Microsoft ended up spending less than expected on capital expenditures last quarter and blamed delays in certain third-party capacity coming online.
- IREN shares fell 2.5% in overnight trading, after a 11.4% drop in the regular session.
- Data center and cloud stocks plunged on Wednesday after Democrats won Congress.
- IREN will report Q1 results on Thursday and analysts expect sales to have declined 9%.
IREN Ltd. (IREN) drew attention from retail traders on Wednesday as cloud and AI stocks came under pressure after Democrats won the midterm elections. The Australian data center company also faced scrutiny after a report said it contributed to Microsoft’s lower AI capital spending last quarter.
IREN shares fell 2.5% in overnight trading, after a 11.4% drop in the regular session. Notably, IREN is scheduled to report its fiscal first-quarter results after the markets close on Thursday.
The Information reported, citing unnamed sources, that IREN faced delays at the Childress, Texas data center site, leading Microsoft to delay spending it had slated for the September quarter.
Microsoft spent about $5 billion less on capital expenditures than planned last quarter because data center capacity it expected to rent wasn’t ready on time. “Capital expenditures were $45.2 billion as some third-party capacity deliveries we expected in Q1 were delayed,” Microsoft CFO Amy Hood said in the analyst call last week.
One provider involved is Iren, though it is unclear how much its delay contributed to the shortfall, according to The Information’s report. Microsoft had agreed to spend $9.7 billion over five years renting Nvidia-powered servers at Iren’s Childress, Texas, data center. Iren had planned to bring the servers online gradually through 2026, but has been facing delays.
Cloud Stocks Get Hammered
Stocks tied to data centers fell Wednesday as investors expect slower AI buildout after Democrats win Congress. Investors and analysts believe that Democrats would tighten regulations for data centers, effectively slowing the buildout of AI infrastructure.
Data center stocks plunged: CoreWeave (CRWV) and Core Scientific (CORZ) fell 10% each while Nebius and Applied Digital fell 7% each , with all four falling further in overnight trading.
IREN’s Q1 Expectations
IREN stocks have fallen sharply after hitting a record high last November, and investors are looking for signs of revival.
Analysts expect sales to fall 9% to $221.7 million in its fiscal first quarter, which would mark the third consecutive degrowth in sales in a row, per Koyfin. They expected adjusted loss to be $0.67 per share, sharply higher than $0.01 per share loss in the corresponding quarter a year ago.
Retail View On IREN
On Stocktwits, the retail sentiment for IREN improved to ‘neutral’ from ‘bearish,’ with traders posting about the Microsoft related news and the stock rising high up in the Stocktwits trending list.
“$IREN A setback is just a setup for a comeback. Tomorrow we will shine and lift the entire sector,” a trader said.
Another wrote: “I’ve been in the market long enough to chill out in these situations, literally parked 180k here and I’m as cool as ever, looking for 40+ by EOY when enough people have panic sold, speed running to 1 million.”
Year to date, IREN stock is down 45%.
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