Executive Summary / Key Takeaways

• Record-Setting Performance & Operational Dominance: CleanSpark achieved its most successful quarter to date in Q3 2025, reporting nearly $200 million in revenue and $0.90 basic EPS, driven by its industry-leading 50 Exahash per second (EH/s) operational hashrate and highly efficient fleet (16.20 w/th). This performance underscores the strength of its vertically integrated, infrastructure-first Bitcoin mining strategy.
• Strategic Capital Management & Self-Funding Growth: The company has transitioned to a self-funding model, utilizing a portion of its Bitcoin production and an expanded $200 million Coinbase (COIN) credit facility to finance growth without equity dilution since November 2024. Its newly launched institutional-grade Bitcoin treasury desk aims to generate a 4-6% annualized yield on its substantial Bitcoin holdings (over 12,600 BTC).
• Technological Edge & Cost Leadership: CleanSpark's commitment to immersion cooling and continuous fleet upgrades has resulted in a significantly lower marginal cost to mine Bitcoin ($44,806 in Q3 2025) compared to spot prices, enhancing profitability and creating a durable competitive moat.
• Robust Growth Pipeline & Market Share Expansion: With a clear path to 57 EH/s (and options to 65 EH/s) fully funded, and over 1 gigawatt of contracted power capacity, CleanSpark is poised to expand its global hashrate share beyond its current 5.14%, capitalizing on a softening ASIC market and strategic M&A opportunities.
• Favorable Macro & Regulatory Tailwinds: Recent U.S. legislative actions (GENIUS Act, Clarity Act) and a supportive political environment are creating significant tailwinds for Bitcoin adoption and the mining industry, further solidifying CleanSpark's strategic positioning in rural America.

The CleanSpark Way: A Foundation of Vertical Integration and Strategic Foresight

CleanSpark, Inc. (NASDAQ:CLSK) stands as a vertically integrated pure-play Bitcoin mining company, a testament to its strategic pivot to digital asset mining around 2019. This foundational shift, following its incorporation in 1987 as Stratean Inc. and rebranding in 2016, laid the groundwork for its current market position. The company's "infrastructure-first" strategy, emphasizing wholly-owned and self-operated data centers across Georgia, Mississippi, Tennessee, and Wyoming, is central to its operational resilience and scalability. This approach allows CleanSpark to control every aspect of its mining operations, from power procurement to hardware deployment, minimizing external dependencies and counterparty risks that have historically challenged the industry.

The broader industry landscape is currently experiencing significant tailwinds, driven by increasing global Bitcoin adoption and rising institutional investment. Regulatory clarity, particularly in the U.S., is also emerging as a powerful catalyst. The recent repeal of SEC's SAB 121 in January 2025 has cleared the path for major financial institutions to engage more actively with digital assets. Furthermore, legislative efforts like the GENIUS Act and the Clarity Act in July 2025 are establishing comprehensive frameworks for stablecoins and digital assets, solidifying Bitcoin's commodity status. These developments, coupled with an executive order making Bitcoin a qualified asset in 401(k) accounts, signal a growing recognition of Bitcoin's role in U.S. innovation and monetary resilience.

CleanSpark's strategic response to these trends is rooted in its "CleanSpark Way" philosophy, which prioritizes operational excellence, capital stewardship, and a long-term view of Bitcoin. This disciplined approach has enabled the company to consistently meet and exceed its growth targets, even amidst market volatility. By focusing on high-return opportunities and leveraging its integrated model, CleanSpark aims to maximize shareholder value and solidify its leadership in the evolving Bitcoin ecosystem.

Technological Edge: Powering Efficiency and Scale

CleanSpark's operational prowess is fundamentally driven by its commitment to technological differentiation, particularly in fleet efficiency and infrastructure design. The company's mining fleet, comprising advanced ASICs like the S21 and S21 XT units, boasts an impressive average energy efficiency of 16.20 watts per terahash (w/th) as of June 30, 2025. This marks a significant improvement from 22.30 w/th a year prior and 19 joules per terahash in fiscal year 2024, further refining to 16.15 joules per terahash by January 2025. This continuous enhancement in efficiency is a direct result of strategic investments in the latest generation miners and the deployment of immersion cooling technology.

Immersion cooling is a cornerstone of CleanSpark's technological roadmap, particularly for its greenfield developments. This technology offers tangible benefits over traditional air-cooled systems, including enhanced miner performance, extended hardware lifespan, and improved heat extraction capabilities. While specific quantifiable metrics for these benefits (e.g., "superior energy yield in high-temperature environments by X%") are not explicitly detailed in company reports, the company's consistent improvement in fleet efficiency and its strategic choice to build more immersion infrastructure underscore its belief in these advantages. Management anticipates that immersion cooling will be crucial for achieving future efficiency gains, potentially pushing the industry towards single-digit joules per terahash levels.

The "so what" for investors is clear: CleanSpark's technological edge directly translates into a lower marginal cost of Bitcoin production. By operating a highly efficient fleet within optimized infrastructure, the company can mine Bitcoin at a significant discount to market spot prices. This cost leadership enhances profitability, strengthens gross margins, and provides a competitive moat against less efficient operators. The strategic investment in immersion cooling also positions CleanSpark to adapt to future technological advancements in ASIC design, ensuring long-term competitiveness and sustained returns on capital.

Financial Fortitude: Record Performance and Strategic Capital

CleanSpark's financial performance in the fiscal third quarter ended June 30, 2025, underscores the success of its strategic execution and technological advantages. The company reported record quarterly revenue of $198.64 million, a substantial 90.8% increase year-over-year. This surge was primarily driven by a significant increase in Bitcoin production to 2,012 BTC and a higher average Bitcoin price of approximately $98,500 during the period. Net income for the quarter reached an impressive $257.39 million, a dramatic turnaround from a net loss of $236.24 million in the prior year, largely benefiting from the mark-to-market adjustment of its Bitcoin holdings. Adjusted EBITDA, a key measure of operational efficiency, soared to $377.70 million.

The company's cost structure further highlights its operational effectiveness. The marginal cost to mine one Bitcoin in Q3 2025 was $44,806, significantly below the average spot price, demonstrating the profitability inherent in its mining operations. While this cost saw a slight increase from the previous quarter due to rising network difficulty, it was largely mitigated by ongoing investments in fleet efficiency. The all-in power cost per kilowatt-hour decreased to $0.056, reflecting seasonal price easing and the energization of additional sites within its diversified power portfolio. CleanSpark's gross margin remained robust at 54.6%, showcasing its ability to manage for profitability rather than simply chasing the lowest power prices.

CleanSpark's liquidity position is robust, ending Q3 2025 with over $1 billion in total liquidity, comprising $35 million in cash and over 12,600 Bitcoin valued at approximately $1 billion. This strong balance sheet supports a strategic shift towards self-funded growth, moving away from equity dilution. Since November 2024, the company has not issued a single share to capitalize its business. A key component of this strategy is its expanded $200 million Bitcoin-backed credit facility with Coinbase Prime, which provides flexible, non-dilutive capital for accretive CapEx. The company also demonstrated financial acumen by exercising an option to purchase 13,200 miners for $76.6 million in April 2025, negotiating payment in Bitcoin at a 15% premium to spot, resulting in approximately $10 million in savings and a free call option to repurchase Bitcoin. This innovative transaction underscores its commitment to capital stewardship.

Competitive Arena: Outpacing the Pack

CleanSpark operates in a highly competitive Bitcoin mining landscape, where scale, efficiency, and strategic capital allocation are paramount. With an operating hashrate of 50 EH/s as of June 30, 2025, CleanSpark commands approximately 5.14% of the total global hashrate, positioning it among the largest miners worldwide. This market share is a testament to its disciplined growth and operational excellence, allowing it to outpace the broader mining landscape.

Compared to direct competitors like Marathon Digital Holdings (MARA), Riot Blockchain (RIOT), and Hut 8 Mining (HUT), CleanSpark differentiates itself through its vertically integrated, wholly self-operated infrastructure and its emphasis on energy technology solutions. While MARA and RIOT may lead in sheer mining scale or aggressive expansion, CleanSpark's focus on superior fleet efficiency (16.20 w/th) and a significantly lower cost to mine Bitcoin ($44,806 in Q3 2025) provides a distinct profitability advantage. Its diversified power portfolio across four states offers greater operational resilience and stability in energy markets, a qualitative edge over competitors with more concentrated operations.

A notable competitive dynamic is the pivot by some peers towards High-Performance Computing (HPC) and Artificial Intelligence (AI). CleanSpark views this as a complex and capital-intensive diversion, with longer timelines to revenue generation compared to Bitcoin mining. This strategic choice by competitors is seen as creating opportunities for CleanSpark, as it can lead to a softening of demand for ASICs and potential M&A opportunities for Bitcoin-specific assets at attractive valuations. The company's ability to self-fund its growth without equity dilution further distinguishes it from peers who may still rely on dilutive capital raises or unsecured lending, a practice CleanSpark explicitly avoids due to risk management concerns.

Even against infrastructure-focused players like MYR Group Inc. (MYRG), CleanSpark's integrated approach, combining mining with advanced energy management, offers a unique value proposition. Its flexible load model makes it an attractive partner for utilities in rural America, helping to balance demand and improve grid resiliency, which can secure access to low-cost power. This strategic positioning allows CleanSpark to leverage its assets for superior returns, even as the competitive landscape evolves.

Strategic Outlook: Beyond 50 Exahash and Treasury Innovation

CleanSpark's outlook is one of continued, disciplined growth, building on its recent achievements. Having reached 50 EH/s in June 2025, the company is now focused on rapidly delivering an additional 10 EH/s of operational hashrate. All necessary miners for this expansion are secured, and nearly half of the required infrastructure is already in place, with the remainder in final planning stages. This initiative is expected to further expand CleanSpark's competitive position, representing approximately a 1% increase in global hashrate. Beyond this immediate target, active projects are underway to push operational hashrate towards 57 EH/s, with vendor options providing flexibility to scale to 65 EH/s.

The company's power pipeline is robust, with over 1 gigawatt (GW) of contracted capacity, 200 megawatts (MW) of which are immediately available for expansion. Additionally, CleanSpark is evaluating approximately 1.2 GW of near-term power opportunities and exploring an additional 1.7 GW of long-term projects that would require utility-level infrastructure investments. These opportunities, primarily in existing operational areas like Tennessee and Wyoming, are expected to be developed through greenfield construction and organic expansion, leveraging CleanSpark's proven execution playbook.

A significant strategic initiative is the newly launched institutional-grade Bitcoin treasury desk. This team aims to generate responsible, risk-adjusted yield from CleanSpark's Bitcoin holdings. The strategy, currently in a "crawl, walk, run" phase, targets an annualized yield of 4% on the entire Bitcoin treasury, by allocating approximately 40% of the HODL balance to derivative strategies like covered calls. This implies a target return of around 10% on the actively managed portion. Management explicitly avoids Bitcoin lending, citing concerns over unsecured exposure and counterparty risk, preferring derivative products for their better risk-adjusted performance and lower collateral requirements. This innovative approach to treasury management is designed to preserve capital, manage cash flow, and further reduce the cost of growth capital in non-dilutive ways.

Risks and Challenges: Vigilance Amidst Growth

Despite its strong position, CleanSpark faces several pertinent risks and challenges that warrant investor attention. A significant concern is the potential for U.S. importation tariffs. In May 2025, the company began receiving invoices from U.S. Customs and Border Protection (CBP) asserting Chinese origin import tariffs on miners purchased from April to June 2024. The total potential liability for previously purchased miners could reach approximately $185 million, excluding statutory interest. While CleanSpark intends to vigorously defend against these allegations, an unfavorable outcome could materially impact its financial performance and increase future hardware costs.

The company's financial instruments also carry risks. Counterparty risk exists with its privately negotiated capped call transactions, as the exposure is unsecured. Default by an option counterparty could lead to increased dilution or uncompensated losses. Furthermore, the accounting treatment for its $650 million 0% convertible senior notes due 2030 could adversely affect reported earnings and financial condition. The amortization of issuance costs will result in higher recognized interest expense than cash payments, and the "if-converted" method for diluted EPS could reduce reported figures. A reclassification of the notes to a current liability, even without actual conversion, could also materially reduce reported working capital.

Operational challenges include technological obsolescence and supply chain vulnerabilities. Miners experience wear and tear, and the need to acquire newer, more efficient models for competitiveness requires substantial capital investment. The global supply chain for ASICs remains heavily reliant on Asian manufacturers, exposing CleanSpark to geopolitical risks, trade restrictions, and potential detentions or seizures by CBP, which have occurred in the past. Bitcoin price volatility also remains a fundamental risk, as its value is influenced by a multitude of external factors.

Internally, CleanSpark has identified material weaknesses in its internal control over financial reporting, specifically concerning information systems general controls over its general ledger and controls related to property, plant, and equipment, and deposits on miners. While remediation efforts are underway, including enhanced user access controls and improved documentation processes, the effectiveness of these changes is still being tested. These weaknesses, if not fully remediated, could pose risks to the accuracy and timeliness of financial reporting.

Conclusion

CleanSpark, Inc. has demonstrably transformed into a formidable pure-play Bitcoin mining powerhouse, leveraging a disciplined, vertically integrated strategy to achieve record-setting financial and operational results in Q3 2025. Its commitment to technological leadership, particularly in fleet efficiency and immersion cooling, underpins a significant cost advantage in Bitcoin production. This, combined with a strategic pivot to self-funded growth and innovative Bitcoin treasury management, positions the company for sustained expansion without relying on dilutive equity.

The company's clear roadmap to 57 EH/s (with options to 65 EH/s), robust power pipeline, and ability to capitalize on a softening ASIC market underscore its strong growth trajectory. Amidst a backdrop of increasingly favorable regulatory and macro tailwinds for Bitcoin, CleanSpark's strategic focus on rural American operations and its flexible load model further enhance its competitive standing. While challenges such as potential tariffs and internal control weaknesses require vigilant management, CleanSpark's proven execution, financial fortitude, and technological edge make it a compelling investment thesis for those seeking exposure to a responsibly scaled, high-performing leader in the evolving digital asset landscape.