Gross Mining Margin Under Stress as Bitfarms Transitions to HPC/AI

Bitfarms BITF is transitioning from its Bitcoin pureplay business to High-Performance Computing and AI (HPC/AI). While this strategic pivot has invited revenue growth, the gross mining margin appears to remain under pressure, casting doubt on whether this headwind is fleeting or hinting at a deeper complication.

During the third quarter of 2025, Bitfarms’ top line skyrocketed 156% from the year-ago quarter, while the gross mining margin of 35% declined 1,100 basis points (bps) from the year-ago quarter and 1,000 bps sequentially. This sharp fall can be attributed to higher operational costs due to repositioning its capacity and exiting mining assets in Argentina and Paraguay that are lower-margin. Moreover, investments were made in upgrading the 18 MW Washington site to HPC/AI workloads, leveraging advanced NVIDIA Vera Rubin GPUs. This demands substantial short-term capital and operational expenses that boost the overall cost.

BITF’s sharp focus on prioritizing HPC/AI capacity, which, despite assuring long-term returns, shoulders higher capital and energy expenses compared to the Bitcoin business. The company’s energy portfolio includes 2.1 GW of U.S. and Canada-based power assets, with 341 MW energized and 440 MW for growth. Although this supports the AI infrastructural demand, it is an ongoing capital deployment facing a delayed margin benefit.

Management is optimistic about BITF’s ability to capture a larger chunk of AI infrastructure demand and expects it to surpass the capacity of traditional datacenters. These anticipations are made despite the short-term margin challenges. Considering the growing energy contract portfolio and the scalability of the North American datacenter, we are bullish on the company’s ability to unlock the HPC/AI market and witness margin improvements as the offerings come online.

We can conclude that the current margin pains are caused by the transition in operations aimed at long-term value creation. Therefore, margin pressures appear to be temporary rather than a fundamental issue, provided HPC/AI execution is flawless.

BITF’s Price Performance, Valuation & Estimates

Bitfarms has soared 74.5% in the year-to-date period, outperforming the 13.8% surge in its industry. The stock has surpassed its competitors, Marathon Digital’s MARA 33.8% decline and Riot Platforms’ RIOT 30.7% growth.

YTD Share Price Performance

From a valuation standpoint, BITF trades at a 12-month forward price-to-sales ratio of 4.05, cheaper than Riot Platforms’ 6.72. However, BITF appears premium when compared with Marathon Digital’s 3.83.

Price/Sales - F12M

Bitfarms, Marathon Digital and Riot Platform have a Value Score of F.

The Zacks Consensus Estimate for BITF’s loss in 2025 is pegged at 28 cents per share, compared with a loss of 13 cents per share over the past 60 days. For 2026, the loss is pinned at 22 cents per share, compared with a loss of a penny per share over the past 60 days.

Bitfarms currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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