Executive Summary / Key Takeaways

• Riot Platforms is strategically leveraging its vertically integrated model and large-scale, low-cost power infrastructure in Texas and Kentucky to drive Bitcoin production efficiency and pursue high-value AI/HPC data center opportunities.
• The company's Q1 2025 results demonstrated strong year-over-year revenue growth in Bitcoin Mining and Engineering, underpinned by increased hash rate deployment, improved operational uptime, and a favorable Bitcoin price environment compared to the prior year period.
• Riot's differentiated power strategy, combining fixed-price agreements with demand response participation, continues to yield one of the lowest all-in power costs in the industry, significantly enhancing its cost to mine Bitcoin.
• A major strategic pivot is underway to evaluate and develop the substantial power capacity at the Corsicana Facility (up to 1 GW total) for AI/HPC uses, aiming to maximize asset value and diversify revenue streams with potentially more predictable cash flows.
• Key initiatives like the Rhodium asset acquisition, ongoing Corsicana infrastructure development (substation, land, fiber, water), and strategic acquisitions (Block Mining, E4A Solutions) are enhancing operational control, expanding capacity, bolstering engineering capabilities, and positioning Riot for future growth in both Bitcoin mining and AI/HPC.

The Foundation: Vertical Integration and Low-Cost Power

Riot Platforms has evolved from an early participant in the Bitcoin mining space in 2017 into a vertically integrated infrastructure platform. This transformation was significantly accelerated by the 2021 acquisition of Whinstone US, Inc., which brought the massive Rockdale Facility into the fold and established a foundation of owned and operated power infrastructure. This strategic shift recognized that in the energy-intensive business of Bitcoin mining, control over power sourcing and infrastructure is paramount to achieving cost leadership and operational resilience.

At the heart of Riot's strategy lies its differentiated approach to power. The company utilizes long-term power purchase agreements, notably at its Rockdale Facility, which provide access to fixed-price electricity. This is complemented by active participation in Demand Response Services Programs and ERCOT's Four Coincident Peak (4CP) program in Texas. This strategy allows Riot to strategically curtail mining operations during periods of high grid demand or high market power prices, selling unused power back to the grid for credits or reducing transmission costs. In the first quarter of 2025 alone, Riot earned $7.8 million in power curtailment credits, contributing to an exceptionally low all-in power cost of $0.034 per kilowatt-hour. This figure stands in stark contrast to the estimated higher power costs faced by many competitors (often ranging from 4 to 6 cents/kWh), providing Riot with a significant, quantifiable advantage in its direct cost to mine Bitcoin. This low power cost is a critical moat, enabling Riot to maintain profitability across a wider range of Bitcoin price environments and network difficulty levels compared to less efficient peers.

Beyond power, Riot's vertical integration extends to its engineering capabilities, significantly bolstered by the acquisitions of ESS Metron and, more recently, E4A Solutions in December 2024. This segment designs and manufactures custom-engineered electrical products like switchgear and power distribution centers, essential components for large-scale energy infrastructure. This in-house expertise and manufacturing capacity mitigate supply chain risks, reduce build-out costs, and enhance the company's ability to maintain and optimize its facilities, contributing directly to improved operational uptime. E4A Solutions specifically adds expertise in maintaining and servicing medium- and high-voltage substations, critical for ensuring the reliability of Riot's power infrastructure and supporting operational efficiency targets.

Operational Scale and Performance

Riot's operational footprint is substantial, anchored by its Rockdale Facility (700 MW developed capacity) and the rapidly developing Corsicana Facility (400 MW Phase I completed, targeting 1 GW total). The acquisition of Block Mining in July 2024 added operational sites in Kentucky, providing access to new energy markets outside of ERCOT (MISO and TVA) and a pipeline for over 300 MW of additional capacity. As of March 31, 2025, Riot's total deployed hash rate reached 33.7 Exahash per second (EH/s), a significant increase from prior periods, driven by the energization of Corsicana and ongoing deployments.

Operational efficiency has been a key focus. Management has aimed to improve the utilization rate of its deployed hash rate, targeting greater than 95% uptime excluding power strategy-related curtailments. Initiatives across facilities, including replacing older machines with newer, more efficient MicroBT miners (part of a long-term agreement for 34.6 EH/s with an option for 75 EH/s more), are contributing to this goal. The company's fleet efficiency is expected to improve to 20.3 Joules per Terahash (J/TH) in 2025, further reducing the energy required per unit of hash power.

The impact of this scale and operational focus is evident in recent performance. In the first quarter of 2025, Riot mined 1,530 Bitcoin, an increase compared to the prior year period despite the April 2024 halving and a substantial increase in the global network hash rate. The direct cost to mine one Bitcoin (excluding depreciation) was $43,808 in Q1 2025. While this figure fluctuates with power costs and network difficulty, Riot's low all-in power cost remains a critical factor in keeping this competitive. Non-power direct costs as a percentage of total direct cost have trended lower, indicating improved economies of scale as the company's hash rate grows.

Financial Health and Recent Results

Riot's financial strategy emphasizes maintaining a strong balance sheet to fund growth and act opportunistically. The company primarily generates non-cash revenue through Bitcoin mining, which is managed according to its Bitcoin Treasury Strategy. This strategy involves retaining mined Bitcoin (holding 19,223 BTC valued at $1.59 billion as of March 31, 2025) and using various financing methods, including ATM equity offerings and debt, to fund operations and expansion.

The first quarter of 2025 saw total revenue reach $161.4 million, a significant increase from $79.3 million in the prior year period. This growth was primarily driven by a near 100% increase in Bitcoin Mining revenue ($142.9 million vs. $71.4 million), benefiting from higher Bitcoin prices compared to Q1 2024 and increased production. The Engineering segment also saw substantial revenue growth ($13.9 million vs. $4.7 million), boosted by the E4A Solutions acquisition and accelerated project completion.

Despite strong revenue growth, Riot reported a net loss of $296.4 million in Q1 2025, compared to a net loss of $211.8 million in Q1 2024. This loss was heavily influenced by non-cash items, most notably a $208 million loss from the change in fair value of Bitcoin held (reflecting the period's price decline) and $77.9 million in depreciation and amortization (increasing due to new facilities and miners). Selling, general, and administrative expenses also rose to $71.4 million (from $57.7 million), partly due to one-time legal and professional fees related to ongoing litigation and M&A activity. Excluding these one-time items, cash SG&A is expected to run between $30 million and $33 million per quarter in 2025.

Liquidity remains a focus. As of March 31, 2025, Riot held $163.7 million in cash and cash equivalents. The company has demonstrated flexibility in accessing capital, utilizing its ATM program (raising $68.4 million net in Q1 2025) and recently securing a $100 million Bitcoin-collateralized credit facility with Coinbase (COIN) (upsized to $200 million in May 2025). This allows Riot to fund CapEx ($198 million planned for 2025) and operations while managing dilution and leveraging its Bitcoin holdings. The company adheres to an internal policy of not exceeding a 40% debt-to-Bitcoin value ratio.

Strategic Evolution: The AI/HPC Opportunity

A significant strategic initiative is now taking center stage: the formal evaluation and potential development of Riot's substantial power capacity for High-Performance Computing (HPC) and Artificial Intelligence (AI) applications. This is particularly focused on the approximately 600 MW of undeveloped capacity at the Corsicana Facility, which has a total approved interconnect capacity of 1 GW.

The rationale for this pivot is compelling. The market for AI/HPC data centers is experiencing explosive demand, driven by the "arms race" among hyperscalers for compute capacity. Industry forecasts project a need for nearly 30 gigawatts of additional power demand for AI/HPC over the next five years. Critically, these applications require reliable, large-scale power, often in proximity to major markets, with speed-to-market being a key priority.

Riot's Corsicana Facility is uniquely positioned to capitalize on this demand. It offers 1 GW of approved power capacity, owned land (with additional acreage being acquired), proximity to a Tier-1 data center market (Dallas, 60 miles away), and scalability. Riot is actively developing the necessary infrastructure, including the 600 MW substation, securing municipal water easements, and enhancing fiber connectivity (increasing lines from two to four). This ongoing development, including completed civil work providing a prime development pad, positions Corsicana for immediate first-phase AI/HPC development targeting energization in 2026.

Management views this as a value-maximizing opportunity, potentially offering long-term, predictable cash flows with credible counterparties, which could reduce the volatility inherent in Bitcoin mining revenue and attract higher valuation multiples. While the evaluation is ongoing and no specific deals are finalized (no LOI in place as of the Q1 2025 call), Riot is actively engaging with potential hyperscaler counterparties, leveraging financial advisors (Evercore (EVR) and Northland), and building internal expertise to pursue various deal structures, with a build-to-suit data center currently seen as the most likely path to maximize asset value.

This strategic pivot does not diminish Riot's commitment to Bitcoin mining. The company continues to scale its mining operations (targeting 38.4 EH/s by end of 2025) and believes its low-cost production is a superior method for accumulating Bitcoin compared to direct market purchases. However, the AI/HPC initiative represents a significant potential avenue for growth and value creation, leveraging the same core asset – large-scale, low-cost power infrastructure – in a potentially higher-value application.

Competitive Landscape and Positioning

Riot operates in a highly competitive environment, both within the Bitcoin mining sector and increasingly, at the intersection of energy and high-performance computing. In Bitcoin mining, its primary competitors include large publicly traded miners like Marathon Digital (MARA), Hut 8 (HUT), CleanSpark (CLSK), and Bitfarms (BITF). Riot differentiates itself primarily through its vertically integrated model and, most importantly, its low-cost power strategy. While competitors like MARA may pursue aggressive hashrate growth, Riot's focus on power efficiency provides a quantifiable cost advantage. Its owned infrastructure and engineering capabilities offer greater control over development timelines and operational uptime compared to miners reliant on hosting agreements or third-party builders.

The strategic move into AI/HPC pits Riot against a different set of players, including hyperscalers themselves and traditional data center developers. Here, Riot's competitive advantage lies in its existing large-scale power infrastructure (1 GW at Corsicana, 700 MW at Rockdale), strategic locations near major data center markets, and the speed-to-market potential offered by its developed sites and in-house engineering capabilities. The "arms race" for power capacity among AI/HPC players creates a demand imbalance that Riot is uniquely positioned to exploit, offering significant blocks of power that are scarce in the market. While some competitors might focus on technological efficiency (like CLSK's hardware focus) or geographic diversification (like BITF), Riot's strength is the foundational energy asset itself and the ability to build the necessary electrical infrastructure efficiently.

Recent developments, such as the Rhodium asset acquisition, further solidify Riot's control over its Rockdale capacity (now 100% dedicated to Riot) and eliminate costly legacy hosting disputes, streamlining operations and improving financial performance relative to peers still burdened by such arrangements. The E4A acquisition enhances the engineering segment's ability to serve external customers in the growing electrical infrastructure market, adding another layer of potential revenue diversification and competitive positioning.

Risks and Challenges

Despite its strategic strengths and growth opportunities, Riot faces significant risks. The most prominent is the inherent volatility of the Bitcoin market. Fluctuations in Bitcoin price directly impact revenue, the value of Bitcoin holdings, and overall financial performance, as demonstrated by the significant non-cash loss in Q1 2025 due to price changes. Network difficulty increases, driven by competition, also impact mining rewards per unit of hash rate.

Operational risks include achieving and maintaining high utilization rates across its growing fleet and managing the complexities of large-scale infrastructure development. While progress has been made on uptime, achieving the 95%+ target is an ongoing effort. Supply chain constraints, although partially mitigated by vertical integration and proactive procurement, can still impact development schedules and costs.

The strategic pivot to AI/HPC introduces new execution risks. Success depends on the ability to complete complex data center development, secure attractive leases with high-quality tenants, and potentially arrange significant project financing. The timeline and economics of these deals are uncertain, and failure to execute could result in substantial capital expenditures without commensurate returns.

Legal proceedings, particularly those inherited from the Whinstone acquisition (though the Rhodium dispute is settled, litigation with GMO remains ongoing), continue to incur significant legal expenses and pose potential liabilities, impacting financial results and management focus. Finally, reliance on equity and debt financing for growth, while necessary, carries the risk of dilution for existing shareholders and potential limitations imposed by debt covenants.

Conclusion

Riot Platforms is strategically positioned at the nexus of Bitcoin mining and the burgeoning AI/HPC data center market, leveraging its foundational strength in large-scale, low-cost power infrastructure and vertical integration. The company's history of building and operating significant energy assets, combined with its differentiated power strategy, provides a tangible cost advantage in Bitcoin mining, enabling it to generate Bitcoin yield efficiently.

The formal pursuit of the AI/HPC opportunity, particularly at the 1 GW Corsicana Facility, represents a significant potential catalyst for future value creation. By developing its power assets for high-demand computing applications, Riot aims to diversify its revenue base with more stable, long-term cash flows, potentially attracting a higher valuation multiple. The ongoing infrastructure development, land acquisition, and engagement with hyperscaler counterparties underscore the seriousness of this strategic pivot.

While challenges such as Bitcoin price volatility, operational execution, and the complexities of the AI/HPC market persist, Riot's strong balance sheet, access to capital, and in-house engineering capabilities provide a solid foundation. The investment thesis for Riot hinges on its ability to successfully execute on both fronts: continuing to scale its low-cost Bitcoin mining operations while simultaneously capitalizing on the AI/HPC opportunity to maximize the value of its premier energy assets. Investors should closely monitor progress on the Corsicana development, the securing of AI/HPC leases, operational efficiency improvements, and the company's ability to manage its capital structure amidst growth.