Do Rising Costs Raise a Red Flag Despite WULF's Revenue Growth?

TeraWulf WULF posted strong revenue growth in its third quarter of 2025, reaching $35.4 million compared to $25.8 million in the prior-year period, yet mounting operational expenses and compressed margins raise questions about the sustainability of its profitability trajectory. The bitcoin miner's 37% year-over-year revenue increase reflected expanded mining output, but the accompanying cost structure tells a more concerning story.

The company's cost of revenues surged to $21.8 million from $14.9 million year over year, driven primarily by higher power costs and increased depreciation expenses related to its expanded mining fleet. This 46% jump in costs outpaced revenue growth, compressing gross margins to 38% from 42% in the prior-year quarter. While TeraWulf has benefited from operational scale at its facilities, the rate of cost inflation appears troublingly persistent.

Operating expenses also escalated significantly, with total operating costs climbing to $30.1 million compared to $20.3 million in the year-ago period. General and administrative expenses rose to $8.3 million, while stock-based compensation added further pressure to the bottom line, diluting shareholder value as the company retains talent in a competitive sector.

The margin compression becomes particularly worrisome when considering bitcoin's price volatility and network difficulty adjustments. TeraWulf's net income of $5.3 million, while positive, represented a margin of just 15%, down from 21% in the previous year. The company's capital expenditure commitments for additional mining capacity could further strain cash flows if bitcoin prices soften or network competition intensifies, making cost management increasingly critical for maintaining profitability.

How Do Rivals Compare on Cost Management?

Riot Platforms RIOT reported third-quarter 2025 revenues of $84.8 million with cost of revenues at $58.9 million, yielding a gross margin of approximately 31%. Riot Platforms' operating expenses totaled $47.2 million, resulting in an operating loss despite its larger revenue base. The company's cost structure reflects significant depreciation and power expenses across its multiple facilities. Meanwhile, Cipher Mining CIFR generated $29.8 million in quarterly revenue with cost of revenues at $17.6 million, achieving a stronger gross margin of 41%. Cipher Mining's operating expenses came in at $15.4 million, demonstrating tighter cost control relative to its revenue scale. Cipher Mining's operational efficiency appears superior, though Riot Platforms maintains substantially larger mining capacity and infrastructure investments that position it differently for long-term market dynamics.

WULF’s Share Price Performance, Valuation & Estimates

TeraWulf shares have appreciated 99.5% year to date, outperforming the broader Zacks Finance sector’s return of 11.1% and the Zacks Financial Miscellaneous Services industry’s decline of 11.2%.

WULF Stock’s Performance

The WULF stock is trading at a premium, with a trailing 12-month price/book of 19.35X compared with the industry’s 2.88X. TeraWulf has a Value Score of F.

WULF Valuation

The Zacks Consensus Estimate for 2025 earnings is pegged at a loss of $1.51 per share, wider by $1.15 over the past 30 days. The company reported a loss of 19 cents per share in 2024.

TeraWulf Inc. Price and Consensus

TeraWulf Inc. price-consensus-chart | TeraWulf Inc. Quote

TeraWulf 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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