Summary TeraWulf's Q1 earnings report and fiscal year outlook should focus on their strategic shift to hybrid mining, combining Bitcoin mining with HPC hosting for AI hyperscaling. TeraWulf's asset-light approach to HPC hosting, avoiding GPU CapEx and market risks, positions it as a flexible and attractive infrastructure partner. The company's financial flexibility has improved, with significant debt repayment and new funding. Institutional interest is growing, with BlackRock increasing its stake, highlighting TeraWulf's potential in the evolving HPC and Bitcoin mining sectors. TeraWulf’s ( WULF ) Q1 earnings report is scheduled for 8:00 AM EST today (May 7). This article will cover the earnings preview and expectations from the earnings call, as well as the outlook for the fiscal year with anticipated updates from WULF Compute, the miner’s HPC hosting segment, and WULF Mining. TeraWulf has become a well-recognized company in the Bitcoin mining business, and is advancing its ESG goals with reduced emissions in Bitcoin mining. Since capitalizing on utilizing computing and energy infrastructure for high-performance computing (HPC) hosting for AI hyperscaling, TeraWulf is becoming a household name in “hybrid mining” - a term for miners focused on both Bitcoin mining and HPC hosting. Hybrid mining has now become an important term in crypto mining. Over the years, miners often wasted valuable energy and underutilized their computing power, which has mostly led to very compressed margins, especially during bear cycles. The use of energy and computing power for HPC hosting is a potential remedy, though it comes with higher CapEx and potential execution risks - the “DeepSeek scare” is a reminder of the stakes involved in HPC hosting for AI hyperscaling. But from a generic view, diversification into HPC hosting can potentially yield better margins for miners down the line, especially in a BTC uptrend. In the past, I wasn’t a fan of WULF because its business lacked a focused strategy. Its mining business had become a single-track operation; hence, I didn't cover the stock here on Seeking Alpha. While TeraWulf ended 2023 on a solid operational note, ending 2023 with 7.9 EH/s, up from just 1.4 EH/s in 2022, I felt the management didn't yet communicate a dominant strategy at that time, the way other miners were pitching their strategy to investors. For HUT 8 Corp. ( HUT ), it was HPC computing, for MARA Holdings ( MARA ), it was vertical integration through proprietary cooling solutions and mining hardware. Riot Platforms ( RIOT ) had a clear strategy with the demand response program with ERCOT, sometimes even making more money from power credits than Bitcoin itself. This created a unique edge in Bitcoin market downturns. This was the type of diversified strategy that TeraWulf lacked then. What’s dangerous is not to evolve. — Jeff Bezos TeraWulf, however, turned the corner in 2024 and showed the maturity to navigate the operational and financial labyrinth of the crypto mining business. The company has scaled and evolved rapidly in the past year, and now stands better positioned than ever for the 2025 fiscal year. Focus on HPC has brought the strategic clarity that was once lacking. And the fact that it is formalizing this into its own subsidiary, WULF Compute, means the company is no longer just experimenting. TeraWulf has quietly built an impressive track record of efficient scaling. Previous mining capacity targets of 10.5 EH/s by 2024 were nearly fully realized at the end of Q4 last year, only missing the target by 0.8 EH/s, having ended 2024 at 9.7 EH/s capacity. Hosting capacity at the Lake Mariner facility almost doubled in 2024 to 195 MW, from 110 MW at the beginning of the year. I believe TeraWulf is now at the "right place at the right time" in HPC hosting. Among the miners, TeraWulf can be considered a late bird in HPC hosting. I believe this has allowed TeraWulf to craft a better strategy for the WULF Compute business line. Sometimes it’s the ones who come late to the party that leave with the best gains, after watching the early guests spill their drinks. In its HPC approach, TeraWulf is avoiding the operational complexity that purchasing and maintaining GPUs for HPC hosting presents, and will be focusing on providing infrastructure to HPC clients – power, cooling, rack, and space – as the management has iterated. TeraWulf’s HPC hosting is basically: bring your GPUs and we’ll host them. Let’s pause and ask ourselves how the HIVE Digital ( HIVE:CA ) heavy CapEx on purchasing Nvidia ( NVDA ) GPUs since 2021 has been going so far. For context, HIVE reported $2.5 million from its HPC business in its Q3 FY25 report and is now looking at a $10 million annual run rate. Let's not forget the $66 million investment in GPU purchases in 2021. The latest HIVE Nvidia GPU purchases were in December last year and were worth $30 million. At the time of the latest purchase, HIVE projected $15 million in annualized revenue from the H100 GPUs by the end of 2024, and over $20 million in revenue from the H200 GPUs by Q2 2025. The $10 million revised annual run rate is a stark underperformance from the initial projections and suggests underutilization of the GPUs so far. TeraWulf’s asset-light approach to HPC hosting should be the company’s main highlight to most investors. I like the fact that TeraWulf isn’t taking on the GPU CapEx and market risks. GPUs are highly depreciable assets compared to assets like electricity, cooling, and racks, which typically see much longer shelf lives. For a company that already faces balance sheet constraints from the Bitcoin mining business and volatile Bitcoin price, the asset-light approach is a good move. And I believe in the coming years, AI GPUs will see faster depreciation compared to Bitcoin mining machines because of the type of competition in AI chip development currently. AI is in an “arms race” phase with a very short tech cycle. At least, Bitcoin miners mostly have to worry about mining machine obsolescence, mainly at Bitcoin halving, around every four years. Even though the mining machines become less efficient over time, their depreciation will be slower compared to AI GPUs. TeraWulf’s balance sheet was only deleveraged last year with the full payment of the legacy loan term debt of $139.4 million. Prudence in execution is an absolute necessity moving forward, and thus makes the HPC execution strategy a must-watch for investors. TeraWulf now stands in a more flexible financial position, with funding generated from the $500 convertible note last year and $75 million obtained from the sale of their 25% equity interest in the Nautilus facility. The fact that the company’s strategy focuses on scalable infrastructure to attract longer-term HPC contracts for longer-term value creation is an underrated edge if you hold WULF in your portfolio. In the Q1 results, I expect clearly stipulated revenue guidance and highlights from the Core42 HPC deal and a progress report on the already-funded 72.5 MW of HPC hosting capacity set for delivery this year. Since TeraWulf doesn’t compete with Core42 in GPU ownership, the deal structure gives Core24 the flexibility to bring their own GPU and scale and upgrade in a vertically integrated workflow. This positions TeraWulf as a neutral, value-add infrastructure partner and makes the structure attractive for long-term hosting deals. Takeaway I'm maintaining a Hold stance with this coverage, which is my initiating coverage of WULF with no price targets yet. The Q1 earnings result later this week has a lot to clarify for WULF in the near and long term. Fintel WULF’s business approach is starting to attract the right attention. Institutional interest is growing. BlackRock has increased its position on WULF by over 100% year-over-year and now holds about 5.4% of WULF common shares. TeraWulf's entry into HPC is based on an approach that minimizes capital and market risks. This approach makes WULF a Bitcoin miner worth being on the watch list. In a sector where timing and strategy are everything, TeraWulf may have just found its sweet spot in HPC.