Cipher Mining Inc. (CIFR) Earnings

Management highlights

- Strategic Positioning and Portfolio Growth - Cipher Digital controls the full turnkey data center development value chain for hyperscalers, with a total portfolio of ~5.3 gigawatts of capacity across 11 sites, 4.4 gigawatts of which is in the future development pipeline. Texas remains the core focus of the portfolio, reflecting the company's early conviction that Texas would become a leading hub for large-scale AI infrastructure. - Added 1.1 gigawatts of new potential capacity in Texas this quarter: a 900-megawatt new site named Apollo near San Antonio, and a 200-megawatt expansion at the existing Stingray site. Both sites are submitted as studied loads in ERCOT's Batch Zero interconnection process. - Construction Milestones and Delivery Execution - Delivered initial data center capacity at Black Pearl 2 months ahead of the original schedule at the tenant's request, with rent already commenced. This delivery demonstrates the company's ability to compress timelines on demand without sacrificing quality, strengthening credibility with tenants and investors. Remaining phases of Black Pearl continue to progress on the original agreed timeline. - Barber Lake Phase 1 (168 critical IT megawatts) remains on track for rent commencement in October 2026, with the tenant already taking partial beneficial occupancy, and 100% of required equipment secured. - Stingray is in early construction, with earthwork and underground electrical work progressing on schedule, and full completion planned for H1 2027. Concrete and steel work is expected to start in Q3 2026. - The Odessa legacy bitcoin mining site is attracting early-stage interest from prospective HPC tenants, as it is already energized and conversion would deliver a much faster timeline to operation than greenfield development. - Financing Highlights - Completed an $810 million project-level senior secured notes offering for the Stingray project, which priced at a 6% coupon (the company's lowest to date) and was 8x oversubscribed, despite widening credit spreads overall. The offering fully funds Stingray through completion, reimburses $56.7 million in prior company expenditures, and follows the same successful project-level financing structure used for Barber Lake and Black Pearl, proving the scalability of the company's capital model. - As of June 30 2026, the company holds $870 million in total unrestricted liquidity (including $832 million in unrestricted cash and $38 million in bitcoin), with no drawdowns on its $200 million committed revolving credit facility. Management stated Cipher does not expect to need additional equity to fund current near-term commitments. - Team Expansion - Added key senior hires this quarter, including former ERCOT Director of Grid Coordination Bill Blevins as Head of Grid Strategies, and former Google global data center delivery lead Mohammed Abouelella, to build organizational capacity for executing on the gigawatt-scale development pipeline.

Guidance

- The company maintains its original delivery guidance for all current contracted projects: Barber Lake Phase 1 rent commencement in October 2026, Stingray substantial completion in H1 2027, and full Black Pearl completion per the original timeline (only initial capacity was accelerated). - Expected capacity additions remain unchanged: 270 gross megawatts from Reveille and Ulysses in 2027, 2 gigawatts from Colchis, Mikeska, and McLennan in 2028-2029, and up to 2.1 gigawatts from Milsing, Apollo, and existing site expansions in 2030 and beyond. - Management maintains that Cipher is well-positioned regardless of delays to the ERCOT Batch Zero decision process, and expects to remain at the front of the queue for interconnection approvals. - No new equity is expected to be required for near-term commitments based on current forecasts, though the company notes equity may be needed for large future leases as the pipeline develops. - Inflation on labor and equipment is expected to push CapEx per megawatt slightly higher for future projects, with costs varying based on individual tenant build specifications.

Segment performance

Cipher Digital operates two primary segments: Hyperscale High Performance Computing (HPC) Data Center Development, and Legacy Bitcoin Mining. For Q2 2026, total company revenue was $25 million, down from $35 million in Q1 2026. The decline was driven by the decommissioning of bitcoin mining capacity at the Black Pearl site, in line with the company's strategic transition to contracted HPC data center revenue. The legacy Odessa bitcoin mining segment performed well in Q2 2026, operating 207 megawatts of capacity, generating 11.6 exahash per second of hash rate at 17.2 joules per terahash efficiency, and mining 346 bitcoin during the quarter. No further capital investment is planned for the legacy bitcoin mining segment, which currently contributes 100% of the company's near-term operating revenue while contracted HPC projects are brought online. The contracted HPC development segment is in active construction ramp-up: 96% of equipment for Black Pearl Phase 1 and 2 is secured, 100% of equipment for Barber Lake Phase 1 is secured, 75% of equipment for Stingray is secured, with all projects progressing toward planned delivery timelines. The HPC segment holds 100% of the company's future contracted revenue, with three executed leases expected to generate $793 million in average annualized net operating income from October 2026 through 2036, contributing 100% of long-term contracted revenue.

Risks & headwinds

- Governor Abbott's recent letter ordering an audit of ERCOT interconnection queue attestations has delayed the expected Batch Zero decision originally scheduled for the end of August 2026, creating near-term uncertainty around the timeline for interconnection approvals for Cipher's pipeline sites in Texas. - Rising treasury yields and widening credit spreads, paired with increasing supply of AI infrastructure debt, have made credit markets more discerning, though this does not impact Cipher's existing fixed-rate project financings. - High overall market demand for data center equipment has created procurement challenges and upward cost pressure for labor and equipment, requiring active in-house supply chain management. - Conversion of the Odessa site to HPC requires renegotiation of the existing power purchase agreement with Vistra Luminant, which expires in July 2027, creating time pressure to complete a conversion lease before that date. - Development of behind-the-meter generation to accelerate capacity delivery faces unresolved engineering, supply chain, and financing challenges, with final project scope still uncertain.

Analyst Q&A

• Q: What is your reaction to Governor Abbott's recent letter on the ERCOT interconnection queue, and what is the impact on Cipher?

  A: Management was surprised by the letter but not by its core theme, which reinforces the need to filter serious developers from less serious participants in the Texas interconnection queue. The main near-term impact is a delay to the Batch Zero decision originally expected this week. Management notes Cipher has completed all required submissions, including water surveys, and expects to remain at the front of the queue regardless of the revised timeline. The delay increases the value of Cipher's 477 megawatts of already-approved capacity available in 2027, and also increases the value of behind-the-meter generation projects where Cipher already has active development work ongoing. Management remains bullish on Cipher's position despite the short-term delay.

• Q: How meaningful is behind-the-meter generation as a growth opportunity for Cipher?

  A: Management states behind-the-meter generation is potentially extraordinarily meaningful, larger than the rest of Cipher's existing pipeline in terms of potential capacity. Cipher's Texas sites have good access to natural gas, and there is strong interest from large high-quality tenants for this type of development. However, the final scope and timeline depend on resolving engineering, supply chain, and financing challenges, so it is too early to provide specific capacity forecasts.

• Q: How was Cipher able to deliver Black Pearl initial capacity two months early, and is this repeatable?

  A: The early delivery was enabled by Cipher's in-house team of largely ex-hyperscaler construction, engineering, and procurement staff, who work closely with tenants to adapt timelines. The tenant agreed to cover the extra cost of burst labor to accelerate work, and Cipher leveraged existing long-term supply chain partnerships. Early delivery is repeatable when a tenant requests an accelerated timeline and is willing to cover the associated extra costs, though it typically only applies to a portion of a project rather than the entire build.

• Q: What are the key requirements tenants need to see before signing a lease for pipeline capacity, and how much of Cipher's pipeline is ready for lease execution?

  A: Historically, tenants required final interconnection approval before signing, so only Cipher's 477 megawatts across Odessa, Reveille, and Ulysses (all fully approved) are currently lease-ready; all that remains is finalizing terms and selecting tenants, and management expects all of this capacity will be leased. However, in the current strong demand environment, Cipher is already holding lease discussions for 1 gigawatt Colchis site, which is still waiting for Batch Zero approval. It is possible a lease could be signed with condition precedents tied to interconnection approval, which is new territory reflecting the strength of current demand.