Core Scientific (CORZ) Q3 2026 earnings review
Core Scientific swings to operating profit, but construction drains cash
Core Scientific's shift from bitcoin mining to artificial intelligence data centers is now generating operating profit while consuming cash for construction. Total revenue nearly tripled from a year ago to $233 million as chief executive Adam Sullivan turned on 90 megawatts of new billing power. That pushed operating profit to $72 million, though the $1.2 billion net profit came almost entirely from non-cash warrant accounting.
| Colocation revenue | $215.4M +58% from last quarter |
|---|---|
| Billing power capacity | 485 MW up from 395 MW last quarter |
| Operating income | $72.4M -$78.5M last quarter |
| CoreWeave 590 MW target | Unchanged full delivery in early 2027 |
⚖️ Verdict: 🟢 Bullish
The story got better because the data-center operator proved its leases can cover overhead costs and began building for a second major customer, AMD, across five campuses. One caution: capital spending reached $985 million this quarter, draining nearly half of unrestricted cash while rent credits held operating cash flow to $65 million by our math.
The question now is whether existing liquidity and incoming cash rent can fund the 530-megawatt AMD buildout without new debt or share dilution. Either tenant prepayments and CoreWeave cash rent cover the bills once credits expire, or the company must raise fresh capital. Fourth-quarter capital spending and customer funding receivables will show the pace of the cash drain.
🐂 Bull Case
Colocation Deliveries Lift Operating Profit Above $72 Million
"Our execution at scale is translating into results, with a significant sequential increase in GAAP colocation revenue," chief executive Adam Sullivan said. Colocation — leasing data-center space and power for artificial intelligence computing — now generates 92.5% of total sales by our math. Core Scientific added 90 megawatts of billing power this quarter to reach 485 megawatts, beating its 450-megawatt late-summer goal.
- Colocation revenue: $215.4 million, up 57.6% from last quarter
- Cost of revenue: 47.1% of sales, down 48.1 percentage points from a year ago by our math
- Overhead and administrative expenses: 19.6% of sales, down 38.9 percentage points from a year ago
- Operating income: $72.4 million, compared with a $78.5 million loss last quarter
That scale matters because colocation carries a 60% gross margin, lifting total gross margin by 48.1 percentage points from a year ago to 53%. Startup costs for new sites also dropped from $27.0 million last quarter to $12.9 million as four of the five CoreWeave campuses finished construction.
What to watch: completion of the final 100 megawatts at the Dalton, Georgia campus in early 2027. Turning on that remaining capacity will bring the full 590-megawatt CoreWeave contract onto the billing rolls.
AMD Contract Diversifies Revenue Across Five Campuses
For the past year, Core Scientific relied on a single colocation tenant, CoreWeave, while early talks with another large technology company expired without a deal. Now "construction under our second is underway across five campuses," Sullivan said. The data-center operator has leased 530 megawatts of power under contracts with chipmaker AMD and a credit-backed cloud partner.
Together with the 590 megawatts leased to CoreWeave, total contracted capacity exceeds 1.1 gigawatts and represents over $24 billion in potential revenue. The company also closed its acquisition of Polaris DS LLC in Oklahoma and reserved nearly 1.9 gigawatts of future power pathways for AMD across Texas and Oklahoma.
What to watch: initial power deliveries for AMD at Pecos, Texas and Auburn, Alabama in the first half of 2027. On-time delivery will show whether the company can build greenfield sites on schedule for a second major customer.
🐻 Bear Case
Construction Spending Drains Nearly $1 Billion of Cash
Building data centers for two giant contracts at once requires heavy upfront cash. Capital expenditures — spending on property, plant, equipment, land and power rights — reached $985.1 million in the third quarter, up from $797.5 million in the second quarter. That equals 423% of quarterly revenue by our math.
Across the first nine months of 2026, total capital spending hit $2.17 billion by our math, already passing the $2.0 billion full-year budget management outlined in May before signing the second tenant. Unrestricted cash on the balance sheet dropped by $965.8 million in three months to $803.9 million, while total liquidity fell by $856.9 million to $1.74 billion.
What to watch: fourth-quarter capital expenditures and unrestricted cash in the full-year report. Another quarter near $1 billion of spending without new project financing would cut unrestricted cash below one quarter's build rate.
Rent Credits Hold Cash Flow Behind Reported Revenue
Core Scientific highlighted $215.4 million of colocation revenue and $133.6 million of Adjusted EBITDA, a profit measure excluding one-offs and non-cash items. However, operating cash flow for the third quarter was just $65.3 million by our math, or less than half of Adjusted EBITDA.
The company's presentation notes that "Capex credits offset 50% of monthly cash rent, so cash trails GAAP revenue" during the early years of the CoreWeave lease. CoreWeave funded up to $750 million of earlier building costs and now deducts those credits from its monthly cash bills. Inaddition, Core Scientific records future rent increases evenly across the 12-year lease.
What to watch: the quarterly decline in deferred revenue and customer funding receivables. Cash collections will only step up to match reported revenue after CoreWeave uses up its construction credits.
Bitcoin Self-Mining Losses Weigh on Gross Profit
Core Scientific is "repurposing its remaining mining facilities to support its high-density colocation services business as circumstances allow," the company said. While that conversion continues, its older business of mining bitcoin for its own account is shrinking and losing money.
Self-mining revenue dropped 43.1% from last quarter and 78.7% from a year ago to $12.3 million. Because power fees of $10.5 million and equipment depreciation of $7.2 million did not fall as fast, the segment posted a negative 61% gross margin and a $7.5 million gross loss, dragging down overall company profit.
What to watch: self-mining power costs in the fourth-quarter report. Shutting down or converting the last mining sites by year-end would remove an annualized gross loss of roughly $30 million.
👓 Other Themes
Warrant Accounting Produced the $1.2 Billion Net Profit
Headline net income of $1.18 billion was driven by accounting rules for warrants — options to buy shares at a set price — rather than data-center operations. Because Core Scientific's warrants are recorded as liabilities, a change in their value created a $1.03 billion non-cash gain, alongside a $106.5 million tax benefit. Excluding both items, net income was $37.3 million by our math.
💲 Other KPIs
Fell 12.4% from $654.4 million last quarter by our math, reversing four quarters of increases. Deferred revenue is construction funding and upfront payments from customers that Core Scientific works off by providing data-center hosting. The $80.9 million drop shows CoreWeave is now using its rent credits as sites come online.
Up 47.2% from 318.6 million a year ago and 44.2% from last quarter. Because the US company reported positive net income this quarter, accounting rules added 141.3 million shares from warrants and convertible notes to the diluted count. Including all outstanding warrants and convertible debt, the total pro forma share count reached 509 million.
🔮 Guidance
Unchanged. The plan still calls for completing the full 590-megawatt CoreWeave buildout in early 2027, generating about $850 million in average yearly revenue. With 485 megawatts billing at the end of September and four campuses finished, only 105 megawatts at the Dalton, Georgia site remain to be delivered by our math.
Unchanged. The digital infrastructure provider plans to begin initial deliveries at Pecos, Texas and Auburn, Alabama in the first half of 2027, followed by Dalton and Muskogee in the second half of 2027, and Hunt County in the first half of 2028. All 530 megawatts are scheduled for delivery by the end of 2028.
❓ Key Questions
What is the new capital spending budget through 2028?
Nine-month capital spending of $2.17 billion by our math has already passed the $2.0 billion full-year plan set before the AMD contract. Investors need to know the total build bill for the 530-megawatt AMD expansion and how much the tenant will fund.
How much CoreWeave rent credit remains to be worked off?
CoreWeave offsets up to 50% of its monthly cash bills using credits from earlier construction funding, which kept third-quarter operating cash flow at $65.3 million by our math. Management has not disclosed the exact date when those credits will run out.
When will the last bitcoin self-mining machines shut down?
Self-mining lost $7.5 million at the gross profit line this quarter on a negative 61% margin. With almost all bitcoin holdings already sold, keeping older machines running drains cash unless they are required to hold utility power agreements.