CORZ

1. Executive Summary

• Post-October 30, 2025, the CoreWeave merger is terminated; Core Scientific remains independent and listed on Nasdaq (ticker CORZ).
• The strategic pivot from bitcoin mining to High-Density Colocation (HDC) continues; HDC revenue rose to $15.0M in Q3’25 (vs. $10.3M in Q3’24).
• Q3’25 showed improving unit economics: gross profit of $3.9M (vs. gross loss in Q3’24), despite lower total revenue of $81.1M.
• Execution risk now shifts to standalone financing and customer diversification while fulfilling large, multi‑year CoreWeave HDC contracts.

Key Takeaways

• The failed merger removes an M&A premium and returns focus to a standalone HDC ramp with significant contracted visibility (multi‑year, 12‑year terms).
• Capex co-funding by CoreWeave reduced Q3’25 cash burden (CoreWeave funded $196.4M of $244.5M capex), supporting near-term buildouts.
• Management expects to enter 2026 at ~$360M annualized colocation revenue (prior guidance; not updated post‑merger termination).
• Near-term stock drivers: delivery of contracted MW milestones in ’25–’26, customer mix expansion beyond CoreWeave, and updated standalone guidance.

2. Financial Performance

Capital Raises & Proceeds

• 0.00% Convertible Senior Notes due 2031:
• Priced at $550M (Dec 2024) with $75M greenshoe; later disclosed as $625M total raised (Feb 26, 2025).
• Initial conversion price: ~$22.49/share; estimated net proceeds up to $608.7M if option fully exercised.
• Liquidity (as of Q1’25): $778.6M cash & equivalents; subsequent quarters saw heavy capex largely funded by CoreWeave under colocation agreements.

Early Revenue Initiatives

• HDC revenue reached $15.0M in Q3’25 (vs. $10.3M in Q3’24), reflecting initial traction in AI/HPC colocation.
• Delivery milestones:
• First 8MW of billable capacity at Denton delivered in May 2025.
• Company previously indicated delivering ~250MW to CoreWeave by YE’25; no post‑Oct 30 update provided.
• Contract base:
• As of Feb 26, 2025, total projected CoreWeave contract revenue ~$10.2B over 12 years with ~590MW contracted across six sites (including Denton expansion).

Expense Management & Cash Flow

• Q3’25: Revenue $81.1M (vs. $95.4M Q3’24); gross profit $3.9M; net loss $146.7M (improved from Q3’24 due to smaller non‑cash fair value adjustments).
• H1’25: Revenue $158.2M; operating loss $68.9M; net loss $356.1M (improved vs. prior year on non‑cash factors).
• Q1’25: Adj. EBITDA $(6.1)M; results remain volatile due to non‑cash warrant/CVR fair‑value swings.
• Capex intensity elevated; however, customer-funded capex offset is a notable cash-preservation lever (Q3’25: ~80% funded by CoreWeave).

3. Guidance and Future Outlook

Production Ramp–Up

• HDC buildout is the primary focus:
• Denton expansion to ~260MW critical IT load; additional 70MW added (Core Scientific to fund $104M of incremental capex).
• Groundbreaking in Muskogee (100MW); site targeted operational by 2026.
• Pre‑termination guidance: delivery of ~250MW billable capacity to CoreWeave by YE’25; no updated post‑merger guidance provided.

Expansion Plans

• Geographic/platform expansions:
• Auburn, AL: New HPC facility, 16MW initial, $135M+ near-term investment, potential $400M+ total.
• Denton, TX: Lease and power allocation expanded to ~394MW access; one of the largest GPU clusters in North America.
• Portfolio capacity as of YE’24: ~1,300MW powered infrastructure; management target of ~300MW additional billable capacity by 2027 across existing sites.

Operational Targets

• Customer concentration management: aim for CoreWeave <50% of billable capacity by end of 2028 (diversification push).
• Revenue scale: entering 2026 at ~$360M annualized HDC revenue (prior indication; pending update).
• Efficiency: continued power curtailment programs and facility retrofits to support high-density AI workloads.

4. Strategic Positioning and Initiatives

Cost Management

• 0% convertible notes lower cash interest burden.
• Customer-funded capex materially reduces near-term cash outflows.
• Energy cost mitigation via demand response/curtailment (tens of thousands of MWh returned to grids monthly).

Product Development

• Conversion of legacy mining halls to application-specific, high-density AI/HPC colocation with advanced power and cooling.
• Build-to-suit for NVIDIA GPU clusters; facilities engineered for ultra‑dense racks and low‑latency workloads.

Market Expansion

• Moving beyond CoreWeave to hyperscalers and large enterprises; pipeline highlighted in Q1’25 call.
• Multi‑site footprint across TX, OK, AL and existing states enables speed-to-power for AI tenants with urgent timelines.

5. Competitive Positioning and Market Trends

Market Positioning

• Among the few independent operators with gigawatt-scale power access and rapid conversion capability for AI-grade density.
• Positioned between legacy mining operators (power access) and traditional data center REITs (AI-density scale and speed).

Competitive Strengths

• Contracted backlog with 12-year terms and renewal options; high visibility on cash flows.
• Co-funded capex structure; reduces equity dilution risks during ramp.
• Speed-to-deploy at brownfield/retrofit sites; pre‑approved power and land expansions (e.g., Denton).

Emerging Industry Trends

• AI-driven data center demand outpacing traditional capacity; scarcity of power-qualified sites.
• Tenant preference for long-term power certainty and bespoke density—Core Scientific’s model aligns with this shift.
• Ongoing GPU supply constraints elongate demand visibility; benefits operators with ready-to-energize sites.

6. Technology and Innovation Strategy

Technological Advancements

• Facility retrofits to support high-density power distribution, advanced cooling, and low-latency interconnects for AI training.
• Building one of the largest GPU supercomputers at Denton, aligning with next-gen NVIDIA architectures.

New Product Developments

• High-Density Colocation (HDC) product tailored to AI/HPC clusters with multi‑MW blocks and 12‑year structured contracts.
• Modular expansions (e.g., 70MW Denton add-on) to scale with tenant roadmaps.

Alignment with Market Needs

• Contracts tuned to AI training/inference workloads requiring rapid commissioning, high uptime, and dense power.
• Strategy to diversify beyond a single hyperscale anchor mitigates tenant concentration and supports enterprise adoption.

7. Risk and Reward Analysis

Growth Catalysts

• Timely delivery of ’25–’26 MW milestones (Denton, Muskogee, Auburn) converting backlog into billables.
• Customer diversification beyond CoreWeave; additional 12‑year contracts with enterprises/hyperscalers.
• Potential policy incentives and regional support for high-tech infrastructure (e.g., Denton approvals).

Downside Risks

• Customer concentration in CoreWeave (ramp and funding cadence dependency); post-merger termination updates to agreements should be monitored.
• Execution risk on high-density retrofits, supply chain timing (transformers, switchgear, GPUs), and commissioning schedules.
• Capital intensity despite co-funding; residual cash needs amid large-scale buildouts.
• Residual exposure to bitcoin mining cyclicality until HDC fully dominates revenue mix.

Valuation Metrics

• Latest reported run-rate profile is evolving; near-term fundamentals are transitioning:
• TTM revenue (Q4’24 + Q1–Q3’25): approximately $334M.
• EBITDA metrics volatile due to mix shift and non‑cash items; Adj. EBITDA negative in Q1’25 and not updated for Q2–Q3.
• Frameworks:
• EV/Revenue: Apply a discount to AI data center peers given concentration/execution (e.g., 3.0x–4.5x 2026E revenue if ~$360M annualized HDC is achieved entering 2026; revise when company updates guidance).
• EV/EBITDA: For stabilized HDC, 9x–12x 2026E EBITDA (vs. 12x–16x for established DC peers) reflecting scale-up and customer concentration risk.
• DCF: Anchor on 12‑year contracted cash flows with step-down risk-adjusted discount rate reflecting counterparty and construction risk; include dilution from 0% converts at ~$22.49 upon conversion scenarios.
• Note: Precise multiples/targets should be recalibrated upon updated standalone guidance post-termination.

8. Investment Thesis

Investment Rationale

• Large, contracted HDC backlog with 12-year visibility and co-funded capex positions Core Scientific to transition from volatile mining to recurring, higher-quality revenue.
• Power-rich footprint and speed-to-deploy confer a competitive edge amid AI capacity scarcity.
• Standalone profile post-merger termination could command a sum-of-the-parts rerating as HDC mix overtakes mining.

Price Target Justification

• Methodology shift post-termination from M&A-linked premium to fundamentals-based:
• Base Case: Apply 3.5x–4.0x 2026E HDC revenue (anchored to the ~$360M annualized entry rate, pending update) OR 10x–11x 2026E EBITDA assuming mid-30s to low-40s EBITDA margins at scale.
• Bear Case: Execution slippage or concentration risk warrants 2.0x–3.0x 2026E revenue.
• Bull Case: Faster ramp/diversification supports 4.5x–5.5x 2026E revenue or 12x–14x EBITDA.
• Revise targets upon:
• Updated standalone guidance, MW delivery cadence, and diversification milestones.
• Clarification of CoreWeave contract cadence post-merger termination.

Influencing Market Dynamics

• AI capex intensity, GPU availability, and grid interconnect timelines drive pricing power and absorption.
• Financing costs and equity dilution pathways (convertible notes) influence equity value capture.
• Regional regulatory/power policy shifts impact sustainable opex and expansion velocity.

9. Macroeconomic and Industry Trends

Regulatory Changes

• Local approvals (e.g., Denton PPA/lease amendments) underscore the importance of municipal cooperation for power increases.
• Potential evolving energy policy and data center siting rules could affect timelines and power pricing.

Supply Chain Dynamics

• Lead times for electrical gear and NVIDIA GPUs remain a gating factor; operators with prepared sites and staged equipment win on time-to-revenue.
• Customer-funded capex partially mitigates working capital strain from supply constraints.

Technology Adoption Trends

• Broadening enterprise AI adoption shifts demand from single-hyperscaler reliance to multi-tenant pipelines.
• Preference for high-density, AI-optimized colocation with long-duration power certainty supports Core Scientific’s retrofit strategy.