In the third quarter among nine major mining companies, three had over half of their revenue not from mining, while the others sold about 31,000 bitcoins to fund their transformation.

Written by: Blockhead

Translated by: Chopper, Foresight News

The financial reports of publicly traded bitcoin mining companies in the third quarter should be viewed primarily as a price signal. Electricity is being priced at its optimal use; according to Blockhead's estimate, at the current price of computing power, renting the same megawatt to AI generates about twice the revenue compared to using it for bitcoin mining. Among the nine companies assessed in this article, three already derive over half of their income from sources other than mining; the remaining few are selling bitcoins on their balance sheets to fund their transformation.

This has two implications. For the mining economy, it shows that profits have become so thin that even with high operational efficiency, capital will exit. For bitcoin, it means a new class of structural sellers has emerged, and the base of computing power is shifting to those mining operators who remain operational.

Two Algorithms for One Megawatt

According to MillionMiner data, the price of computing power (i.e., the revenue earned per PH/s of computing power per day) settled at $33.18 in October, down 17.5% from $40.24 on October 1. One of the lowest-cost operators, MARA, reported costs of $30.8 per PH/s per day, with its own metrics indicating a profit margin of about 7% at the end of October. According to its earnings call records and document summaries, in its own mines, an electricity price of $0.04 per kilowatt-hour means the electricity cost for mining one bitcoin is $39,674.

Power rented to AI represents another business. Core Scientific's announcement showed that its billed power capacity is 485 megawatts, which translates to over $700 million in annual hosting revenue. This equates to about $1.44 million per megawatt per year, with an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) profit margin of 57%. With energy efficiency between 15 to 20 joules per TH (terahash), one megawatt of mining corresponds to 50 to 67 PH/s, resulting in annual revenue of $600,000 to $800,000, from which approximately $350,000 in electricity costs must be deducted.

Based on these assumptions consistent with industry benchmarks and excluding depreciation, an AI tenant pays 1.8 to 2.4 times the revenue from mining for each megawatt, leaving a significantly higher net after deducting electricity costs. In standard AI data center contracts, electricity costs are designed to be pass-through expenses (tenants pay for electricity directly in addition to rent). Therefore, landlords almost entirely pocket the rent as gross profit, while miners must first deduct their electricity bills from the volatile cryptocurrency rewards.

Tenants will also bear a portion of capital expenditures: in the first half of the year, CoreWeave paid $180.9 million towards Core Scientific's capital expenditures.

Differences within the same company can also be seen. HIVE reported a gross profit margin of 34% from bitcoin mining, compared to 51% from high-performance computing and AI services, stating that the target EBITDA profit margin for its new GPU cluster is 80%. It also mentioned in its quarterly report the decrease in the market value of mining equipment, leading to a non-cash impairment resulting in a loss of $78.7 million. The drop in ASIC prices is the second signal that the mining hardware side is being repriced.

Sell Coins to Build AI Data Centers

Another difference is in the type of revenue. Mining revenue fluctuates with bitcoin prices and network difficulty: a 37% drop in the average price of bitcoin wiped out $94.8 million from MARA's quarterly revenue. AI leases, however, typically run for 15 to 20 years. Core Scientific reported contract revenues exceeding $24 billion, Cipher at $16.6 billion, TeraWulf's single facility at about $19 billion, and Hut 8 at about $26.6 billion — differing metrics lead to a total exceeding $85 billion.

Compared to bitcoin mining, where hardware difficulty adjusts to nearly zero approximately every 3 to 4 years, upgraded AI facilities represent a long-term infrastructure asset with a lifespan of 15 to 20 years. The cost is capital intensity: converting a facility from bitcoin mining to AI leasing is a typical high capital expenditure, high return infrastructure upgrade.

Therefore, the payback period is longer, but the end value of land and electricity assets is much higher. Core's capital expenditures in the first half of the year were $954.2 million, while IREN recorded a net loss of $26.3 million in its first financial quarter.

Regardless of what miners do, approximately 450 BTC are issued daily by the bitcoin protocol, so exiting does not change the supply. What changes is who holds these coins and who sells them. In this quarter, MARA sold a total of 17,488 BTC, which is 7.8 times its mined total of 2,247 BTC. MARA plans to continue selling to fund AI infrastructure and repay debt obligations. Riot sold 10,599 BTC in the third quarter, and Hut 8 sold about 3,100 BTC in the third quarter and October combined. Together, this amounts to about 31,000 BTC, approximately $2.4 billion, equivalent to 69 days' worth of new issuance.

Miners used to sell bitcoin to pay for electricity, now they sell bitcoin to finance capital expenditures.

Computing Power is Retreating, Risks are Changing

In October, miners' daily revenues ranged between $34 million and $43 million, and on November 2, the total network computing power was about 1,069 EH/s, approximately 8% lower than the historical record. The retreat of miners is visible: Core Scientific had nearly 50% fewer online mining machines than at the end of 2025, and IREN produced 402 BTC, down from 2,039 BTC a year ago. According to Blockhead's calculations based on disclosed figures, the combined mining revenue of Core Scientific, TeraWulf, and IREN has dropped about 84% compared to a year ago, from $334 million to about $54 million.

Core expects to complete its exit from the bitcoin business in the fourth quarter and to become a purely hosting service provider by 2027. IREN also anticipates that it will "essentially complete" its transition away from bitcoin mining by the end of 2026.

Remaining operators are expanding their shares: MARA's computing power has increased by 18%, and its block reward share has grown from 5.0% to 5.4%.

There is a structural consequence. Every megawatt now has a "AI option" reservation price, and convertible mining sites will only continue to mine when the computing power price exceeds the revenue that can be earned from renting it out at the same electricity rate. This creates a lower limit on computing power prices that is partially a function of AI electricity demand. Where AI wants access, mining loses its capability, and difficulty is adjusted to the remaining capacity. The dollar-denominated security budget continues to follow the price of bitcoin — in MARA's case, this price is down 37% year on year.

This shift trades bitcoin price risk for counterparty risk and political risk. As Core Scientific's primary tenant, CoreWeave reported revenues of $3.7 billion, a growth of 168%, with a backlog of approximately $133 billion and indicated that it expects to finance remaining expenditures primarily through delayed draws on time loans, which correlate with customer contracts. Its five-year credit default swap was around 1,152 basis points on Tuesday, closing at 1,278 basis points on Thursday.

The hosting agreement between Core and CoreWeave covers 590 megawatts, all financed by CoreWeave. On the electricity side, U.S. energy company NRG states that the Texas electricity reliability council pricing is running nearly 40% below planned levels; its 1.2 GW Texas data center project is on schedule, with an announcement expected by the end of the year; however, following the Texas incoming governor's vow to pause new data center approvals, its stock price fell 13.5% on November 4.

Analysts are taking a cautious stance. Keefe Bruyette warned that a "lease catalyst scarcity" would occur until early 2027. Bernstein significantly cut the target prices of seven mining companies by up to 54% due to Texas' situation. Blockhead previously reported on the sources of these issues in August — Wall Street is becoming more selective about which mining companies can truly capitalize on AI, and Texas’ order to audit data centers, which Bernstein believes makes existing miners more valuable.

Next, we will look at four indicators. The price of computing power against the efficient mining machine cost of about $31 is the first measure — below it, more capacity will exit, and difficulty will decrease; the second is miners' selling; MARA has already indicated it will continue to sell; the third is the pace of new leases, which is necessary for the industry to continue growing; the fourth is the financing situation of tenants and electricity, observable through CoreWeave's credit spreads and Texas' policies.