Executive Summary / Key Takeaways

• Bit Digital is undergoing a significant strategic pivot, shifting from a primary focus on volatile Bitcoin mining to establishing itself as a diversified High-Performance Computing (HPC) infrastructure provider encompassing high-margin Cloud Services and Colocation Data Centers.
• The acquisition of Enovum Data Centers Corp. was a transformative step, providing critical data center ownership, an experienced development team, and a robust pipeline of over 500 megawatts of potential capacity, enabling vertical integration and new revenue streams.
• HPC revenue is growing rapidly, becoming the largest segment and contributing significantly to gross profit, with specific contracts like the anchor customer ($50M annualized potential), DNA Fund ($20.9M annualized), and Cerebras (5MW colocation) underpinning near-term growth expectations.
• The Company is actively pursuing non-dilutive financing options, including commercial mortgages and vendor financing, to fund its capital-intensive HPC expansion, aiming to reduce reliance on equity raises seen in its mining-focused past.
• While Bitcoin mining remains part of the portfolio, the strategy is now opportunistic, focusing on fleet efficiency and cost reduction rather than aggressive exahash growth, complemented by a growing ETH staking business and a recent significant shift of treasury holdings to Ethereum.

The Strategic Pivot: From Bitcoin Blocks to AI Compute

Bit Digital, Inc. (NASDAQ:BTBT), historically known primarily for its Bitcoin mining operations, is fundamentally transforming its business model. Recognizing the inherent volatility and increasing capital intensity of the Bitcoin mining sector, particularly post-halving, the Company has strategically pivoted to become a diversified High-Performance Computing (HPC) infrastructure provider. This shift, primarily under the WhiteFiber brand, encompasses high-margin Cloud Services and Colocation Data Centers, complemented by its digital asset holdings and ETH staking activities.

This evolution is not merely an incremental change but a deliberate response to market dynamics and a pursuit of more predictable, higher-margin revenue streams. Management explicitly views HPC as a "better long-term investment" and is prioritizing capital allocation towards this segment. The goal is to build a "durable, diversified and high-margin infrastructure platform" that can generate consistent cash flows, providing stability against the "spicy asset appreciation" potential of digital assets.

The competitive landscape is also evolving. While traditional Bitcoin miners like Marathon Digital (MARA), Riot Platforms (RIOT), and CleanSpark (CLSK) continue to focus heavily on scaling hash rate and operational efficiency in mining, BTBT is positioning itself against these players not just in mining, but also against emerging HPC providers and even indirectly against cloud giants like AWS and Azure. The Company's strategy is to leverage its experience in procuring specialized equipment and managing distributed infrastructure to compete in the demanding AI and machine learning compute market.

A pivotal moment in this transformation was the acquisition of Enovum Data Centers Corp. in October 2024 for approximately $46 million. This transaction was "transformational," providing BTBT with critical data center ownership, an experienced development team with a proven track record in retrofitting industrial sites, a strong customer base, and a significant pipeline of expansion opportunities. This vertical integration allows BTBT to offer colocation services directly, capture additional margin, and gain greater operating flexibility by housing its own GPU inventory.

Building the Moat: Technology and Infrastructure

At the heart of Bit Digital's HPC strategy is its focus on providing high-performance, reliable infrastructure tailored for generative AI and machine learning workloads. This goes beyond simply acquiring GPUs; it involves building a robust, software-driven platform and securing strategic partnerships.

BTBT is an authorized NVIDIA (NVDA) Preferred Partner, and has partnerships with SuperMicro (SMCI), Dell (DELL), Hewlett Packard Enterprise (HPE), and Quanta Computer Inc. This network allows the Company to be "among the first service providers to offer H200, B200, and GB200 servers," positioning it at the forefront of AI hardware deployment. The focus is on delivering a "performance-first solution" designed for demanding AI workloads, which management believes is a key differentiator in a market where some competitors offer solutions that "fall short on performance and reliability."

The Company is investing in proprietary software development, including the recent launch of an API layer for external provisioning of bare metal GPU servers, with Shadeform as the first integration partner. This initiative aims to streamline operations and position WhiteFiber as a "premium cloud infrastructure offering focused on maximum performance and reliability." While specific quantifiable performance metrics for this platform are not detailed, the strategic intent is clear: to build a competitive moat based on technical excellence and customer satisfaction, thereby reducing churn.

On the data center side, the strategy involves acquiring and retrofitting industrial sites to Tier-3 standards, often in or near metropolitan areas to meet the low-latency requirements of inference workloads. This approach, spearheaded by the experienced Enovum team, is intended to accelerate time to market and reduce costs compared to greenfield development. The recent physical installation of a pilot GB200 liquid cool system at Montreal II highlights the Company's commitment to testing and deploying next-generation liquid-cooled systems. This focus on infrastructure ownership and advanced cooling technologies provides a tangible advantage in delivering the high-density capacity required for modern AI hardware.

Segment Performance and Strategic Execution

Bit Digital's financial performance in recent periods clearly reflects its strategic pivot. While total revenue in Q1 2025 decreased by 17% year-over-year to $25.11 million, this was primarily due to a significant 64.5% decline in Digital Asset Mining revenue, impacted by the Bitcoin halving and fleet redeployment. In stark contrast, Cloud Services revenue surged by 83.9% year-over-year to $14.84 million, and the newly established Colocation Services segment contributed $1.64 million.

The HPC segments are not only growing rapidly but also demonstrating superior profitability. In Q1 2025, Cloud Services achieved a gross margin of 59%, expanding sequentially, while Colocation Services posted a gross margin of 67%. This contrasts favorably with the Digital Asset Mining segment's 21% gross margin in the same period. For the full year 2024, HPC revenue made up over 40% of total revenue and contributed 64% of gross profit in Q4 2024, driving the overall gross margin for the year to 42.3%, up from 34% in 2023.

Operational metrics also underscore the shift. The active Bitcoin mining hash rate stood at approximately 1.5 EH/s at the end of Q1 2025, down from previous levels, reflecting the fleet redeployment and strategic prioritization. The Company targets returning to approximately 2.5 EH/s by June 2025 and around 3 EH/s in the first half of 2025 through targeted upgrades and new hosting agreements, aiming for improved efficiency around 22 J/TH. However, management emphasizes that significant growth capital is not being allocated to mining, viewing it as a "non-capital-intensive call option on higher Bitcoin prices."

The ETH Staking segment continues to contribute revenue, earning $560,641 in Q1 2025 from native staking activities. The Company holds a significant ETH position, recently shifting its entire treasury to Ethereum following a $172 million public equity raise. This move positions BTBT as one of the largest ETH holders among public companies and aligns with management's bullish long-term view on ETH's utility and staking yield advantage over ETFs.

Outlook, Guidance, and Capital Allocation

Management's outlook is firmly centered on the continued expansion of the HPC business. They expect "stronger sequential revenue growth in the second quarter and continued growth in the third quarter of 2025" for Cloud Services, driven by recently secured contracts. Key deployments include:

• The anchor customer's 464 B200 GPU deployment, representing approximately $50 million of annualized revenue over an 18-month term, with a start date adjusted to August 20, 2025.
• Expansion with DNA Fund, adding 616 H200 GPUs across two contracts totaling approximately $10.8 million of additional annualized revenue, commencing in May 2025. This brings DNA Fund's total contracted deployment to 1192 GPUs, representing approximately $20.9 million of annualized revenue.
• Initial deployments with Boosteroid, the third-largest cloud gaming provider, with potential to scale significantly throughout 2025, targeting around 10,000 GPUs.

On the Colocation side, development is progressing on key sites:

• Montreal II (5 MW Tier-3 data center) is expected to come online around early to mid-third quarter 2025, with approximately $19.3 million expected investment for the retrofit.
• Montreal III (supporting the 5 MW Cerebras colocation contract) is on track for a targeted go-live date of July 2025.
• The acquisition of a 95-acre property in North Carolina for $53.20 million, intended for data center development, is expected to close around May 19, 2025.

The development pipeline remains robust, with over 500 megawatts of potential capacity under evaluation or negotiation across Canada and the US, including 156 megawatts under exclusive LOI. Management is engaged in discussions for "several large contract discussions," each with annualized revenue potential above $100 million over three to five-year terms.

To fund this capital-intensive expansion, BTBT is prioritizing non-dilutive financing. They are "nearing finalization of a mortgage financing package for our Montreal II facility" and have initiated the process for commercial mortgage financing in the US. They are also exploring vendor financing and leasing structures for GPU investments. While the ATM remains available as a tool (with a new S-3 registration filed for up to $500 million), recent equity raises (including $46.70 million net proceeds subsequent to Q1 2025) are balanced with digital asset sales ($32 million of Bitcoin sold in Q1 2025) to strengthen liquidity and support strategic initiatives. The recent C$60 million credit facility with RBC (RY) for the data center business further validates the model and provides a foundation for growth.

Risks and Challenges

Despite the promising strategic direction and growth prospects, Bit Digital faces significant risks. The inherent volatility of digital asset prices continues to impact financial results, as seen in the $49.21 million loss on digital assets in Q1 2025 due to price decreases. While HPC revenues offer stability, the Company's balance sheet remains exposed to crypto price fluctuations.

Execution risk on the data center build-outs and GPU deployments is substantial. Delays in securing financing (as seen with Montreal II), obtaining permits, managing construction, or procuring hardware could push back revenue recognition and increase costs. Hardware reliability issues, particularly with newer GPU models (like early B200 iterations), could impact service delivery and customer satisfaction.

The competitive landscape in HPC is intensifying, with both traditional miners diversifying and established cloud providers offering scaled solutions. BTBT needs to consistently deliver high performance and reliability to retain customers in a market with compressed sales cycles and increasing demands for readily available inventory. Evaluating pre-ordering GPUs to meet demand speed increases inventory risk.

Regulatory changes, particularly concerning digital assets and data center operations (including potential impacts from tariff wars on imported components), could affect the business. Legal proceedings, such as the ongoing suit against Blockfusion, introduce uncertainty and potential costs.

Conclusion

Bit Digital is in the midst of a profound transformation, strategically pivoting from a Bitcoin mining-centric model to a diversified HPC infrastructure provider. The acquisition of Enovum and the rapid build-out of the WhiteFiber platform, encompassing Cloud Services and Colocation, are foundational to this shift. While the legacy mining business faces challenges post-halving, the growth and higher margins in HPC segments are driving overall financial performance and represent the core of the investment thesis.

The Company's focus on securing key HPC contracts, developing a substantial data center pipeline, and prioritizing non-dilutive financing positions it for significant future growth. Leveraging strategic partnerships for advanced hardware and investing in proprietary software aim to build a competitive moat based on performance and reliability. While risks associated with crypto volatility, execution challenges, and increasing competition remain, the strategic pivot towards predictable, high-margin HPC revenues, supported by a strong balance sheet and opportunistic digital asset strategy, offers a compelling narrative for long-term value creation. The successful execution of the data center build-out and the continued expansion of the HPC customer base are critical indicators to watch as Bit Digital seeks to establish itself as a formidable player in the evolving landscape of high-performance computing.