Cipher Digital Earns $31.6M in Q3 as AI Data-Center Expansion Offsets Mining Decline

Cipher Digital generated a third-quarter profit of $31.6 million, despite a significant fall in revenue as it continued moving away from Bitcoin mining and expanding into AI data-center development.

The company’s November 2 filing with the US Securities and Exchange Commission showed revenue of $26.7 million, down 63% from $71.7 million in the same quarter of the previous year.

Bitcoin mining brought in $20.8 million, representing a 71% annual decline. The reduction reflects Cipher’s strategy of shifting computing resources from mining operations to data-center capacity intended for artificial intelligence customers.

Although Cipher reported net income of $31.6 million, or 8 cents per share, the result was heavily influenced by a $127 million non-cash accounting gain associated with warrants issued to Google.

The company’s business update also showed that including the potential dilution from those warrants and other securities would change the quarterly result to a loss of 22 cents per share.

Black Pearl Begins Contributing to Revenue

Cipher’s investment in AI-related infrastructure started producing income during the quarter, with its data-center operations generating $5.9 million in revenue.

The contribution followed the launch of the initial phase of its Black Pearl facility in Texas in August. Cipher had discontinued Bitcoin mining at the site in February to prepare it for a new tenant.

Despite the initial revenue contribution, the transition has weighed on operating performance. The company posted an operating loss of $71.9 million, compared with $37.6 million in the third quarter of the previous year.

Adjusted EBITDA moved from a $40.8 million profit to a $10 million loss, highlighting the financial pressure accompanying the restructuring.

Google-Related Warrants Drive Reported Profit

Cipher’s positive bottom line was largely attributable to a $127.2 million non-cash gain resulting from an increase in the fair value of warrants issued to Google.

The warrants are connected to Google’s agreement to backstop certain lease payments involving Fluidstack, an AI infrastructure company. The revaluation increased reported earnings but did not provide Cipher with an equivalent cash inflow.

The company is nevertheless building a larger pipeline of long-term data-center revenue. Cipher recently extended its Barber Lake lease agreement to 20 years, raising the site’s contracted revenue to approximately $9.1 billion.

The expansion signals Cipher’s commitment to AI infrastructure as an alternative to its declining Bitcoin mining business. Its latest results, however, show that the shift has yet to eliminate operating losses or offset the reduction in mining-related income.