Summary BitFuFu faced a sharp Q1 revenue and capacity decline, but operational recovery and hashrate expansion post-Q1 signal a positive turnaround. Cloud mining remains BitFuFu’s dominant revenue source, with registered users nearly doubling YoY to over 607,000 users, signaling growing retail demand despite infrastructure lag. BitFuFu's close ties with BITMAIN offer hardware procurement advantages but pose related-party and concentration risks, though liquidity remains healthy for now. Despite recent setbacks, BitFuFu’s infrastructure recovery, improving efficiency, and growth in cloud user base, point to a stronger Q2 and support my continued Buy rating for FUFU shares. BitFuFu (NASDAQ: FUFU ) is one of the new entrant publicly traded Bitcoin ( BTC-USD ) mining companies in the current crypto market cycle. BitFuFu has grown in popularity since going public in March last year thanks to the company’s cloud mining segment, which makes Bitcoin mining more accessible to a larger audience. The company is headquartered in Singapore and has close ties with Bitcoin mining hardware manufacturing giant BITMAIN. The founder and CEO of the company, Leo Lu, commands extensive experience in the crypto mining business, having headed the cloud mining division at BITMAIN for several years before going on to found BitFuFu in December 2020. Several other key members of BitFuFu’s team were former members of BITMAIN and Bitdeer ( BTDR ). BitFuFu’s long-standing relationship with BITMAIN gives an edge in securing cutting-edge mining hardware, but it also poses potential related party risks (which I’ll discuss down the line in this article). BitFuFu's operational and financial performance last year was impressive. FY24 was both an operational breakout year and an inflection point for BitFuFu, with revenue surging by 63.1% compared to FY23 and net income skyrocketing 414.3% compared to FY23. Revenue for the full-year FY24 was $463.3 million and net income was $54 million. I covered the FY24 earnings review in a previous article published here on Seeking Alpha in March this year. Reference to FY24 is necessary for an insight into the Q1 FY25 earnings and the outlook for the remaining quarters of FY25. BitFuFu Q1 FY25 results were announced last week. It was a mix of positives and negatives, with headwinds impacting top-line performance, yet underlying operational trends suggest that the company might be undergoing strategic adaptation and still showing ongoing resilience despite the headwinds faced. Virtually every miner that has reported earnings so far in 2025 has experienced headwinds that are cutting across the board. A first peek at BitFuFu’s Q1 results might suggest that FY25 is shaping up so far to be quite not like FY24. Since tariffs and macroeconomic shifts, the crypto market has been grappling with volatility. But putting volatility and Bitcoin price aside, let’s examine BitFuFu’s Q1 operational performance so far this year in this piece. FUFU has been on a nosedive since the start of the year. And on the heels of the Q1 results, the pressing question for investors is whether FUFU still presents a compelling investment opportunity in Bitcoin mining. Data by YCharts What BitFuFu FY25 Is Shaping Up To Be BitFuFu’s Q1 results must have been an unwelcome surprise for most investors following last year's stellar financial performance. The YoY decline was pronounced across the board. BitFuFu saw revenue decline in Q1 by 46% YoY. Revenue fell from $144.4 million in the same period last year to $78 million in Q1. Net loss was $16.9 million, compared to net income of $35.3 million in Q1 FY24. A breakdown of revenue shows cloud mining still holds a dominant position in the company’s operations at 68.8% of total revenue in Q1. Self-mining accounted for 22.5%, while the sale of mining equipment and other segments contributed about 8.7% of total revenue. Growth on the cloud mining side shows nearly a 100% increase in the past year, with the number of registered users growing from ~321,000 users in Q1 last year to over 607,000 users in Q1 this year. The growth in registered cloud mining users did not offset the revenue decline, though. BitFuFu attributed the decrease in financial performance to several factors, including last year's April Bitcoin halving event, an increase in blockchain network difficulty (as a result of the halving), and the temporary decrease in the company's hashrate under management in Q1. I think some of the justifications from management for the decrease in financial numbers are somewhat debatable. The halving event was over a year ago, and miners have ramped up capacity to compensate for the reduced block rewards. Moreover, the Bitcoin price has increased nearly 70% since the halving. The ~70% increase in the value of each Bitcoin mined is more than substantial enough to greatly offset, if not entirely negate, the impact of halved block rewards. I, therefore, believe that still blaming the halving in Q1 2025 is much about an attempt at deflection. I’d focus on operational factors as the main cause of BitFuFu's production and financial decline in Q1. I believe the decline in BitFuFu’s mining capacity (hashrate) and electricity capacity in Q1 (as reported by the company) were the main driving factors responsible for the decline in Bitcoin production and revenue in Q1. Operational metrics (BitFuFu form 6-K) While BitFuFu nearly doubled its cloud mining users compared to Q1 last year, the growth came at a time when total hashrate and power capacity declined sharply. This result is a telling disconnect between demand and supply. Without the infrastructure to match rising demand, revenue per user likely fell, which explains why cloud mining’s dominant share of revenue (68.8%) wasn’t enough to prevent the steep top-line decline. BitFuFu’s power capacity declined from 644 MW to 478 MW YoY, which was a 26% decline. Hashrate under management declined by 28% from 28.6 EH/s in Q1 FY24 to 20.6 EH/s in Q1 this year. Sequentially, their hashrate under management also decreased by 12.3% from 23.5 EH/s in Q4 FY4 to 20.6 EH/s in Q1 FY25, while power capacity declined sequentially by 13.3% from Q4 FY24 to Q1 FY25. I’ve pointed out the sequential capacity contraction to show that BitFuFu’s operational capacity contraction is more than just a seasonal or cyclical variation but rather reflects an ongoing operational slowdown. Moving beyond Q1, there has been some turnaround in the capacity drop at BitFuFu which was caused by expired hashrate procurement contracts, and disruptions from supplier miner fleet relocations and upgrades in Q1. BitFuFu has reported a strong recovery in capacity post-Q1, with hashrate rebounding to 28.3 EH/s as of April 30 , driven by expanded supplier partnerships and increased hash power procurement; power capacity also increased to 566 MW in April. Hashrate further increased by 20.5% to 34.1 EH/s as of May 31, while power capacity increased another 15% sequentially from April’s 566 MW to 651 MW as of May 31. Notably, much of the hashrate added is from the latest generation Antminer S21 miners deployed in May, translating to more efficiency in improving cost structure per BTC produced and maintaining competitiveness against rising mining difficulty. BitFuFu recorded an average fleet efficiency of 19.1 J/Th in May. A breakdown of BitFuFu’s hashrate composition in May tells more about BitFuFu’s asset-light ongoing business model and why reduced capacity in some quarters might be a necessary adjustment as cloud demand outstrips supply and vice versa. Of the 34.1 EH/s hashrate under management in May, 29.9 EH/s of the hashrate were from third-party hosts, while 4.2 EH/s were from its own facilities. It’s worth mentioning that the hashrate from third-party can be used flexibly by BitFuFu for both self-mining and cloud-mining services as overall demand dictates. BitFuFu’s liquidity doesn’t present an immediate concern, considering the drop in capacity and sales already discussed so far. Besides, the company has invested heavily in acquisition and expansion in the past year. BitFuFu’s BTC in treasury increased by 71.2% to 1,835 BTC as of Q1, compared to 1,072 BTC as of Q1 last year. As of May 31 (which is the latest update), BitFuFu held 1,709 BTC, a decrease of 199 BTC from figures reported in the April operations update . I think it is notable to have maintained a substantial increase in BTC held in treasury YoY despite needing to fund operational needs, strategic investments, and working capital requirements, especially during net loss quarters. BitFuFu has had two net loss quarters since Q1 last year — one in Q3 FY24, and the other is the latest in Q1 FY25. Balance sheet [$ ’000] (BitFuFu form 6-K) The balance sheet further paints a picture of a company that is actively expanding and navigating the headwinds that come with the Bitcoin mining business. On the balance sheet, we see notable growth in equipment, showing ongoing infrastructure build-out in Q1 despite the near-term capacity contraction, which further suggests that new hashrate and energy deployments were possibly delayed to later quarters or pending external infrastructure readiness. One line item that raises my eyebrow in the Q1 balance sheet is the sequential high surge in the amount due to related parties, which increased 880% from $1.6 million in Q4 last year to $15.5 million in Q1 this year. Remember, in the brief overview in the intro of this piece, I mentioned BitFuFu’s close ties with mining hardware giant BITMAIN. Some aspects of these ties are financial in nature, and BitFuFu also maintains some operational and service-related dependencies on BITMAIN, and this poses some potential concentration risks, particularly in times of liquidity strain. In BitFuFu’s latest form 20-F filing , BITMAIN is named as “a related party to a shareholder of the Company,” confirming the indirect but material connection, and translates to financial leverage or obligations likely not easily controllable by BitFuFu. We also rely on Bitmain to provide the miner hosting services under certain hosting service cooperation arrangements, through which Bitmain sources a limited number of hosting facilities to host miners and provide services related to maintenance and technical support, electricity, network, and security. These hosting facilities may demand upward adjustments of their service fees, including electricity costs, which we may not be able to pass on to our customers. We cannot assure you that it can continue to maintain cooperation with these hosting facilities, or the services provided by these parties always meet the level of quality, efficiency, and timeliness necessary for us to render satisfactory hosting services to our customers. Such hosting facilities may experience interruption or other incidents from time to time and may be unable to provide services to us. We may not be able to obtain alternative hosting facility supplies in a timely manner and/or at commercially viable terms. If we are unable to effectively address these risks, our ability to serve customers will be affected, and our brand image, reputation, and financial performance may be materially and adversely affected. - Excerpt from BitFuFu Form 20-F Related parties transactions [$ ’000] (BitFuFu form 20-F) I’m highlighting these close ties because it is one of the main risks I associate with BitFuFu apart from the broader industry risks associated with Bitcoin mining in general — the risk of constrained negotiations in a business line where favorable terms and flexibility are very crucial. As of Q1, debt to related parties hasn’t posed an immediate risk, as BitFuFu still has enough liquidity to manage obligations. The quick ratio and current ratio in Q1 were 2.3 and 3.03 respectively. BitFuFu is one of the miners that least taps into equity fundraising. Investors have enjoyed a largely undiluted share structure since FUFU went public. Yesterday, BitFuFu announced a new funding plan to raise $150 million through an ATM offering. Investors should watch out for dilution in the near term. How BitFuFu Stack Up to Peers Price-to-Hodl peer comparison (Author) When comparing miners based on how much investors are paying for each dollar of Bitcoin held in treasury, BitFuFu sits in mid-tier at 3.09x Price/HODL. This makes sense as BitFuFu does not pursue a full HODL strategy but liquidates some produced BTC to fund ongoing operations and growth initiatives. I believe BitFuFu’s P/HODL is more likely to shrink in the near-to-mid term, and FUFU becoming more attractive if the miner continues to emphasize operational growth, as we've seen with hashrate and power capacity turnaround and the acquisition of the 51 MW data center facility in Oklahoma in Q1 among other growth initiatives. Also, BitFuFu’s balance sheet isn’t so strained that it will need so much ongoing divesting of BTC produced in self-mining. Data by YCharts BitFuFu’s P/S (TTM) at 1.51x remains attractive among mining peers despite the drop in revenue in Q1. Last year’s strength in sales still supports the P/S ratio on a TTM basis. As we have analyzed the factors that influenced the drop in revenue in Q1, BitFuFu’s latest reported 34.1 EH/s (which already surpasses the hashrate guidance for the full year 2025 of 33 EH/s) and recovery of power capacity signals an upside setup for Q2 and a potentially lower P/S when Q2 results are announced, prompting a rerating of the metric if Bitcoin also maintains its current momentum. Despite the headwinds, I’m reiterating a Buy for FUFU here on the operational recovery post-Q1 and the ongoing growth prospects the operational recovery presents.
