towards Corsicana’s substation, land and initial capex for the first 112MW. Riot says its key capex needs through year-end are fully-funded with cash on hand, yet current debt suggests the company will need to raise more cash sooner rather than later to progress with more phases at Corsicana.
Conclusion:
There is a disconnect between analyst estimates for Riot on the bottom line once Corsicana’s 600MW is delivered as the net operating income will provide a significant boost to the bottom line. We’ve seen this across the board where Miners rebound from being deep in the red from their Bitcoin mining operations to seeing healthy margin expansion.
However, this one is hard to time – it is a complete guess if Riot can deliver sooner than Q1 2027. In the meantime, we’ve identified some strong trends in play right now that we prefer to re-allocate to.
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