Galaxy Digital’s recent announcement of a 15-year AI hosting agreement with CoreWeave signifies a major strategic development for the company, as highlighted by H.C. Wainwright & Co. analyst Mike Colonnese.
The partnership was unveiled during Galaxy Digital’s Q4 2024 earnings call. Under this agreement, Galaxy will repurpose 200 MW of its Helios mining facility in West Texas to support 133 MW of critical IT load for CoreWeave’s GPUs.
This contract is anticipated to generate $4.5 billion in total revenue over its duration, translating to approximately $300 million per year. This figure represents about 70% of Galaxy’s projected total revenues for 2024, according to the analyst. The deal’s terms are considered particularly advantageous compared to other high-performance computing contracts, with an estimation of $2.26 million in annual revenue per MW at nearly 90% EBITDA margins.
Helios Facility: Growth Opportunities Ahead
Although initial retrofit costs are expected to be between $1.46 billion and $1.73 billion, Colonnese emphasized that most of these expenses will be financed through project debt. CoreWeave will take on ongoing electricity and operational costs, ensuring Galaxy’s recurring expenses remain low. Additionally, the analyst pointed out that Galaxy has an extra 600 MW capacity at Helios available for future growth. He noted:
“Applying current data center valuations to contracted capacity for Galaxy’s new data center business, we estimate the segment could eventually be worth over $3.5B, a valuation that is far from being priced into shares.”
The analyst maintains a Buy rating on Galaxy’s stock, adjusting the price target from C$35 to C$30. This target reflects a roughly 40% discount compared to traditional financial brokers, attributed to “Galaxy’s smaller scale and narrow focus on digital assets,” as well as a similar discount to Coinbase.
Q4 Performance: Strong Results
Galaxy also outperformed expectations in Q4, reporting revenue of $698.1 million, a dramatic 388% increase from the previous quarter. This figure surpassed both the analyst’s model of $248.2 million and the consensus estimate of $202.7 million.
The company noted a realized gain of $560.6 million on digital assets for the quarter, alongside a realized loss of $84.9 million on investments. Total operating expenses reached $440.3 million, reflecting a 137% rise quarter-over-quarter, partly due to a $166.3 million one-time charge related to a settlement with the New York Attorney General concerning its involvement with LUNA.
Net income for the quarter was reported at $174.3 million with an EPS of 52 cents, exceeding the analyst’s estimate of $94.2 million and 28 cents per share.
