Original Title: From Mining Coins to Mining Intelligence
Original Author: Prathik Desai, Token Dispatch
This article will delve into Galaxy Digital's Q2 2025 financial report, as this digital asset and data center solution provider is preparing for a significant transformation. It is shifting from its core business (which contributes 95% of revenue but has a profit margin of less than 1%) to a new business model that promises an exceptionally high revenue-to-cost ratio.
TL;DR (Too Long; Didn't Read)
Galaxy's crypto trading business generated $8.7 billion in revenue but only brought in $13 million in profit (with a profit margin of just 0.15%), while quarterly compensation expenses were $18.8 million—core business cash flow is negative.
AI Transformation: Signed a 15-year agreement with CoreWeave for 526MW capacity, promising to achieve an average annual revenue of over $1 billion with a profit margin of up to 90% starting in the first half of 2026.
In a supply-constrained market, Galaxy controls 3.5GW of Texas power capacity, while data center demand is expected to quadruple by 2030.
Secured $1.4 billion in project financing, validating commercial viability and eliminating execution risk.
The current model relies on treasury revenue from crypto (which was $198 million in the second quarter) to fund operations, as returns from capital-intensive trading are negligible.
Stock prices initially rose 17% before retreating, as investors have to wait until the first half of 2026 to see incremental revenue.
When you look at Galaxy Digital's second quarter financial report, one thing is easy to overlook: what will happen next. A closer look reveals that this company, led by Michael Novogratz, is at a turning point from cyclical crypto trading to more stable AI infrastructure revenue.
The Gold Mine of AI Infrastructure
Galaxy Digital is undergoing one of the largest business transformations in the crypto space—from a low-margin trading business to a high-margin AI data center. Galaxy reported a net income of $31 million this quarter, with EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of $211 million after adjusting for non-cash and unrealized expenses.
In total revenue, its trading business earned only $13 million from $8.7 billion in sales, with a profit margin of just 0.15%. This means that nearly 95% of its revenue brought in almost no profit.
In contrast, their new AI data center contracts promise an average of over $1 billion in revenue per year with a 90% profit margin. While I am very optimistic about the construction of AI and high-performance computing capabilities, I believe the promised profit margins are overly exaggerated. This is not my subjective view. You can compare it with the 46-47% profit margins reported by top AI data center operators Equinix and Digital Realty this quarter.
However, I still believe this direction is correct. Purely from the perspective of generating revenue, most of Galaxy's current income comes from its trading business, which is costly and has low margins. Most of its earnings (income minus expenses) come from its treasury and corporate segments.
The treasury department includes investments in digital assets and mining activities, equity investments, and both realized and unrealized gains and losses on these digital assets and equity investments.
Its $2 billion treasury serves both as an investment tool in favorable market conditions and as a strategic source of financing.
The segment generated $198 million in revenue (excluding non-cash unrealized gains). Unlike pure crypto companies, Galaxy's treasury business allows it to raise funds by strategically selling treasury assets at opportune moments.
This is where I find Galaxy's approach to crypto treasury fundamentally different from Michael Saylor's Bitcoin treasury. Strategy's "buy, hold, but never sell" approach realized $14 billion in unrealized gains this quarter. But all of this is just paper profit. Shareholders of Strategy cannot share in that $14 billion in unrealized gains.
Galaxy's situation is different. It not only buys and holds crypto assets in its treasury but also engages in strategic sales, generating realized profits. This is real cash that shareholders can share.
Nevertheless, I still believe that Galaxy's treasury department is an unreliable source of income. As long as the crypto market is in optimal condition, the department will continue to generate earnings. But that is not the case for either traditional or crypto markets. The market is at best cyclical, which makes these returns heavily dependent on the state of the crypto market.
This is why Galaxy needs its AI transformation to succeed, as its current model is unsustainable.
Market Opportunities
Galaxy positions itself at the intersection of two massive trends: explosive AI computing demand and the long-standing power infrastructure shortages in the U.S. A report by McKinsey indicates that global data center demand is expected to quadruple from 55GW in 2023 to 219GW by 2030.
Large cloud service providers (Hyperscalers) are expected to invest $800 billion in capital expenditures (CapEx) in data centers by 2028, a 70% increase from 2025, but constrained by power supply.
Galaxy's advantage lies in its 3.5GW potential capacity at the Helios campus in Texas, which is enough to power over 700,000 homes in the state. Helios has already received approval for 800MW, with an additional 2.7GW currently under study by the Texas Electric Reliability Council (ERCOT), giving Galaxy control over some of the largest available power capacities in the supply-constrained AI infrastructure market.
Digital rendering of Galaxy's Helios AI and HPC data center campus in Texas.
The foundation of Galaxy's transformation is a 15-year agreement signed with CoreWeave, one of the largest AI infrastructure deals in the industry. CoreWeave has committed to using 526MW of critical IT capacity in three phases.
The expected 90% profit margin is attributed to the lightweight operational nature of the data center infrastructure once built.
I see a huge risk in the CoreWeave deal: execution. Just as I ponder how Galaxy will need to raise funds, plan, and execute, the company has already cleared the first hurdle.
On August 16, Galaxy successfully completed $1.4 billion in project financing for the Helios data center, securing the funds needed to complete the first phase of construction. This gives me more confidence in how it can help eliminate critical financing risks and validate the commercial viability of the Helios project.
Cash Flow Equation
Galaxy's current cash flow exposes the unreliability of its trading business while highlighting why AI infrastructure can provide real financial stability. The company had $1.18 billion in cash and stablecoins at the end of the second quarter, which sounds like a lot, but there are more details behind it. Most of this $1.18 billion is not freely available.
The free cash flow actually generated by Galaxy is negligible. After paying $14.2 million in interest expenses and ongoing operational demands, the core business is nearly break-even on a cash basis.
This forces Galaxy to rely on the appreciation of the crypto market, namely its treasury and mining operations, to generate revenue to fund operations amidst inherent cyclicality and unpredictability. The three-phase contract structure with CoreWeave and the high-profit nature of the business are likely to create positive cash flow immediately.
Even if the profit margin is not as high as 90%, a more reasonable profit margin of 40-50% is still more reliable and stable than the cyclical treasury department.
Unlike trading businesses that require continuous capital investment in working capital and technology infrastructure, data center operations generate cash that can be reinvested into expansion or returned to shareholders.
Galaxy's recent Helios project financing helps address cash flow issues. By securing dedicated construction funding, Galaxy separates infrastructure development from its operating cash flow needs. This is impossible in the expansion of the trading business, as it requires balance sheet capital that competes directly with other business needs.
Expense Details
The total expenses for the digital assets segment were $8.714 billion, with trading fees accounting for the vast majority ($8.596 billion). These are purely transactional costs, with almost no markup opportunities. As they are unavoidable in commodity trading operations and spreads continue to compress, Galaxy has little ability to optimize these costs.
More concerning is that quarterly compensation expenses included $18.8 million in equity incentives, which must be paid in cash. This means that Galaxy's spending on retaining talent exceeds the earnings generated by its core business ($13 million).
The transformation to AI infrastructure will help change this situation. Once the facilities are operational, the variable costs required for data center operations are minimal. For example, Galaxy's entire digital asset business had an adjusted gross profit of $71.4 million in the second quarter. At full utilization, just the first and second phases of Helios (approximately 400MW) could generate $180 million in quarterly revenue, with operational complexity and costs being only a small part of that.
Market Reaction
Galaxy's stock price rose moderately by 5% within 24 hours of announcing its second quarter financial report and jumped about 17% in the following week, before investors pulled out funds.
This is likely because investors realized that $180 million of the $211 million earnings came from non-cash adjustments and treasury gains, rather than operational improvements. Investors may not have yet factored in Galaxy's complex AI infrastructure transformation, as meaningful data center revenue is not expected until the first half of 2026.
Given everything that is about to happen in the future, I remain optimistic about the long-term sentiment. The additional 2.7GW capacity under study by ERCOT indicates that Galaxy aims to solidify its position as a long-term infrastructure provider, not just a single-tenant facility operator.
Once fully developed, Galaxy's operations in Texas could rival some of the largest hyperscale data center campuses operated by Amazon, Microsoft, and Google. This scale can provide leverage in negotiations with more AI companies while creating operational efficiencies to improve profit margins. The company's crypto-native expertise positions it uniquely at the intersection of emerging AI and blockchain technologies.
The Road Ahead
Galaxy is making a huge, all-or-nothing bet.
If the AI infrastructure transformation is successful, they will shift from a profit-squeezed trading company to a cash-generating machine. If it fails, they will spend billions building expensive properties in Texas while their core business slowly dwindles.
$1.4 billion in project financing validates external confidence, but I am watching two key metrics: whether they can actually deliver 133MW of AI facilities before the first half of 2026, and whether that 90% profit margin can be maintained when they start paying actual operating costs. Current operations provide enough cash flow to sustain operations, but meaningful growth investment requires a continued strengthening of the crypto market. The opportunities in AI infrastructure promise stable and reliable income-generating potential, and their success entirely depends on execution in the next 18-24 months.
The recent completion of project financing eliminates a significant execution risk, but Galaxy now must prove that they can successfully transform crypto mining infrastructure into enterprise-level AI computing facilities to attract long-term bets from investors. Until then... stay curious.
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