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After WhiteFiber reported its November results, we updated our fair value and cut our quality score to 3.3. We lowered our rating for the people running the business and how fast sales are growing, but we raised our score for how much profit it makes on its investments. We have started tracking the availability of electrical equipment like switchgear and the volatility of the company's investment portfolio. We also reset our projections for the timeline of the North Carolina campus after equipment delays postponed customer billing.
WhiteFiber reported revenue of 20 million dollars for the quarter, which was lower than the 30 million dollars analysts expected. While sales grew 65 percent compared to last year, the company lost about 16 million dollars overall. Much of this loss came from the costs of being a new public company and the heavy spending required to set up its specialized data centers.
The core of the business remains its cloud services, which brought in 18 million dollars with healthy profit margins of 65 percent. However, the overall miss on sales and a larger-than-expected loss per share show the strain of the company's current phase. It is essentially in a race to finish its massive North Carolina campus before its cash runs low, making the timing of that project the only thing that truly matters for the stock's value.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
WhiteFiber signed a deal with Morgan Stanley and other lenders for up to 300 million dollars in loans. The money is specifically for the first 40-megawatt phase of its NC-1 data center in Madison, North Carolina. This is a vital step because the company has been burning cash to build this site, which is the main engine for its future growth.
The funding comes in two parts: an initial 200 million dollars and another 100 million dollars available later. To get the first payout, WhiteFiber must show that the first phase of the site is ready and that customers have accepted the capacity. The loans carry a high interest rate of at least 8 percent, reflecting the risk of building large-scale infrastructure before it is fully operational. If the project stays on track, this cash should bridge the gap until the site starts generating revenue in 2026.
Source: 8-K filing
Several large banks, including Morgan Stanley and UBS, suggested that the recent drop in AI-related stocks went too far. They believe the risk of the government passing strict new rules on how data centers are built and run is unlikely to happen anytime soon.
This is a helpful shift for WhiteFiber, which is currently spending heavily to build out its North Carolina campus. Since the company's value depends on its ability to secure power and permits for these sites, a lighter touch from regulators makes its path to opening those centers much clearer.
Source: Reuters
On October 28, WhiteFiber finished buying two properties in Yadkin County, North Carolina, for $60 million in cash. These sites are expected to provide at least 60 megawatts of power, with the potential to grow to 198 megawatts over the next seven years.
Securing this power is a major step for the company because electrical capacity is the main bottleneck for building AI data centers. While this purchase uses up a significant amount of cash, it locks in the physical infrastructure WhiteFiber needs to meet its goal of doubling its capacity by early 2026.
Source: 8-K filing
Management has a history of setting overly optimistic targets that the business consistently missed until a recent small beat. This makes their future forecasts harder to trust.
| Expectation | |
|---|---|
| EPS | $-0.40 |
| Revenue | $40M |