Summary Hut 8 Corp.'s recent outperformance versus Bitcoin is notable, but operational profitability remains heavily dependent on unrealized gains from BTC holdings. The compute segment showed strong revenue and margin growth, but other segments struggled, and overall profitability is masked by accounting for Bitcoin revaluation. Ballooning SG&A and depreciation expenses are concerning, especially if the AI/data center buildout fails to deliver expected growth. Despite some positives, I maintain a Hold rating on HUT stock, preferring direct Bitcoin exposure or purer HPC/AI plays for investors. As we approach five months since my last Seeking Alpha article covering Hut 8 Corp. ( HUT ), we have two additional quarters of company performance to assess in addition to the performance of the stock price. Readers might recall that back in March, I felt investors would do better being long Bitcoin ( BTC-USD ) rather than HUT shares: While I'm encouraged by Hut 8's ability to transform the business over the last year or two, the equity still goes as Bitcoin goes. And if given a choice between the two, investors will likely do much better just buying Bitcoin. As fate would have it, that call has turned out to be wrong: Data by YCharts Since my last HUT piece , the stock—as well as the broader mining sector—outperformed Bitcoin by a rather significant margin. I think it's worth looking at HUT's recent earnings report to estimate whether this outperformance can reasonably continue. Q2-25 Earnings For the quarter ended June 2025, Hut 8 reported $41.3 million in top-line revenue. This was a 17.3% year-over-year increase from June 2024. By segment, the revenue breakout was as follows: Revenue 000s 3mo 6/30/25 3mo 6/30/24 YOY Power $5,492 $10,530 -47.8% Digital Infrastructure $1,512 $5,264 -71.3% Compute $34,295 $15,795 117.1% Other $0 $3,626 -100.0% Total Revenue $41,299 $35,215 17.3% Source: Hut 8. These numbers are a bit all over the place due to Hut 8's reclassification and consolidation of certain revenue segments. Underneath the "Power" umbrella, Hut 8 generates revenue from capacity contracts and energy sales to the Ontario electrical grid. Under this same segment, Hut 8 offers its energy infrastructure expertise to institutional clients. Within Hut 8's "Digital Infrastructure" segment, the company offers co-location services for both Bitcoin mining and CPU-based workloads. "Compute" rolls up three different sub-segments that include Bitcoin mining, which has been spun out to American Bitcoin, data center cloud services, and Highrise AI, the latter of which runs a GPU-as-a-service model. As would likely be expected given the operations of the legacy Hut 8 entity and the biggest contributor to top-line revenue in the table above, Compute was Hut's largest expense with $14.6 million in COGS in the quarter ended June. COGS 000s 3mo 6/30/25 3mo 6/30/24 YOY Power $5,000 $5,449 -8.2% Digital Infrastructure $2,120 $4,331 -51.1% Compute $14,656 $8,670 69.0% Other $0 $2,186 -100.0% Total COGS $21,776 $20,636 5.5% Source: Hut 8. Compute COGS grew year over year by 69%, which was actually quite a bit less than the 117% year-over-year growth in revenue from that category. This led to a monster gain in gross profit for Compute from $7.1 million last year to $19.6 million this year. That said, the year-over-year performance in the other segments looks quite rough: Gross Profit 000s 3mo 6/30/25 3mo 6/30/24 YOY Power $492 $5,081 -90.3% Digital Infrastructure -$608 $933 -165.2% Compute $19,639 $7,125 175.6% Other $0 $1,440 -100.0% Gross Profit $19,523 $14,579 33.9% Source: Hut 8. Again, this is due to segment consolidation and reclassification to some degree. But gross profit in Power fell by 90% year over year, and Digital Infrastructure turned negative. This was largely impacted by the termination of an agreement with Ionic Digital. Compute remains the biggest driver of the top line for Hut 8, and that segment is still highly reliant on Bitcoin mining. As has been a common tale in mining earnings reports for the last few quarters, positive net income is generally only possible with paper gains in Bitcoin holdings. During the quarter, Hut 8 reported a positive net income of $137.5 million. Take away the $217.6 million gain on BTC holdings, and Hut 8's real operations were actually negative to the tune of $80.2 million in the quarter. I recognize that FASB accounting rules allow for this, but I do think it can be misleading to include unrealized gains on dormant assets in a company's operational performance, as it can potentially give investors a false view of the company's true profitability. And if BTC asset revaluation is going to be the key determinant in Hut's corporate performance, then the level of BTC relative to the market valuation of the equity may be important to consider. mNAV, Sats Per Share, and Ownership While HUT is not a 'treasury company' in the same sense that an entity like Strategy ( MSTR ) would be considered one, Hut 8 does command the 12th largest BTC stack held by any public company with 10,667 BTC as of quarter-ended June. Hut 8 mNAV Trend (BitcoinTreasuries) Given the company's current market value, HUT has an mNAV of 1.76. This is close to the mNAV of Strategy and generally in line with other mining stocks like Riot Platforms ( RIOT ) and CleanSpark ( CLSK ). Even as the company has often relied on shareholder dilution to fund growth, the year-over-year change in the "sats per share" figure shown below has grown 2% year over year from 10,017 to 10,217. HUT (Sats per Share) (Author's Chart, Data from Hut 8 and Seeking Alpha) This is well below the YoY sat-backing growth that we've seen from companies like MARA Holdings ( MARA ) or Riot Platforms, but ahead of similarly sized Cipher Mining ( CIFR ). It should also be noted that recent "sats per share" numbers over the last few quarters have been roughly flat and well below the highs from 2022. Something else that I like to look at with the public miners is the degree to which hedge funds are holding the stocks. As of Q1 25, 30% of HUT's outstanding shares are held by the "smart money". Shares in millions (Author's Table, Data from Hedge Follow and Google Finance) This 30% hedge fund ownership generally puts HUT in the middle of the pack relative to the 12 stocks shown above, but much closer to top-owned Core Scientific ( CORZ ) than HIVE Digital Technologies ( HIVE ). My read on this is that even though Hut 8 is seen as one of the stronger bets in the public mining space by fund managers. Risk to Consider We've already seen that Hut is not a profitable company without BTC revaluation. Despite that, Compute has actually seen growth in gross margins year over year. From where I sit, a big factor holding back Hut from positive net income in more real terms is the ballooning expenses in SG&A and Depreciation & Amortization: HUT, SG&A as a % of Revenue (Seeking Alpha) Both categories have seen growth outpace total revenue over the last year. But it's the level to which the spending is occurring relative to top-line revenue that I find more concerning. In Q2 24, SG&A was 44.5% of revenue, which is still quite high. That figure ballooned to 89.7% in Q1-25 and 73% last quarter. While lower on a relative basis, Depreciation and Amortization came in at 68.3% and 47.1% of revenue over the last two quarters. To be clear, Hut is not the worst offender of SG&A as a percentage of revenue, but the trend is worrisome if the HPC/AI data center buildout turns out to be a bust. Closing Takeaways I think the major concern here is fairly straightforward; it takes unrealized gains in Bitcoins that have already been mined to generate positive net income in the reporting quarter. This has the double impact of masking operational losses while also putting the company at significant risk if the value of that Bitcoin were to actually go down substantially, as has been the case numerous times over the coin's nearly 16-year history. There are likely some who view Bitcoin cycle theory as less relevant in a post-ETF world, but Bitcoin, the asset, is currently reliant on capital flows rather than underlying usage of the network itself. As easily as this capital has moved into BTC, it can most assuredly move out as well. That said, Bitcoin's current trajectory still appears to be up. If the company can continue to grow "sats per share" the way it has over the last quarter, then it stands to reason that HUT could theoretically continue to outperform BTC in a bull run. As a raw BTC proxy, I like other opportunities better. And as an HPC/AI investment, there are other companies that are closer to pure play. I'm still going to rate HUT shares a Hold today.
