Core Scientific’s Colocation Revenue Jumps 58% as AI Capacity Expands

Core Scientific (NASDAQ: CORZ)'s third-quarter colocation revenue rose 58% from the previous quarter as it brought more data-center capacity into service, accelerating its shift from bitcoin mining to infrastructure for AI.

Colocation revenue reached $215.4 million, up from $136.7 million in the second quarter and $15 million a year earlier, the company said in its earnings release on Thursday. Total revenue increased 42% sequentially to $232.9 million, almost triple the $81.1 million reported a year earlier.

The expansion also lifted adjusted earnings. Adjusted earnings before interest, taxes, depreciation and amortization reached $133.6 million, compared with $41.1 million in the second quarter. The company’s adjusted EBITDA margin widened to 57% from 25%.

Core Scientific reported net income of $1.18 billion, compared with losses of $1.16 billion in the preceding quarter and $144 million a year earlier. The profit benefited from a non-cash gain tied to changes in the fair value of warrants, making the headline earnings figure an imperfect measure of operating performance.

The accounting effect had worked in the opposite direction in the second quarter, when warrant revaluations were the main driver of the company’s loss, according to its previous earnings release.

Core Scientific was billing customers for 485 megawatts of capacity as of September 30, up from 395 megawatts at the end of June. The September capacity represented more than $700 million in average annualized colocation revenue under generally accepted accounting principles, the company said.

Chief Executive Officer Adam Sullivan said Core Scientific was nearing full delivery under its first colocation agreement, while construction under a second agreement was underway across five campuses.

The company’s expansion includes a partnership with Advanced Micro Devices Inc. announced in July. That arrangement was anchored by 15-year agreements covering about 530 megawatts across five sites, with more than $14 billion in potential base contracted revenue. The broader partnership allows for capacity to expand to as much as 2.5 gigawatts.

Colocation accounted for about 92% of third-quarter revenue, compared with roughly 18% a year earlier. Core Scientific has said it is repurposing its remaining mining facilities for AI-related colocation services as circumstances allow.

The build-out continues to require substantial investment. Third-quarter capital expenditures reached $985.1 million, up from $797.5 million in the preceding quarter and $244.5 million a year earlier. Gross profit increased to $123.3 million from $70 million in the second quarter.