Galaxy Digital’s newly announced 15-year agreement for AI hosting with CoreWeave is poised to significantly impact the company’s trajectory, as noted by analyst Mike Colonnese from H.C. Wainwright & Co.
This partnership was revealed during Galaxy Digital’s earnings call for Q4 2024. Under this agreement, Galaxy plans to convert 200 MW of its Helios mining facility located in West Texas to accommodate 133 MW of essential IT load for CoreWeave’s GPUs.
The contract is projected to bring in $4.5 billion in revenue over its duration, translating to about $300 million per year, which accounts for 70% of Galaxy’s total revenues for 2024, according to the analyst. These conditions are viewed as “exceptionally favorable compared to other high-performance computing agreements,” yielding an estimated $2.26 million per MW in annual earnings with approximately 90% EBITDA margins.
Significant growth potential at Helios
While initial retrofit expenses are anticipated to fall between $1.46 billion and $1.73 billion, Colonnese mentioned that a significant portion of this will be covered through project financing. CoreWeave will handle ongoing electricity and operational costs, helping to keep Galaxy’s recurring expenses minimal. The analyst also highlighted that Galaxy has an additional 600 MW of capacity at Helios to facilitate future growth. He expressed:
“By applying current data center valuations to the contracted capacity for Galaxy’s new data center operations, we estimate the segment could ultimately be valued at over $3.5 billion, a figure that is not yet reflected in the stock price.”
The analyst is maintaining a Buy rating on Galaxy’s shares, adjusting the price target from C$35 to C$30. This target represents approximately a 40% discount compared to conventional finance brokerages, attributed to “Galaxy’s smaller scale and its concentrated focus on digital assets,” as well as a similar discount compared to Coinbase.
Q4 recap: exceeded expectations
In addition, Galaxy surpassed expectations in Q4. Revenues reached $698.1 million, indicating a 388% increase from the previous quarter, outperforming the analyst’s forecast of $248.2 million and the consensus estimate of $202.7 million.
The company recorded a realized gain of $560.6 million on digital assets during the quarter, alongside a realized loss of $84.9 million on investments. Total operating expenses amounted to $440.3 million, up 137% quarter-over-quarter, partly due to a one-time charge of $166.3 million related to a settlement with the New York Attorney General concerning its involvement with LUNA.
Net income/EPS stood at $174.3 million/52 cents, exceeding the analyst’s expectations of $94.2 million/28 cents.