Summary BitFuFu, a Singapore-based Bitcoin miner, offers cloud mining solutions, allowing users to lease mining equipment, eliminating the need for hardware management. Cloud mining is BitFuFu's primary revenue source, accounting for over half of its annual revenue in the past three years. The company ticks all boxes as a Bitcoin miner with strong potential to grow and is also using a Bitcoin treasury strategy. A two-year forecast for EH/s, revenue, and operating expenses reveals the company is well-positioned to see strong growth in operating income in the next two years. Singapore is a tech hub. If you have ever visited this tiny nation with a population of around 6 million, you'd know that. Although not a bet on the tech sector, I have invested in one of Singapore's largest banks - DBS Group Holdings ( OTCPK:DBSDF ), so I am not new to exploring investment opportunities in the nation. When it comes to tech investing, I have so far preferred American and Chinese companies, given that there have been an abundance of opportunities in these markets over the past 8 years. However, BitFuFu Inc. ( FUFU ), a Singapore-based Bitcoin miner, caught my attention recently. After understanding the company, its ongoing business transformation, and the global market it is tapping into, I find FUFU interesting. A Flexible, Scalable Business BitFuFu, at its core, is a company that offers cloud mining solutions. For those who are unfamiliar with this concept, cloud mining enables individuals (or even companies, for that matter) to conduct Bitcoin mining by leasing equipment or computing power from a data center operator. As many of you know, Bitcoin mining requires the acquisition of mining hardware, which incurs substantial up-front costs, storage costs, and electricity. Cloud mining provides a perfect solution for this, as miners do not need to manage mining hardware when they sign up to lease mining equipment from a cloud mining solutions provider such as BitFuFu. BitFuFu generates revenue in a few different ways, with the sale of cloud mining being the leading source. In each of the last three years, cloud mining has accounted for more than half of its annual revenue. BitFuFu offers a unique, one-stop cloud mining experience to its users by charging them an upfront fee to onboard them. To provide this packaged solution, BitFuFu purchases mining equipment and pays for hosting services. In 2024, cloud mining accounted for almost 60% of revenue. As of April, BitFuFu had over 612,000 registered cloud-mining users. Exhibit 1: BitFuFu segment information Investor presentation BitFuFu also generates revenue from self-mining Bitcoin. This involves the company using the Full Pay-Per-Share method (a commonly used revenue distribution model) to confirm Bitcoin payout daily based on hash calculations. Self-mining, after growing from $100 million in 2023 to $157.5 million in 2024, accounted for 34% of the company revenue in 2024. BitFuFu's other business lines include selling mining equipment and providing miner hosting services. After understanding BitFuFu's business model, what stands out is the flexibility with which it can efficiently deploy Bitcoin miners across cloud mining and self-mining operations to maximize rewards. This flexibility, in my opinion, helps the company allocate resources strategically during increased market volatility to maintain stable revenue growth compared to some other Bitcoin miners. BitFuFu's Aladdin system is at the center of this strategy, as it enables adjustments to the allocation of hash rate between self-mining and cloud mining operations. This advanced system is home to several unique features, such as FuFu Sentry for miner monitoring, FuFu Proxy for mining capacity slicing, and FuFu Dispatcher Engine for hash calculation dispatching. BitFuFu is backed by Bitmain, one of the largest crypto mining hardware manufacturers in the world. The company's CEO, Leo Lu, in fact, served as a director at Bitmain where he co-founded the cloud-mining business. Bitmain invested in BitFuFu in 2021 before committing to another $70 million in investments through a PIPE structure in 2022 in partnership with AntPool. BitFuFu's close ties to Bitmain are likely to help the company secure a stable supply of advanced Bitcoin miners in the foreseeable future. In 2024, Bitmain was indeed the largest supplier for BitFuFu. Exhibit 2: BitFuFu's milestones Investor presentation Although based out of Singapore, North America accounts for the largest market for BitFuFu. In 2024, North America accounted for just over 51% of revenue, while Asia and Europe contributed 31% and 13% of revenue, respectively. BitFuFu's Growth Strategy Ticks All Boxes As a Bitcoin miner, BitFuFu's growth depends on a few variables. Increasing the overall hash rate is one of the primary drivers of revenue. A higher total hash rate opens doors for higher Bitcoin rewards from self-mining and subscription fees from packaged cloud mining solutions. The company has entered into agreements with Bitmain for large-scale purchases of advanced mining equipment, which is an important step in the process. A two-year agreement with Bitmain allows BitFuFu to purchase up to 80,000 S-series miners, which includes the latest models such as S21 XP and S21 Pro. According to the company management, this planned acquisition of mining equipment alone will add up to 16 EH/s to its hash rate. I am also encouraged by the payment terms BitFuFu has secured with Bitmain which allows the company to pay for a portion of the total due with its common equity and also defer some cash payments until after the delivery of mining equipment. In its monthly update for April, BitFuFu reported a 37% MoM increase in hash rate to 28.3 EH/s, which came on the back of increased hash power procurement from suppliers. I believe this marks the beginning of a phase where the company will see strong momentum in hash rate growth, setting up the stage for robust revenue growth in the long run. Expanding access to data center facilities also plays a key role in long-term growth. BitFuFu has made progress on this front too. For instance, last February, the company announced the acquisition of a majority stake in a 51 MW Bitcoin mining data center in Oklahoma. BitFuFu, as confirmed in February, is planning to deploy highly efficient AntMiner S21 series models at this data center, effectively bringing the average cash cost to mine one Bitcoin to just $18,000 excluding depreciation. The site also operates at a very competitive electricity cost of just 3 cents per kilowatt-hour. This acquisition is projected to add 3 EH/s to the total managed hash rate of the company. In April, BitFuFu's total power capacity under management increased almost 19% MoM to 566 MW. This suggests that the company is well on track to meet its ambitious goal of reaching 1 GW of global capacity by the end of 2026. The company has also signed 10-year lease agreements for two U.S.-based mining facilities with a combined capacity of 33 MW. Since electricity is one of the biggest expenses for a Bitcoin miner, BitFuFu remains focused on lowering its power costs by strategically maintaining mining hubs in low-cost regions. As part of this strategy, the company recently acquired a stake in a facility in Ethiopia with an estimated electricity cost of 3.6 cents per kWh. Exhibit 3: BitFuFu's hashrate network Investor presentation BitFuFu is also investing in improving the underlying technology supporting its business, which, I believe, is the right way forward. Better technology leads to lower downtime and lower maintenance costs, which ensures that the hash rate is consistently productive. The Aladdin system, as noted earlier, can efficiently manage a very large number of miners (more than 100,000,000 simultaneously), and the company has focused on enhancing the mining platform user experience to attract and retain customers. Tech investments can indirectly improve the overall mining efficiency as well, which is evident from how BitFuFuOS optimized 9.7 EH/s of hashrate in April alone. BitFuFu also ticks Bitcoin treasury functionality as the company, as outlined in its annual report, is strategically holding Bitcoin for operational and financial purposes. As of April, the company held 1,908 Bitcoin, valued at almost $200 million at today's BTC price of over $103K. At a market cap of just $600 million, BitFuFu is trading around three times the value of its Bitcoin holding. BitFuFu Is On Track For Stellar Operating Income Growth I did a simple exercise to project BitFuFu's operating income for the next two financial years (2025 and 2026). Any valuation/projection model is prone to errors, and it's nearly impossible to get it right. So the idea behind this model was not to predict the future, but to get a basic understanding of what we are dealing with. I have made several critical assumptions in this model to estimate hash rate growth, including the phased deployment of advanced miners and a 60% annual increase in Bitcoin network difficulty. Other key assumptions include: Self-mining cost of a Bitcoin is expected to average $22,000 in 2025 and $24,000 in 2026. Cloud mining gross margin of 7% (compared to 6.2% in 2024). Hosting & Other segment gross margin of 2%, similar to 2024. Removal of stock-based compensation from operating expenses for simplification. Hash rate allocation of 30% for self-mining, 60% for cloud mining, and 10% for hosting and other services. The table below summarizes the key findings in my model. Metric 2025 2026 Notes Hash rate 38 60 Based on the April 2025 actual numbers, the phased Bitmain deal, and facility expansions. - Self-Mining EH/s (30%) 11.4 18 - Cloud-Mining EH/s (60%) 22.8 36 - Hosting/Other EH/s (10%) 3.8 6 Average BTC price $85,000 $100,000 BTC mined per average EH/s/Year ~220 ~130 Assuming 60% annual Bitcoin network difficulty Revenue Projections Self-mining revenue (millions) $213.2 $234 Cloud mining revenue (millions) $433.2 $720 Selling of mining equipment (millions) $25 $25 Hosting & Other (millions) $7 $10 Total revenue (millions) $678.4 $989 Cost of revenue projections Self-mining costs (millions) ($55.2) ($56.2) Cloud mining costs (millions) ($402.9) ($662.4) Selling equipment costs (millions) ($22.5) ($22.5) Hosting & Other costs (millions) ($6.9) ($9.8) Depreciation and amortization (millions) ($40) ($60) Total cost of revenue (millions) ($527.5) ($810.9) Gross profit (millions) $150.9 $178.1 Gross profit margin 22.2% 18% Operating expenses (millions) ($27.1) ($39.6) Pre-SBC operating income $123.8 $138.5 Operating margin 18.2% 14% BitFuFu has already showcased its potential by bringing in more revenue than some established mining companies such as Riot Platforms ( RIOT ) and CleanSpark ( CLSK ) in 2024, and I believe the company is well-positioned to see strong operating income growth in the next couple of years. Exhibit 4: BitFuFu vs peers Investor presentation At a P/S multiple of around 1, I find BitFuFu very attractively valued compared to 5.5 for Riot Platforms, 6.8 for Core Scientific ( CORZ ), and 7 for MARA Holdings ( MARA ). One possible reason for BitFuFu's cheap valuation is the company's Singapore origins and the absence of a hype factor. However, since investing is not about getting behind the most hyped companies, FUFU stock seems an attractive bet on the crypto economy. Takeaway BitFuFu is a hidden gem in the Bitcoin mining sector. This Singapore-based company with close ties to Bitmain has performed well in the past couple of years and is on the verge of reporting strong revenue and operating income growth. At a substantially cheap valuation compared to other established Bitcoin mining companies, BitFuFu stock offers a sufficient margin of safety to bet on the crypto economy.
