0001628280-25-046272
SEC filingRevenue declined 42% to $239.3M due to halving and strategic shift to colocation, partially offset by colocation growth.
For the nine months ended September 30, 2025, total revenue declined 42.4% to $239.3 million from $415.7 million in the prior year period. The decrease was primarily driven by a 43.1% drop in Digital Asset Self-Mining revenue to $187.0 million, as bitcoin mined fell 67% to 1,855 BTC due to the April 2024 halving (50% reduction in block rewards), a 20% decline in self-mining hash rate to 16.3 EH/s, and a 48% increase in network difficulty. These headwinds were partially offset by a 70% increase in the average bitcoin price to $102,198. Gross profit plunged 85.3% to $17.1 million, with gross margin contracting to 7.2% from 28.0% as cost of revenue decreased only 26% (driven by lower power and depreciation) while revenue fell more steeply. Operating income swung to a loss of $126.3 million from income of $20.6 million, reflecting higher SG&A expenses (up 88% to $166.4 million) including $26.8 million in Colocation startup costs, $31.7 million additional stock-based compensation, and $5.5 million in Merger Agreement advisory fees. Net loss improved to $502.8 million from $1.05 billion, largely due to a $781.1 million reduction in the change in fair value of warrants and contingent value rights.
Segment performance highlights the strategic pivot to colocation. Digital Asset Self-Mining gross margin fell from 28.2% to 3.7%, as revenue dropped 43% while cost decreased only 24% (employee costs rose 49%). Digital Asset Hosted Mining revenue declined 74.5% to $18.1 million due to customer attrition, though gross margin held at 26.6%. In contrast, Colocation revenue surged 115% to $34.1 million, with gross margin improving to 16.1% (licensing gross margin 22.4%) as new data halls at Denton, Texas and Marble, North Carolina came online. The segment now accounts for 14% of total revenue versus 4% a year ago.
Management emphasizes the ongoing transformation from bitcoin mining to high-density colocation services, targeting 250MW of billable capacity by end of 2025. The pending merger with CoreWeave, announced July 7, 2025, is expected to close pending stockholder approval on October 30, 2025. Cash and equivalents stood at $453.4 million as of September 30, 2025, down from $836.2 million at year-end 2024, reflecting heavy colocation capex ($405.3 million) partially funded by $323.8 million in deferred revenue from colocation prepayments. No specific financial guidance is provided, but the company expects to meet fiscal 2025 delivery dates despite weather and construction delays.
Core Scientific generated $125.2M in operating cash flow despite a net loss of $502.8M, reflecting significant non-cash adjustments. Key add-backs include $365.0M from the change in fair value of warrant liabilities, $70.3M in stock-based compensation, and $54.8M in depreciation. A substantial $323.8M increase in deferred revenue from colocation services contributed to operating cash flow, indicating strong customer prepayments. Excluding this working capital inflow, underlying cash generation would be negative.
Capital expenditures surged to $454.2M (3.6x operating cash flow), far exceeding the $66.2M spent in the prior period. This heavy investment likely relates to facility repurposing for AI colocation. Investing cash flow also included $5.0M in equity investments and $10.2M in intangible assets.
Financing cash flow turned negative to $41.3M from $221.4M provided, driven by $26.9M in debt extinguishment payments and $8.6M in principal payments, partially offset by $1.7M in warrant proceeds. No dividends or share repurchases were reported. The company ended with $453.4M in cash and restricted cash, down from $837.0M at the start of the period.
The large deferred revenue increase ($323.8M) is a notable anomaly, likely tied to new colocation contracts. Additionally, the $365.0M warrant liability adjustment is a non-cash item that will reverse over time. The company's operating cash flow is highly dependent on these non-operational factors.