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Colin, y'all. Welcome back to Blockspace Live, presented by CleanSpark for round two of earnings week.

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And we are hitting the ground running with Keel's earnings, which dropped this morning, which we will head off the show with.

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We will also touch on Bitdeer's earnings later on in the show after an interview with Lagos Finance CEO, Jay Patel. To cap off the show, we'll be looking at FactSet's most recent earnings insights.

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Over 80% of S&P 500 companies have reported their Q2 earnings, and Charlie, it has been an insane quarter for earnings. Now, Alphabet and Amazon are the lion's share of that bump in earnings growth.

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But even if you strip it out, it was still a stupendous quarter when we compare historical averages. So we're gonna get into those numbers at the end of the show. But the two big ones today, Charlie, Keel

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and Bitdeer, with some pretty interesting disclosures on how they are going to manage their Bitcoin mining fleets for the rest of the year. That's right. Blockspace goes live every weekday.

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We are Compute's daily live show covering AI, data centers, emerging technology, and markets. If you miss the live stream, it turns into a podcast anywhere podcasts are found shortly after we wrap up here.

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And if you can't get enough of the podcast or the live stream, you can see the rest of our work, a lot of written content and coverage on AI at the data center world on our website at blockspace.media.

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This show is brought to you by CleanSpark, Nasdaq-listed at ticker CLSK. More on CleanSpark later on in the show. Before we go to the first story, Colin, we gotta get into the earnings update.

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[beeping] That's right. It is earnings week two because we cover earnings and publicly traded data center companies on this show.

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Here's a little look at what we're covering this week. Starting out today, this morning, Keel had their earnings. Bitdeer as well. Riot was rescheduled. We're doing a watch party for Riot later today.

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Tomorrow, and for the rest of the week, we have a executive interview from, uh, a number of these companies every single day. Tomorrow we've got John Belizaire of Salo- uh, Soluna, then the CoreWeave watch party.

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On Wednesday, we have Sam, uh, uh, Tabar of, uh, White Fiber and Brandon McBee of CoreWeave, as well as watch parties for Nevius and White Fiber.

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Thursday, we have Ben Gagnon, Captain Keel himself, and we're watch partying the Soluna earnings, and then Mike Pitchie, uh, CFO of Soluna, on Friday. So make sure to put these on your calendar.

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Tune in every day at 1:00 PM Eastern to catch our earnings week coverage. Speaking of earnings week, Colin, we got some earnings to cover. We've got Keel Infrastructure first up today, Charlie.

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And if you're listening to this and you have questions about the earnings or the discovery and forward guidance given during the analyst call, let us know.

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Throw us a comment, and if it's a good question, we will field it to Ben Gagnon when he's on this week. I believe we have Ben for 30 minutes, so it's going to be a pretty in-depth interview.

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We're going to be- We'll see if we can keep him to stay on for a whole hour. Who knows? [laughs] Yeah. [laughs] If only we could be so lucky.

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But we're going to be getting into the nitty-gritty of everything that went down in Q2, and there's a lot to talk about, Charlie. So to head off, we'll look at the article from Blockspace.

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Headline, Keel Q2 Revenue Falls 50% as Liquidity Reaches $819 Million Q2 Earnings.

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The big takeaway from this call, Charlie, that will shock some, Keel has retired its entire US Bitcoin mining fleet as it paves the way for its first AI tenant, maybe tenants, at the end of the year.

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It's going to keep a small segment active in its Sherbrooke, Quebec site. CEO Ben Gagnon said that this is a rounding error in terms of revenue for Keel. It produces a couple of-- a few Bitcoin a day.

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Uh, but they are going to keep that online as they have no clear plans right now for converting that to AI.

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But they're going to be focusing on their Pennsylvania sites and the Washington site, which is first up according to management for an AI lease.

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Gonna get into some of the headline numbers and then get into some of the commentary, Charlie, and some of the qualitative updates.

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So again, revenue came in at $30.4 million, minus 50 from Q2 2025 of s- uh, revenue of $60.9 million. Cost of revenues went up significantly, $117.2 million.

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A lot of that is related to SG&A and new hires for their AI line. Gross loss was $86.8 million. Gross margin was -285%. G&A up 62% to $31.3 million.

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Operating loss minus $140.8 million. And earnings per share loss was 11 cents per share for a net loss of negative 65-- or for a net-- for a loss of $65 million. Adjusted EBITDA came in at negative $23.7 million.

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A lot of negatives, but there's a reason for that, and we're gonna get into that right now. Going back to what I said at the beginning,

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Bitfarms is pulling the plug on all of its Bitcoin mines-- miners as it seeks its first AI tenant at these sites. Keel shut down all US Bitcoin mining during the quarter.

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Washington State, the Moses Lake site on April 28th, followed by Panther Creek, Scrub Grass, and Sharon on June 29th, right before quarter end.

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Only the Canadian legacy mining site is still running, and that is- Part of why you're seeing that minus fifty percent on the revenue although most of that is because hash price is in the gutter.

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You know, the, the Pennsylvania sites were not taken off till, till the end of the quarter and the Moses Lake site was taken off in April twenty-eight. But Moses is like eighteen megawatts.

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It's not very large, so we can't attribute that shortfall in revenue specifically towards to pulling the plug on Bitcoin mining. They still do not have a signed HBC lease. We'll get into that here in a second.

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But they are in active discussions with multiple tenants across hyperscaler, neo cloud, etcetera, verticals. The depreciation line is largely due to this retiring of the Bitcoin mining segment.

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CFO Jonathan Mear specified that sixty-three million of the quarter's depreciation was accelerated depreciation tied to the mining rig shutdowns at Panther Creek and Scrub Grass.

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So there was the eighty-four million aggregate non-cash depreciation figure, so there are a few other things in there. But the lion's share of it, again attributable to the retiring of that Bitcoin mining segment.

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There was a seventy-seven million non-operating derivative gain, kept that net loss from being even larger, and that is related to twenty twenty-five cap calls for, um, their, uh, for a,

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a d- a convertible note that they have taken out. Long-term derivative assets jumped from five point two million to seventy-eight point eight million on the balance sheet.

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Um, again, this is a mark on their own stock, stock price, not operating performance, and this could reverse if the stock price falls.

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The sixty-five million dollar net loss headline kind of understates the operating deterioration by more than half as a result.

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The Bitcoin position for Bitfarms is underwater, Charlie, and it is being wound down currently.

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They had two thousand two hundred and sixty-one BTC at the end of the quarter, worth about a hundred and thirty-two point four million against a reported cost basis of two hundred and five point nine million.

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They sold one thousand and eighty-five Bitcoin for seventy-five million between April first and August seventh.

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So their balance is now after quarter end when accounting for some of those sales in August, eighteen hundred and sixty-one Bitcoin.

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And Q2 booked an eleven point two million unrealized loss and a nine million un-- uh, or e- eleven point two million realized loss and nine million unrealized loss on the digital assets for a total H1 unrealized loss of fifty point five million.

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Now, we've seen this play through with some of the other companies in our coverage.

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Mara sold one point six billion dollars worth of Bitcoin in the first half of twenty twenty-six, and most of these Bitcoin miners are starting to shuck their treasuries.

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They're really not doing anything for them at this point.

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It's not moving the needle in terms of interest in the stock, and we are far away from the heady days of twenty twenty-five, the summer of twenty twenty-five for Bitcoin treasury mania.

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I'm gonna keep zooming through this here, Charlie, um, 'cause we've got-- there's a, there's a lot to cover on this.

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I think the things that people are probably most interested in are the pending AI sites for Keel, and those are Moses Lake, Washington.

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There's eighteen gross megawatts at that site, and that will be the first in line for an HBC build. There has been reporting that it could be Amazon.

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Amazon had a job posting in the area, so that is repor- that could be the tenant at the site. We have no way of knowing for sure till we have a, a disclosure from Keel here.

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Sharon, Pennsylvania site, Panther Creek, Pennsylvania site, and Scrub Grass, Pennsylvania site are the other three in the portfolio. Sharon, Pennsylvania is a hundred and ten gross megawatts.

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Panther Creek, sixty gross megawatts energized. And Scrub Grass, Pennsylvania, sixty-three gross megawatts energized.

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A lot of the analyst commentary, Charlie, centered on the approvals and permitting for these sites, and this is where I wanna kinda close out our, our, uh, recap of this earnings. So

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a few rundowns of where these sites all land in terms of permitting and regulation, 'cause they're all at different stages.

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Moses Lake, vertical permitting expected to wrap, quote, "later this quarter," end quote, according to management. Site development is already underway under Washington regulations and rules.

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Again, this will be the first site that they land a deal in once it comes through the door. It's the furthest along in the pipeline. Sharon, there's full zoning that was accomplished in April.

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Land development was approved this past quarter. There are environmental permits remaining. We'll get into the details here in a second. Sharbr-- uh, Panther Creek,

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the zoning and conditional land development has been secured, but there is a final d- um, permit running a few months longer than expected with the Department of Environmental Protections in Pennsylvania.

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And if we look at Scrub Grass, it is still in the energy application phase only.

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There's a seven hundred and fifty megawatt load study with utility engineering for five hundred and fifty megawatts of on-site generation with a third-party provider.

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No permits or proposals submitted, um, right, as of right now. Expect an update on that according to management in December and January. Uh, December of this year, January of next year.

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They were peppered with questions, Charlie, about the permitting schedule for these sites during the analyst questions. And

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Gan Yong gave an answer with regard to the Panther Creek and Sharon permits, where he basically was making the point that the remaining permits for these sites are sewage plus erosion and stormwater, and described them as engineering-focused rather than politically sensitive, and said Keel is more confident than they've ever been.

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Um,

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the, uh, the permitting that they are going to have to look at for the Department of Environmental Protections is specifically within the eastern Part of that department, Panther Creek is in eastern DEP and they're more backlogged than the west, so that's part of the reason why there's been a delay here.

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But I, I will point out that there is a little bit of political, um, risk with this in the sense that there's an August 20th meeting for the,

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uh, for the Panther Cre- uh, Panther Creek site specifically.

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The, the DEP is holding a question and answer meeting on August 20th at a local high school covering the data center project and a public hearing taking comments on the water obstruction and encroachment joint applications, um, for the site.

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The two takeaways here, the-- that there is actual s- legitimate organized local opposition with a specific line of attack for this.

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There is the Save Carbon County Coalition, and they are publicly framing the application as a reversal, arguing Keel promised a closed loop facility in multiple public meetings and is now seeking to discharge roughly 18,662 gallons per day.

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I have not looked into that claim, and it's something I'm gonna ask Ben on when we have him later on in the week. I don't know if that characterization's fair.

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As we've seen with a lot of these anti-data center groups, Charlie, they often overstate things and sometimes obfuscate the actual truth of what's going on, so I don't wanna state that as actual- actively happening right now witho- without, uh, you know, uh, you know, a, a, a certain understanding of the events on the ground.

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Um, and there is, uh, a w- there's, there are more questions about the waterways for this site.

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Dennison Run and Broad Run carry Pennsylvania's EV designation, which triggers the state's highest water quality protection standard. There's a material higher bar than an ordinary regulatory hurdle for this.

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Keel has separately applied for a Chapter hun- One- 105 permit covering overhead crossing of Dennison Run. So Ben's right to say that these are, uh, water considerations up, uh, in the August 20th meeting.

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That being said, there is actually a, uh... Th- there may be more at play here with regards to local pushback and also the hurdle they have to clear for those sites.

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Last thing I wanna cover here, Charlie, and then we will get on to Jay. He's waiting patiently in the wings. Thank you, Jay. Lot to chew through with these Q2s. Um, there were a few changes to the capacity.

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Keel is evaluating collapsing Sharon's phasing into a single 110 megawatt phase rather than phasing it out into 30 megawatts and then 80 megawatts.

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And they've also given up on an option to expand Moses Lake by 10 megawatts. That's now firmly 18 megawatts, and there wasn't really much follow-up on the, on the analyst call about that specifically.

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Um, and then for AI tenant discussions, this is where we will cap it. Uh,

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the mo- uh, they were-- uh, management was asked directly for a formal update on whether Keel is targeting three leases in 2026, given the Panther Creek delay.

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Gagnon neither reaffirmed nor withdrew the target, and he said they're in due diligence and negotiations.

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And he was also asked whether or not there would be one tenant across all these sites or multiple, and Gagnon confirmed multiple tenants want all three sites, but said Keel would rather keep tenants focused on one site each and then build an expansion pipeline into 2028 and 2029.

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So looks like they are in conversation with multiple tenants across these sites, and they're not trying to have any exclusivity clauses across, um, any one site from the first tenant that they have secured.

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Last point on lease structures that are under discussion. For Moses Lake, there's a possibility of a modified gross rather than triple net lease with matched credit support.

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They're aiming this at faster moving tenants who want a fully operational facility and keep Keel in operational control.

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The focus at Sharon is a triple net lease pairing fast-growing AI companies with investment-grade credit support, and counterparties named across the portfolios were potentially hyperscalers, leading AI companies, GPU clouds, large enterprises, but they did not disclose any names at this time.

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I will just do a quick little show. I mean, it, it's where are we in terms of, like, the scoreboard for who's depreciated their fleet the fastest and who is writing the most off?

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'Cause this is basically Keel ripping the Band-Aid off. Wolf appears almost to be done with their full, uh, accelerated depreciation. Core Scientific has written off a lot of theirs.

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Again, these are not apples to apples numbers, but Core Scientific has written, I believe, a quarter billion. Um, Iron's taken impairment, and, and impairment.

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Mar has written off, it looks like, or depreciated 90 million. Uh, again, these are not, like, percentages of their fleets, but it just shows how these-- everyone's trying to write the fleet off as quickly as possible.

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Uh, a- and Claude, doing a quick little scout, does not think Riot, Cipher, CleanSpark has really, uh, made, uh, significant depreciations. And then Hut and Bitdeer are kind of special situations.

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I'll let you go into Bitdeer at the end of this. Um, but so yeah, it's kind of a game.

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Who can rip the Band-Aid off or, uh, say, uh, change the book value of their ASICs, their Bitcoin miners, uh, to position them for the next cycle? So- Yeah, it's interesting.

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Bitdeer moved their, their ASICs to property plant and equipment off of the balance sheet And- Yeah I guess that's because- And we'll get into it... they've got a lot of hash rate that they can't move right now.

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Like, they can't- Yeah... sell it to anyone, and it's also losing value as hash price craters. Um, very interesting that Claude didn't pull anything for CleanSpark.

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I don't know what the accounting gimmicks were there for the fact that they couldn't l- label that.

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But also Riot's, uh, earnings coming this week, so we'll have more info on- Or, yeah, Riot's earnings is in four hours, or three and a half hours. So we will probably get an update on that very soon.

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So by the time you're listening to this on podcast, we'll be learning about it live.

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All right, we have Jay Patel in the wings patiently waiting, and we'll get to talk some macro here in a s- here in a second after a word from our sponsor, CleanSpark. [gentle music] We are CleanSpark,

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America's Bitcoin miner, a publicly traded company with the largest operating hash rate. Powered entirely by self-operated infrastructure across four states. This is our proof of work.

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We are setting the standard for what's next. Learn more about the intersection of energy and Bitcoin at cleanspark.com. All right, let's bring Jay on up here. Jay, welcome back to the show. How you guys doing?

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[chuckles] Fantastic. Fantastic. We've got a number of kinda zooming out, talking macro trends, yen carry trade, et cetera.

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But first, really quick, it looks like MicroStrategy sold some Bitcoin, or rather, as they say, increased the USD reserve. What's your quick take on this?

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I'm, I'm actually back to being much more bullish than I was a few weeks ago on Bitcoin. So MicroStrategy sold, I think we're down to 64,000 or thereabouts. Um, it seems like,

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you know, Saylor can continue selling and folks aren't gonna freak out. Um, and I think the overhang of MicroStrategy is lifting a little. I think STRC prices are back in the mid-90s. Um, look, I don't think it, it...

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I, I don't think these incremental cash raises are gonna be what moves the needle at this point, but I guess they're, you know, preparing for a worst case and, you know, trying to get ahead of the, the, the bonds maturing or, um, at least the, the potential cash needs for the converts.

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Um, but I think overall, Bitcoin is in a pretty good spot. Like, I know people are disinterested or it feels like, you know, we're sideways, but, you know, I, I guess we'll get into it on the macro side.

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But I actually think the setup for Bitcoin is quite good. You know, long rates are pretty high, and Bessent has indicated that they, you know, wanna try to tamper those.

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Um, I think, you know, the AI trade has sucked a lot of liquidity out of the market, but, you know, hyperscalers, these neo clouds, everyone is increasingly looking for other sources of capital because there's a scarcity of liquidity.

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Um, and so I actually think the setup for Bitcoin is good. You know, historically, when Bitcoin vol is really low and rates are really high, um, things tend to turn the other direction, and relatively quickly.

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Um, and, you know, I would never be short Bitcoin vol for an extended period of time. That's a way to definitely lose money. Um, and so, you know, I think we get a reversion towards some volatility.

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Jay, when I hear you say the setup is good, first of all, thank you for that opium. I n- I needed it- [laughs]... this morning. Second, though, square with me how Bessent can get rates down with Warsh.

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Because I feel like the entire... You know, they've been kind of wrestling with the angels, so to speak, this, their entire, or Bessent has his entire term.

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Since Warsh has come in, there has been this prevaricating on whether or not he's hawkish or dovish, but it seems to me like they've kind of lost control of the tail end of the longer duration bonds, and they keep going up.

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I mean, the 30-year just hit its highest level in 19 years. So what are you seeing that indicates that they might actually be able to get these down in the, in the short to near term? So I actually think this is, um...

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Uh, and, you know, I think Jeff Park had a great post on it.

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Um, Bitcoin tends to do well in both bull and bear steepeners, so regardless of why the curve is steepening, whether it's near rates coming down or the long end going up, you know, Bitcoin has historically performed well in all of those scenarios, and I think that this is going to be one of those cases again.

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I actually, I agree. I think the Fed, the Treasury, they're in a very tough spot. Um, look, fiscal spending is high.

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Uh, it's not clear how they actually reduce the kind of fiscal deficit, and I don't think that there's many other levers to bring down long rates, other than if we get into, like, you know, Japan yield curve control territory, which I know.

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You know, there's a lot of stuff going on with the BOJ, Ministry of Finance in Japan, and obviously, you know, there's...

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If, if you're trying to go far out in the future and think, where does the US end up, that's probably not the direction we want to go into either.

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Um, but I do think that this setup means that there's probably a, a, a motivation for Treasury to move financing towards the, the nearer end of the curve.

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Um, you know, we're going into an election cycle, so I can only imagine that spending will increase.

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And if we see any more difficulty in this AI CapEx kind of cycle, I do think that the government will step in and provide liquidity one way or another because, you know, if you look at it by a state by state, like the GDP numbers, you know, if you take out AI CapEx and kind of like the flow through, like, a lot of the United States is not doing so hot.

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And so for whatever we need to do to keep that, you know, cycle going, I think, you know, Bessent and, and Warsh understand that. Maybe they're not as dovish as the markets would hope. Um, but I think that, you know,

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there's going to be an end to, like, the strong dollar soon enough. And in that setup, I think Bitcoin does really well. Um, and the other thing is, like- You know, I think right now all equities are priced

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pretty expensive. If you look at like the S&P 500, I think there's a fair share. I think the highest portion of the S&P 500 outperforming the index overall in a long time. But I don't think that's sustainable long term.

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I think you do see eventually a shakeout where like who are the net beneficiaries of all this AI capex and the AI trend and who's left behind.

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And when that happens, I do think you'll get a big injection of liquidity that will find its way to Bitcoin. Yeah, just two things to glom on to there, not really as ways of follow up, it's just additional commentary.

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Going back to the bailout narrative, Luke Gruman was on what Bitcoin did recently, and he said he's already hearing rumblings that there are like war games for what that would look like on Capitol Hill, like exactly what shape it would take, who would actually get the money, and how you would kind of control a bleeding of that sector.

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And with regards to equities being rich, this is Charles Balilo, great market strategist. He's got a good newsletter and market intelligence platform called Creative Planning. But the

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Shiller PE ratio is nearly where it was at the dot-com boom. So the price to earnings are just crazy high right now.

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And if you look at other things like sharp ratios, we're getting close to where they were at the dot-com bubble. Maybe this time is different.

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Maybe there, I mean, there are structurally things that are quite different now about the economy and the stock market than they were back then.

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But the last quarter or the last month has been defined by like a reversion to the mean on a lot of this stuff with regards to some of these stocks that had crazy run-ups in the last two years.

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I mean, why don't they- Why don't they just go higher? Why don't we just, isn't the whole, isn't like a lot of the AI accelerationists like say, let's grow through the debt? I mean, yeah.

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What's the case that we just don't keep going? So my

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very simple framing of like, what are the three or four questions you can ask someone to derive most of their investment thesis right now is, do you believe compute is a commodity?

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Do you believe intelligence is a commodity? And do you think that the economy can outgrow government spending?

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Like if you can answer those three questions, I think you can kind of figure out what exactly someone's investment thesis should be.

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So on the first two, there's definitely pressure on the intelligence side of things, right?

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If you look at the margins that OpenAI and Anthropic have relative to their inference costs, serving frontier models, I think the latest numbers are between 70 and 85% margins.

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And then if you look at like the, you know, Fireworks, Base10, other folks on the other side, the margins for just serving commodity open source models are much lower.

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A lot of this build out, you know, people say either way, there's going to either be, you know, if open source does well, there'll be a lot of demand for open source models.

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If closed source does well, then, you know, Anthropic, OpenAI, maybe Croc, if they get back in there, Gemini will have a lot of demand for compute.

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I think that misses the fact that if you have 70, 85% margins, you can pay a lot more.

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And like at these elevated prices, you know, you have to make a, you have to kind of think about, do you think that the, you know, doubling in price of your thereabouts that people expect for, you know, GB200s and, you know, the latest N chips, do you think that's a temporary dislocation or do you think that's permanent?

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And if you think that's permanent, then you have to kind of make the assumption that, hey, a lot of these other companies are going to be able to over earn or Anthropic and OpenAI are going to make just a shit ton of money and they're going to be able to spend it.

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Like, I think a lot of folks post kind of earnings call for SpaceX. You know, I think some folks who are SpaceX bulls and, you know, I would not short SpaceX. You know, this is financial advice, but not financial advice.

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It's back over the IPO price as of right now. Yeah, yeah. So if you want to express this thesis, shorting SpaceX is probably the worst way to do it.

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But for all the folks who think that, hey, SpaceX is going to be fine because all of this compute, you know, OpenAI and Anthropic will be able to pay, you know, $50 billion, $100 billion plus, what is it, per gigawatt, and like they're going to be able to monetize it easily.

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I think you're assuming, A, that either they're going to be able to keep raising a ton of equity capital or they're going to maintain these like 70 to 85% margins.

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And if that doesn't happen, then you might see a compression. But yeah, overall, I think like the outgrowing, you know, I think that's the biggest bet you're making.

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Like you can be super long and bullish, but then you do have to make the bet that the economy can outgrow government spending.

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And my view, and I think history kind of proves it out, is no matter how fast the economy grows, I bet you DC can spend faster. And like I, as optimistic as I am on technology and AI, I'm not an AI bear.

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I just don't see a world in which politicians are like, there's just no more dollars we can spend. We're growing so fast, abundance. Like, let's be real. Like if there's extra dollars, they will spend them.

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If there's a thought of extra dollars, they'll spend them. Yeah, it's so true. Like I'm bullish that we can revitalize the American economy, rebuild the Rust Belt.

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The politicians are going to spend that money somewhere or another. Yeah. I actually think that's, to Colin's point, like I think that's why the bailout is not as far out of the picture as people think.

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Like people think that it's outlandish that the US government would bail out, you know, frontier labs and neo clouds. But there's so many ways to get dollars into this cycle under the guise of national security, right?

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Like you don't have to cut checks into CoreWeave.

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You can just cut checks into folks who are developing data centers or power infrastructure or chip fabs or anything along the kind of cycle and say, hey, we're revitalizing American growth.

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We're, you know, defending our national security interests against, you know, you can always blame, hey, we have credible, you know, evidence that China is going to take an action against Taiwan.

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And so we need to spend trillions of dollars doing stuff, you know, here.

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Like I think there's enough angles where however you want to think about it, dollars from the federal government will find their way into this trade, whether it's as equity capital or subsidies or grants or whatnot.

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And I think that, you know, at some point they will have to. Yeah, there's so much more wrapped up into this than if we compare it to the mortgage-backed securities bubble.

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You know, the biggest beneficiary of those bailouts were actually the banks that were taking losses from those mortgage-backed securities.

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But it didn't really do anything to stop the bleeding in the housing market, right? Like, that, that, the rug was pulled out from under that, um, you know, spectacularly. And, uh, with this, I, I...

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That point is really salient to me that, you know, maybe it's making sure that the construction companies actually are, have enough liquidity to continue the operations if they get stressed.

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Then you think about even, like, on the local level, there's the, uh, Applied Digital, uh, site in the Dakotas, I think in, um, in, uh, North Dakota, I believe.

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But there, it was making the rounds on social media recently.

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Like, the property tax for that city has gone up significantly from, like, a few hundred thousand dollars to, like, 3.5 million just in the first few quarters of this year, and that's the, that's real revenues for those local tax bases, so.

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Yeah.

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There is the, um, there is the interesting piece to all of this, though, which is, like, you know, let's say, you know, midterms you get a blue sweep and, you know, the next presidential cycle you get a, you know, AOC type who, you know, Democratic socialists have kind of publicly voiced their frustration with how government is working with the AI companies and supporting build-out and things like that.

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And I guess that's the one piece where if, if the politicians and the folks in power are actually, you know, staunchly against AI and the build-out, you know, there might be less room for the government to do something to help them out.

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My thinking though is that it's more of a platform. Like, you know, it's very easy to say, "Hey, AI is taking the jobs and using the water, and, you know, it's why your electricity prices are going up."

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But when you're actually in the position of power and you understand that, like, hey, if we shut this spigot off right now, like, things could come, you know, crumbling down pretty fast. I, I'm hopeful that they won't.

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Um, but yeah, you know, that, that'd be the one kind of nuance. Obviously, you kind of see it in the blue state/red state divide, right?

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Where, like, you know, there are a lot of municipalities in red states that are doing pretty well from a tax revenue basis because they're allowing these build-outs. And I think net, the local economies are benefiting.

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Um, and you know, as much as people can say in the news that, like, you know, our, our state is banning data centers so your power prices won't go up, like, you're probably missing out on revenue, um, for your state.

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How, you know, deep people look into that is a different question. Um, but actually, you know, all this, in, in my mind, I think more of and more of this is just bullish for Bitcoin.

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It's, uh, you and Lyn Alden, nothing stop this, nothing stops this train, so. Yeah.

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Jay, maybe, uh- As much as, as much as Bessent will try to say that, you know, they've, they've got it under control, they're gonna outgrow things, I think that will be the talking point of the, the Trump cabinet.

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Like, I think over the next couple weeks you're gonna see Bessent, you're gonna see Lutnick, you're gonna see everyone out there saying, "Hey, they're revitalized American growth.

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We expect, you know, kind of crazy projections for tax receipts and revenues because of all this growth." And I think that's gonna be their best effort to try to tame the long end of the bond market. Um,

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and my fear is just, you know, that's not gonna work 'cause, yeah, nothing stops this train.

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I mean, that, that's bullish for my, uh, s- my AI data center bags, but, like, when do I rotate that back into Bitcoin when the market realizes that I should, that's the question, so. Yeah.

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Uh- So Jay, uh, kind of a- as a closing topic,

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they're focusing on AI revitalizing the American economy, and at the same time they have this, I believe w- you could g- give me the technical terms, a swap line with Japan for the yen. Uh, this made headlines obviously.

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It was, uh, to the jeering of many people who are disaffected by Trump saying that this isn't America first.

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But there's a clear reason that they're doing it with regards to US Treasuries and trying to defend US Treasuries and foreign banks. Can you explain exactly what Bessent and the administration's trying to do with this,

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uh, supposed bailout of Japan, and what ramifications you see it having, depending on which way it goes, for equities, Bitcoin, and investments here in the US? Yeah. So I, I guess just quick background, right?

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The yen has been getting weaker and weaker for years at this point. Um, and the Ministry of Finance, the Bank of Japan, have obviously taken a bunch of actions to try to limit that.

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You know, there's this new economic plan under the new prime minister. The Bank of Japan is, you know, indicated that they're going to raise and continue to raise rates.

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Um, uh, my understanding is basically that they were going to already, you know, independent of what the US did, the, you know, Japanese Ministry of Finance was going to do some market intervention to try to prop up the yen.

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And if you're Bessent, right, you know, Ministry of Finance has really one way to finance the purchase of yen on the open market, which is to sell US Treasuries or to sell dollar-denominated assets and buy yen.

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Um, and we're already seeing, you know, long end bonds kind of, um, uh, you know, hit new highs.

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I think it was a little overblown in the sense that, like, if you look at holdings for foreign governments, the duration of Treasuries that they hold has actually gone down.

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Like, they don't hold, you know, as much 30 and 10 years as they used to. But I think Bessent, you know, it, it's a nice cover, right?

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Obviously you can say that, hey, we don't want the yen to weaken too much because it hurts trade relations between our countries.

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A- Japan is a partner, and we're gonna help them out, and by helping them out, we get to protect the US Treasury curve by making sure that they're not just dumping ye- uh, Treasuries on the market.

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They use the, um, Fed swap lines where basically, you know, they can effectively get a full advance against the value of the Treasuries that they hold to buy yen on the market without selling those Treasuries and hurting, you know, kind of- The treasury market.

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And, uh, you know, obviously on the other side you saw Bessent actually, like go and, you know, sell euros for yen without telling [laughs] um, Europe.

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Which probably tells you a little bit more about just, like where the political, you know, geopolitical lines are being drawn right now. Um, and you know, I think Europe is definitely not in, in the US' good graces.

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Um, but I think that this intervention, like if anything, if you saw the activity on Friday through today, it didn't work.

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Like, I don't think that this is sustainable long term, and I think the market is saying like, "Hey, you know, you need real economic change in Japan for, you know, the, the, the market to really let the yen appreciate significantly."

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And the US, like we mentioned for long rates to come down, I think you need more than people talking.

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Like, I think you need some demonstrated progress towards fiscal deficit reduction or, you know, I guess if you're, uh, in the, um, the Uber bull camp, you know, if you're holding the bags like Charlie is, you need to think that we're gonna get back to like 6% GDP growth and just rip through any deficit with growth.

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Um, uh, yeah, you know, I think- I think words carry less and less weight, um, especially in this administration. You know, like, I think Hormuz is the- the great example of this.

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Like, at this point, no one even cares what Trump tweets about the strait being open or closed. Like it doesn't even move the market. Jay, thank you so much for your time. Thanks for your insights.

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And you heard it here first, bullish for Bitcoin. So, thank you Jay, so much. All right. Take care, guys. Cheers. Thanks, Jay.

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You know, if you're wondering why we're dumping euros to prop up the yen, in the words of President Trump on Air Force One, "Japan's been very good to us, with the exception of Pearl Harbor. Very good."

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[laughs] Well, he's not wrong. No, he's not. I just think it's like... I mean, th- he doesn't miss, man. It's just like every single time you think there's just a layup answer to a question- [laughs]...

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he goes out of his way to say something that is, uh, somewhat uncouth. Yeah. It's like- But in the most hilarious way possible.

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Look, we've spent- we've spent ne- you know, nearly a trillion dollars on next token prediction for these AI chatbot models. Could never do what Trump says. You never know what he's gonna say next.

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Okay, uh, we're gonna keep on rolling. We're gonna talk Bitdeer, and then we're gonna zoom out and talk general macro earnings. Before we go to Bitdeer, a word from our sponsor, Luxur.

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But you can also try it for free. So if you'd like to learn more, go to luxur.tech/commander. Try it for free for 60 days. All right, Charlie. All right. We're gonna move on into Bitdeer.

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And man, if it took me a minute to get through Qiao Charlie, this one is going to be a doozy. Bitdeer has a huge pipeline. And it's kinda hard to keep all of the sights in array. We're gonna do our best here.

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Headline block space- And we've been covering Bitdeer for a while. I mean, like if- if so- I- I would just pause you.

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W- we're gonna ju- Colin's gonna go into earnings, but, like, I would recommend to listeners who have not been paying attention to Blockspace for the past two years, go to our website, blockspace.media, and just search Bitdeer in the search bar.

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And you can kinda see how we tell the Bitdeer story. We've interviewed a few folks, a few folks, Brandon Bailey, um, in particular. Done some write-ups.

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So you can kind of see the story of this company and how they've built and accrued these sites, the hash rate, and how the company's evolved over the years. So... Yeah.

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And one note on that, 'cause this will be a big theme for this earnings recap.

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We had Brandon Bailey on in Q4, maybe Q3 of 2024, and he was giving the bull case for Bitdeer, and it hinged on their ASIC line, the SealMiner.

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And Brandon was completely proven correct in his bullish thesis over the ensuing year, 'cause Bitdeer ripped.

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But now with the AI pivot, which we couldn't have seen, uh, uh, back then as being as sticky for these Bitcoin miners as it is now, that AI or that ASIC line has actually become something of a liability for Bitdeer.

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If- if we look at the numbers in terms of what they're producing and what they were making on that business line in terms of selling it to the secondary market versus now using it for their own mining line.

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Brandon actually branded that as a bull case for Bitdeer, and at the time it really was, this idea that they're making their own ASICs, and if they can, they can sell it into the market when the time is right.

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When Bitcoin is r- ripping and hash price is doing well, they have the optionality to sell it for very high margins. If Bitcoin's not doing well, then they can just mine with it.

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But now that no one cares about Bitcoin miners, and they would rather see those electrons chasing higher value workloads like AI, uh, there are questions as to whether or not this...

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At least for me, there are questions as to whether or not Bitdeer continues pursuing this business line, and I think there are legitimate questions regarding that for all of the ASIC manufacturers like Bitmain and MicroBT and Can- uh, Canaan specifically.

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Anyway, back to the Q2 earnings. Bitdeer Q2 revenue rises 47% to 228.8 million as net lo- loss widens. Bitdeer beat on their... I- I believe they beat on their revenue expectations

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in this Q2 earnings, and all of that is attributable to Bitcoin mining so far. Here are the numbers From the Q2 earnings.

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Revenue, once again, came in at 228.8 million, up from 188.9 million in Q1, and also up fr- year over year from 155.6 million. Cost of revenue came in at 237.3 million.

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Gross loss was 8.5 million. Gross margin minus 3.7%. Loss from operations came in at 101.7 million. Net loss, 92.3 million.

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Adjusted EBITDA came in at 31.1 million, and earnings per share, basic and diluted, was minus 37 cents per share. The self-mining revenue, Charlie, came in at 100...

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segment came in at 168.4 million, and their co-location mining, 25 million, AI cloud, 14 million, cloud hash rate, 3.7 million. No one's really renting out hash rate anymore with hash price being so low.

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Margins are basically non-existent. And membership hosting came in at 12.8 million. Here's the big one, Charlie. SEAL miner sales were $400,000 for the entire quarter.

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This is versus 69.5 million in Q2 2025. A- So first of all, who-... huge reversion. Who are they selling them to? [chuckles] I know. That's, that's a great question.

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Probably some of their hosted customers, if I had to guess. Yeah. But the... I mean, that just kind of, I think, encapsulates where the Bitcoin mining market is at.

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These equipment manufacturers, man, they can't move inventory like they used to. And one of the looming existential questions that I don't think we've seen the other shoe drop, [chuckles]

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uh, mixing my metaphors here, but, uh, seriously, a looming existential question with regards to these ASIC manufacturers and Bitcoin's hash rate in general,

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w- what, what does the ASIC manufacturing landscape look like two, three years from now?

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You know, save a rebound in Bitcoin and hash price to where it's actually more profitable for these companies to start moving inventory again, there are legitimate questions for Bitmain, MicroBT, and Bitdeer with regards to can they secure wafer allocation at TSMC and Samsung going forward, especially as AI ASICs start moving into the fold,

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and these frontier labs and hype... a- and, and big tech companies start minting more of their own chips specifically for AI inference. You know,

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this is incredibly bullish in some cases for Bitcoin miners that have capacity online, right?

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There's very little headroom for more hash rate to come online, especially when you consider that, like, I don't know how many chips that these Bitcoin mining manufacturers can actually push out

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o- on a quarterly or yearly basis at this point. And Bitmain's been real quiet. We haven't really seen, haven't much news from them recently, nor MicroBT.

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The only news we're getting here from Bitdeer with regards to this ASIC manufacturing line is through their Q2 earnings, obviously. [lip smack] But

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that collapse in SEAL miner revenue is a deliberate shift in how they are managing it. They are now consuming their own production.

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Inventories went from 252 million of the SEAL miner to n- to nothing, and they've reclassified their ASICs into PP&E, and there was a 690...

260
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796.9 million worth of inventory transferred to PPE from this in H1. So that had PPE nearly doubling from 1.1 bill to 2.1 billion, and they basically stopped...

261
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You know, they're no, they're no longer selling this because they have no one to sell it to, and it's, it's now sitting in their facilities.

262
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Um, they, they have all of this equipment, and they can only mine it or mine with it. There's nothing else to do. And that's part of the reason why their revenue is up so much.

263
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Their self-mining hash rate hit 73 exahashes in Q2 2026. Co-located mining was 15.9 exahashes. Total hash rate under management, Charlie, 86.1 exahashes. Bitdeer is nearly 10% of the entire network. Yeah.

264
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It's w- I mean, 'cause, uh, right now, uh, hash rate's at 950 exahash on the rolling 30-day. So Bitdeer, 10% of the network. Who's the other 10%? Probably Tether. Mara. [chuckles] Um, so it's like wild, like- [chuckles]

265
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Yeah. It's wild here. I mean, if, if you actually wanted to dig into that, if you took Mara, Bitdeer, and Tether together, that's about a fourth, a fifth- Yeah...

266
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of the entire se- uh, network hash rate according to the most recent seven-day average, like just below 900 exahashes. But- Kind of crazy to think about...

267
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it, it's crazy to think of the actual s- physical scale of these, but at the same time, uh, this is not something foreign to the Bitcoin network.

268
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If you go back, there have been times when, um, now it's ancient history, where single miners have been 10, 15, 20% of the network.

269
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There are some stories that there have been, you know, higher than that of a single entity. But those are long ancient history and, um, probably irrelevant now. Still, uh, kind of wild just to think of [chuckles]

270
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these now tens of millions of cyber hornets, uh, humming, uh, all across the world. Yeah, and especially when you consider where Bitdeer was two years ago or a year ago.

271
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They only had 16.5 exahashes of self-mining hash rate in Q2 2025. They had a total hash rate under management of 30.6 exahashes. So they've nearly tripled their hash rate under management in a year.

272
00:48:22.172 --> 00:48:31.632
And again, the reason for that is they, they don't really have any options for their SEAL miner sales. They, they can't move that inventory that's being absorbed within the company itself.

273
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And there, there are legitimate questions for me at least about, like, where does Bitdeer go from here with that business line when they're focusing on AI, right? Now they have their Bhutan agreement.

274
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They've got data centers all over the world, and I, I would imagine that they're going to keep Bitcoin mining active at some of those for a lot longer than some of their peers, no doubt.

275
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But we'll go ahead and move on to the AI segment really quickly, uh, because though we, we spent a lot on the Bitcoin mining segment, I just think it's interesting to look at the fact that, you know, one of the largest Bitcoin miners in the world is moving towards AI, and there's not really a clear off-ramp for some of their ASICs that they have a manufacturing line for.

276
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So Bitdeer, last note actually on the Bitcoin side, uh, they held a hundred and fifty coins at the end of the quarter, which is down from fifteen hundred, and it's basically selling everything it mines at this point.

277
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It-- they were, uh, almost two hundred million of digital asset disposals in Q2 and four hundred and two point four million in the first half of twenty twenty-six.

278
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So Bitdeer's power portfolio, in terms of prospective power, sits at two point nine eight gigawatts. One point seven five two gigawatts are currently online. And of course, the big,

279
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the big deal that they announced s-shortly before Q2 earnings came out was this title Nor-Norway lease with Volta for an AI deal.

280
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The four point seven billion dollar sixteen-year AI and HPC data center lease is for a hundred and twenty-one IT-- critical IT megawatts.

281
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It's configured for N-Nvidia GPUs, and an end-- the end customer is described as, quote, "a leading AI lab."

282
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I think it's pretty safe to say at this point, based on the fact that they have contracts with Volta, Anthropic is most likely on the other end of the compute that Volta will be hosting at this facility.

283
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Bloomberg reported that. Bitdeer has not confirmed it, but all signs point to Anthropic. Phase one, sixty-six point five megawatts is targeted to come online at the end of this year.

284
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Phase two, sixty-six point five megawatts in Q1 twenty twenty-seven. Phase three, forty-seven megawatts in the second half of twenty twenty-seven.

285
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And Bitdeer says that they only have half a billion dollars worth of CapEx left on this site. That's what comes out to about four million dollars per megawatt. They didn't disclose how much they've spent to date.

286
00:50:56.736 --> 00:51:08.216
We don't really have clear CapEx figures for this site, neither for an aggregate total for it or-- nor for the dollar per megawatt. But you have that four million dollar megawatt figure.

287
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If you look at industry standard, we can safely assume that they've spent anywhere from six to eight dollars per megawatt-- a million dollars per megawatt so far in terms of building out the site.

288
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But it could be cheaper, who knows? As far as I can tell from reviewing the contracts, uh, disclosed in these earnings, Volta is not in charge of paying for any of that construction.

289
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So if you see that four million dollar per megawatt figure, that is accounting for what needs to be done un-until the deal is completed. It's not what has already been laid.

290
00:51:39.836 --> 00:51:49.576
It's a brownfield, so maybe a little bit of a cost reduction, but still a massive CapEx commitment. There have been some slippages and problems across the rest of its pipeline.

291
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It's g-- uh, Bitdeer is rolling out eighty-six megawatts in Knoxville, Tennessee. Shout out, Rocky Top. They have to fully redesign this, and completion has been pushed to Q3 twenty twenty-seven.

292
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There is their Wenatchee, Washington site, thirteen megawatts, which is ready for service and to be updated. They are redesigning it for the latest Nvidia GPU stack.

293
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Big one, which we reported on, uh, earlier this year, is their Clarington, Ohio site, five hundred and seventy megawatts. It's currently being blocked by litigation from American Heavy Plate Solutions.

294
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There is a fair use dispute on the leased property.

295
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It is shared with this, this, um, this, this American Heavy Plate Solutions company, and they're basically saying that Bitdeer's construction is completely messing up their operations and violating their contract for using the land.

296
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Bitdeer describes in the release, and they actually went kind of gloves off here about this, quote, "As under extensive influence from MHR, a New York-based PE firm founded by Mark H. Rachesky."

297
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That's pretty unusually pointed language for an earnings release. Apparently, the-- an, a, a proposal to dismiss this case was denied by a judge. It's currently in the discovery period.

298
00:53:10.676 --> 00:53:18.056
Who knows how long this will be locked up in court, but a legitimate snag for that site. The other interesting thing, Charlie, when I was doing my review,

299
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when I was reporting on this earlier in the year, Bitdeer was branding this site as for data center, like HBC data center loads, and it seems like they backed off on that a little bit in the Q2 earnings.

300
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Al-almost kind of saying like, "No, we're gonna put Bitcoin mining-- Uh, we're gonna put a Bitcoin mining hardware in this site." Uh, I, I wonder if two things.

301
00:53:41.096 --> 00:53:49.836
One, they're worried about the PR fallout from having something like this, a snag with one of the, uh-- a, a large data center in their portfolio for AI.

302
00:53:50.516 --> 00:54:03.696
Part of me also wonders if they are maybe conceding through that, that they are not going to be able to actually do a revamp of this site in the way that they would hope because of this pushback from American Heavy Plate.

303
00:54:05.016 --> 00:54:16.456
So maybe they're saying, "Okay, we're just gonna, we're gonna, we're gonna wait for this storm to calm and just host Bitcoin miners here, uh, for the time being." I don't know, but an interesting development.

304
00:54:16.516 --> 00:54:24.176
Again, five hundred and seventy megawatts, big site, and a big snag for them in with regards to this lawsuit. There's also the Massillon, Ohio site.

305
00:54:24.296 --> 00:54:33.636
Twenty-one megawatts has been delayed to phasing in Q3, uh, from phase, uh, from-- delayed to phase Q3 twenty twenty-six energization on electrical component delays.

306
00:54:33.676 --> 00:54:46.486
There were fires at that site that damaged two b-buildings. Uh, twenty si- twenty-six megawatts worth, uh, is being rebuilt, and there's four point three million insurance recovery booked and other net gains for that

307
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Rockdale, Texas, Charlie. People forget Bitdeer is also in Rockdale next to Riot, 563 megawatts- Right down the street from Riot.

308
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This is a, you know, a, I don't wanna say rivalry, but it was kind of like one of the tale of two miners, uh, during the initial post-China build-out, so yeah. 100%.

309
00:55:07.340 --> 00:55:15.240
In an area that you think would be ripe for plucking for a deal. Riot did delay its earnings, Charlie.

310
00:55:15.520 --> 00:55:24.220
I wonder, were they trying to get something across the finish line so that they could announce it when they dropped their earnings? I think we will see- I mean, we'll find out in like two hours, so yeah.

311
00:55:24.310 --> 00:55:33.560
It'll be interesting We will see later today. But Bitdeer saying that they have 563 megawatts online and in, quote, "active evaluation for AI transition."

312
00:55:34.220 --> 00:55:43.280
It's very, been very interesting to see the lack of movement on the Rockdale site, um, specifically with regards to either of those companies announcing a deal.

313
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Uh, maybe they have something in the c- in the books, but again, a huge site for Bitdeer.

314
00:55:46.930 --> 00:55:56.030
You'd have to think that that would be a priority for hopefully getting one of these, you know, uh, S-tier AI leases that some of their peers have. All right, Charlie,

315
00:55:57.280 --> 00:56:03.120
I'm gonna wrap this up with some management commentary during the Q&A session for the earnings.

316
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Uh, Brad Nompluck of Cantor asked, um, this question with regards to Tidal, which was one of the more valuable disclosures during the call, at least when, when management asked it.

317
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Sa- um, he asked, "How much has Bitdeer already put into Tidal, excluding the 500 million remaining?" Harris, uh, Bassett's answer was that, quote, "Hundreds of millions of dollars of development into the site already.

318
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Some was spent on the AI data center and some on originally developing it as a crypto site." He explicitly framed it as, quote, "More of a brownfield or semi-developed site than a complete greenfield."

319
00:56:40.160 --> 00:56:49.120
Not that much there with regards to answering how much they've put in. That being said, hundreds of millions could mean anything from 200 billion to 900 million.

320
00:56:49.720 --> 00:57:04.040
So a huge range there, but they have clearly already committed a large amount of capital to get it to where it is. [lip smacks] Um, the management also cleared up a bit of a, a, a capacity discrepancy. Um,

321
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Tidal is for 180 gross megawatts total. Um, 133 of that is leased to Volta. 121 of that is for critical IT.

322
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There's 47 gross megawatts left over that is retained by Di- Bitdeer for its own AI cloud use, um, which is interesting.

323
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So there's initial capacity, or there's additional capacity at that site, and they were asked as a follow-up, would, uh,

324
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M-Mike, uh, Coloness of HC Wainwright pressed twice on this saying, "Okay, 47 megawatts, will that be colocation or your own GPU deployment? Would Volta want it?"

325
00:57:46.080 --> 00:57:56.070
And management wouldn't really speak for Volta, but said, quote, "There is a lot of interest from Volta in expanding our relationship." So maybe Bitdeer rolls out their own cloud there.

326
00:57:56.100 --> 00:58:06.739
Probably easier to just let Volta take that if they're happy with the services that they're receiving so far, though. [lip smacks] Um, an important question with regarding the seal miner models.

327
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Uh, one analyst asked, um, how to model external seal miner sales going forward. Management answer effectively confirms that the $400,000 revenue line is an anomaly.

328
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Existing wafer inventory is designed for internal use only.

329
00:58:25.240 --> 00:58:40.460
Um, they then articulated the strategic logic, which is generally, um, powered land in an early stage development gets crypto mining, deploy it in, deploy into it quickly to generate cash, and critically keep the power at the site by continuing to draw.

330
00:58:41.080 --> 00:58:51.100
If you keep using the power, management says, "It's less likely that the utility will try and move it away from the land," end quote. So you're using mining as a capacity retention tool.

331
00:58:51.640 --> 00:58:57.400
It-- the revenue line honestly is like not really that interesting with it, considering what it could be used for.

332
00:58:58.130 --> 00:59:08.940
And this is the bull case, I think, as Bitdeer is presenting it for continuing to have that revenue line if you have those ASICs that you're producing. Park them at a site that you want to use for AI.

333
00:59:08.980 --> 00:59:20.540
Continue tapping from the PPA. Get a deal underway, get it signed, get it leased, and then pull that equipment, shuffle it somewhere else. Could be a beneficial strategy.

334
00:59:20.620 --> 00:59:32.460
I think time will tell, especially when you consider that Bitdeer sites are scattered all over the world, so easier said than done, right? [lip smacks] But that, that kinda wraps it up, Charlie, for this.

335
00:59:32.960 --> 00:59:42.760
There was a lot of commentary on where they're focusing on expansion. I believe they have a data center in Malaysia that they're also gonna be targeting for AI workloads. Kind of interesting to see.

336
00:59:43.260 --> 00:59:56.200
Uh, the Washington site as well is one of the first up for being retrofitted, and obviously they have the Tidal Norway site as their bedrock AI deal, which still don't have CapEx guidance on it, so.

337
00:59:58.860 --> 01:00:11.740
And that wraps up the Bitdeer, uh, tour de force from Colin. And, uh, we're gonna keep on going. We're gonna do, uh, we're gonna zoom out, do a quick little market update.

338
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Um, but to give Colin a, uh, moment, uh, to catch his breath, I will read, uh, the ad from our next sponsor, Lygos.

339
01:00:22.640 --> 01:00:38.320
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340
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341
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342
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343
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344
01:01:28.300 --> 01:01:43.200
Go to lagos.finance to learn more. All right. Tagging Colin back in to land this plane, talk about the markets. Bless you, Charlie Spears. [laughs] Thank you for the read.

345
01:01:43.880 --> 01:01:51.940
Uh, so I wanted to kind of use this as an opportunity to give a temperature check on where Q2 earnings are landing for the rest of the

346
01:01:52.840 --> 01:02:02.480
economy, a- and specifically focusing on the tech sector as, as we, uh, do here at Blockspace. But as I said at the top of the show, Charlie, per FactSet's most recent earning insight,

347
01:02:04.800 --> 01:02:19.280
86% of S&P 5 companies have re- uh, uh, or 80, 88% of S&P 500 companies have reported results. 86% of those have reported a positive earnings per share surprise, and 76% have reported a positive revenue surprise.

348
01:02:20.340 --> 01:02:32.980
And that's kind of with- in line with the surprises we've seen over the last few quarters. Uh, they, they've been in the ballpark of 80 to 70% in terms of positive surprises for the companies reporting.

349
01:02:33.000 --> 01:02:46.700
But the interesting part about this one, Charlie, is just how stunning that a- that blended average has been for the S&P 500. The blended g- mmm, the blended earnings growth has been 50.4%.

350
01:02:48.140 --> 01:03:04.520
50.4%, which is the highest, if it sticks, 'cause there's still about 12% that need to report, that would be the highest since Q2 2021's 91.6%, which was the rebound following the fallout of COVID and the shutdowns across the globe.

351
01:03:05.120 --> 01:03:20.160
Uh, the stock market rebounded heavily after a round of printing and things opening back up in 2021. But it is also the second straight quarter above 25% and the seventh consecutive quarter of double-digit growth.

352
01:03:20.320 --> 01:03:28.000
So going back to kind of our segment with Jay, earnings growth has been spectacular during the AI boom.

353
01:03:28.560 --> 01:03:38.690
We have seen clear growth and accretion to the companies that are getting involved in this, but it's starting to get a little top-heavy with where that is concentrated, and that's...

354
01:03:38.700 --> 01:03:52.040
FactSet makes that very clear in this. Alphabet and Amazon together, are you ready for this one, Charlie? They accounted for 71% of the dollar level increase in, in index earnings since June 30th. What in the world?

355
01:03:52.160 --> 01:04:05.460
Is it just the Google and Amazon economy? And why? It's just J- Jeff Be- It's Jeff Bezos's world- Mm... and we're all living in it now. And Sundar Pichai. Yeah. Yeah. Thank you. I was... I, I, I could not recall.

356
01:04:05.560 --> 01:04:20.080
Don't worry. I got it. [laughs] So that, that's pretty, that's pretty staggering. So the other thing that's staggering about this earnings insight, the surprise percentage is an all-time record and mostly an artifact.

357
01:04:21.100 --> 01:04:27.250
Aggregate earnings came in at 29.2% above estimates against a five-year average of 7%.

358
01:04:28.100 --> 01:04:40.100
That would be the highest earnings surprise if it holds since FactSet began tracking the metric in 2008, breaking the prior record of 23.2% set in Q2 of 2020.

359
01:04:40.880 --> 01:04:51.480
Excluding Alphabet and Amazon, it falls to 10.9%, which is still well above averages, but nowhere near that record. So again, it shows you just how much y- you...

360
01:04:51.540 --> 01:05:01.360
And at different quarters, you could almost swap Amazon and Alphabet for Microsoft or Meta or Nvidia. If you look at... If you take the Mag Seven out,

361
01:05:03.040 --> 01:05:15.140
the stu- uh, the stupidity of these earnings growth rates starts to, uh, kinda come down a little bit and, and it's a little more muted. So I think that's worth mentioning.

362
01:05:15.300 --> 01:05:27.680
Um, net profit market, uh, margins are a- are the one record that survives this exclusion. Blended net profit margin is 16.9% versus 14.8% last quarter and 12.9% a year ago.

363
01:05:28.100 --> 01:05:39.030
Five-year average is 12.4, and the most recent reading from FactSet with this current batch is the highest since FactSet began tracking in 2009. Previous record was 14.8%.

364
01:05:39.800 --> 01:05:43.480
Ex Alphabet and Amazon, it's 15%, so it'd still be a record.

365
01:05:43.700 --> 01:05:58.300
That's the cleanest like, hey, the strength is actually here data point in the report and, you know, it's, it's worth mentioning in context with everything else with regards to how Amazon and Al- Alphabet are driving most of the growth for this quarter.

366
01:05:59.420 --> 01:06:13.090
Uh, revenue growth, blended revenue growth is 15%. That's the highest since Q4 2021's level of 16.1%. Importantly, all 11 sectors are reporting revenue growth in the FactSet report.

367
01:06:13.530 --> 01:06:23.840
If you also look at earnings growth, the only sector that did not report earnings growth in this quarter so far has been healthcare, which is interesting 'cause that's where most of the job numbers have actually been coming.

368
01:06:24.560 --> 01:06:32.780
Um, if you look at job growth in the US over the last year, a lot of it is concentrated in healthcare, some in financial services as well.

369
01:06:33.980 --> 01:06:48.620
Um, and I will, I will wrap up here with concentration with regards to energy and semis. If you look at that revenue growth, excluding information technology and energy, index revenue growth falls to 9.7% from 15%.

370
01:06:50.276 --> 01:07:05.716
And looking at energy and semis and the whole AI bubble in conversation with each other, Charlie, energy unsurprisingly posted the highest earnings growth of any sector at 147% [laughs] and the highest revenue growth at 42.5%.

371
01:07:06.736 --> 01:07:11.396
Obviously, oil was ripping in Q2. This is kind of no surprise.

372
01:07:11.416 --> 01:07:26.176
The average oil price in Q2 2026 was 92.55-- or $92.55 per barrel, and that was up 45% from the average of $63.68 a barrel in Q2 2025.

373
01:07:27.176 --> 01:07:42.416
If we look at information technology, earnings were plus 70-- 70.4%. Revenue was up 35.9%. Semiconductors and semiconductor equipment earnings were up 135%, with revenue up 77%.

374
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Importantly, excluding semis, IT sector earnings growth falls to 34.3% from 70.4%. So that's half of the sector's earnings growth is in that single-- in, uh, is in that single sector of the industry.

375
01:07:57.896 --> 01:08:10.636
Now, that being said, 34.3% is nothing to shake a stick at, but again, if you strip out some of these outliers, you get a clearer picture of what's going on with the rest of the economy. Um, last note on that.

376
01:08:10.676 --> 01:08:26.336
If you take out communication services, which had 117% earnings growth, excluding Alphabet alone, it falls to 6%. So much, much lower. Last note that Fact Set makes, Charlie, and I will shut up for the day.

377
01:08:27.096 --> 01:08:30.816
The market isn't paying for beats the way that it used to, Charlie.

378
01:08:31.276 --> 01:08:44.996
Companies with positive sur- positive surprises average a 0.4% price change two days before through t- two days after their, their reported earnings versus a five-year average of a 1% change.

379
01:08:45.496 --> 01:09:00.456
Companies with negative surprises averaged -2.3% growth versus a 5% average of -3%. Record beats and record surprises, all of that is there, but there's been muted price reaction in both directions here.

380
01:09:01.636 --> 01:09:09.296
Either the market has priced in this strength already, or it's discounting the quality of the strength as we move through earnings.

381
01:09:09.316 --> 01:09:14.316
And we've kind of felt this, I think, throughout this-- the, the prelude to this earning seasons.

382
01:09:14.356 --> 01:09:24.996
With July's sell-off, it seems like people were updating their priors, or folks started really reevaluating what some of these AI leases mean for the companies that we cover, right?

383
01:09:25.576 --> 01:09:39.196
Like we saw Bitdeer is down since it announced its first AI lease a year ago, you know, or in Q3, Q4 of 2025. That would have ended in a huge stock price bump, right? We saw the same thing with CleanSpark.

384
01:09:39.296 --> 01:09:42.036
We also saw the same thing with Core Scientific with their AMD deal.

385
01:09:42.476 --> 01:09:51.236
The market's just not privileging these leases as much as they used to, and we're also seeing that show up in their reactions to earning surprises as well. Maybe it's a lull.

386
01:09:51.676 --> 01:09:56.436
Maybe people are legitimately starting to ask questions with regards to, is this market too rich?

387
01:09:57.106 --> 01:10:09.096
I think we'll know more as we continue to march through earning season and also see how the market reacts to whatever Q3 has coming down the pipe. And that is the show.

388
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Thank you for listening to Block Space Live, going live every single weekday at 1:00 PM Eastern. I will call your attention to, once more, that we are in the middle of earnings week two,

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featuring earnings coverage on AI data centers and NeoClouds, especially executive interviews.

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So every day for the rest of the week, we have an executive from a number of the companies dropping their earnings this week, as well as hosting live stream watch parties as the earnings are happening.

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Make sure to put this stream and this account on notifications, whether on YouTube or X. And if you haven't followed us on all of our accounts, LinkedIn, Yahoo Finance, et cetera, et cetera, make sure to go do that.

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This show is brought to you by CleanSpark, Nasdaq listed ticker CLSK. Thank you for listening. I'm Charlie, and that's Colin. I'm Colin. [laughs] And we'll see you tomorrow.

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