Article Author: Prathik Desai
Article Translation: Block Unicorn
Today, we take an in-depth look at Galaxy Digital's Q2 2025 financial results, as this digital asset and data center solutions provider prepares for a transformation. From its core business—accounting for 95% of revenue but with profit margins of less than 1%—to a business model that sounds incredibly promising in terms of revenue-to-expense ratio.
Summary
Galaxy's cryptocurrency trading business realized only $13 million in profit from $8.7 billion in revenue (profit margin of 0.15%), while paying $18.8 million in salaries each quarter—resulting in negative cash flow from the core business.
AI Transformation: Signing a 15-year, 526 MW contract with CoreWeave, expected to achieve over $1 billion in annual revenue with a 90% profit margin starting in the first half of 2026.
Controlling 3.5 GW of capacity in a supply-constrained market, data center demand must quadruple by 2030.
$1.4 billion project financing secured, validating commercial viability and eliminating execution risks.
The current model relies on cryptocurrency asset returns ($198 million in Q2) to fund operations, as capital-intensive trading yields meager returns.
After a 17% rise in stock price, it fell back as investors do not see incremental revenue before the first half of 2026.
When you look at Galaxy Digital's Q2 data, it's easy to overlook one thing: what happens next. A closer look reveals that the company, led by Michael Novogratz, is at a turning point in transitioning from cyclical cryptocurrency trading to more stable AI infrastructure revenue.
Goldmine of AI Infrastructure
Galaxy Digital is undergoing one of the largest business transformations in the cryptocurrency industry—shifting from low-margin trading to high-margin AI data centers.
Galaxy achieved a net income of $31 million this quarter, with adjusted EBITDA totaling $211 million after accounting for non-cash and unrealized expenses.
In its total revenue, the trading business earned only $13 million in profit from $8.7 billion in sales—a profit margin of just 0.15%. Thus, nearly 95% of its revenue is hardly profitable.
In contrast, their new AI data center contract promises a 90% profit margin on over $1 billion in annual revenue.
While I am optimistic about building AI and high-performance computing capabilities, I believe the promised profit margins are overly exaggerated. But don't just take my word for it; you can compare them with the profit margins reported this quarter by top AI data operators like Equinix and Digital Realty: 46-47%.
However, I believe the direction is correct, purely from a revenue generation perspective. Currently, most of Galaxy's revenue comes from high-cost, low-profit trading operations. The majority of its profit (revenue minus expenses) comes from its asset and enterprise sectors.
The asset department includes investments in digital assets and mining activities, equity investments, and realized and unrealized gains and losses from digital assets and equity investments.
Its $2 billion asset pool serves as an investment tool and even as a strategic source of funding when market conditions are favorable.
The department generated $198 million in revenue without accounting for non-cash unrealized gains. Unlike pure cryptocurrency companies, Galaxy's asset business generates funds by strategically selling assets at opportune times.
This is exactly where I believe Galaxy's cryptocurrency asset strategy differs from Michael Saylor's Bitcoin asset strategy. Saylor's 'buy, hold, but never sell' strategy realized $14 billion in unrealized gains this quarter. But these are just paper profits, and Saylor's shareholders cannot share in the spoils.
Galaxy's situation is different. It not only buys and holds cryptocurrency in its asset pool but also makes strategic sales that generate realized profits. This is real money that shareholders can share.
However, I believe Galaxy's asset department is an unreliable source of income. As long as the cryptocurrency market is in optimal condition, this department will continue to generate profits. But the market does not operate that way, whether in traditional markets or cryptocurrency markets. The market is at best cyclical, which makes these returns heavily dependent on the state of the cryptocurrency market.
This is why Galaxy needs its AI transformation to succeed, as the current model is unsustainable.
Market Opportunity
Galaxy has positioned itself at the intersection of two huge trends: explosive demand for artificial intelligence computing and the long-term shortage of electricity infrastructure in the United States. A McKinsey report indicates that global data center demand is expected to increase from 55 GW in 2023 to 219 GW by 2030, a fourfold increase.
Hyperscale cloud service providers are expected to invest $800 billion in data centers as capital expenditures (CapEx) by 2028, a 70% increase from 2025, but constrained by power supply.
Galaxy's advantage lies in its Helios campus in Texas, which has a potential capacity of 3.5 GW, enough to supply electricity to over 700,000 homes in the state. 800 MW have already been approved, and another 2.7 GW is under study by the Electric Reliability Council of Texas (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 located in Texas.
The foundation of Galaxy's transformation is a 15-year commitment made with CoreWeave, one of the largest AI infrastructure deals in the industry. CoreWeave has committed to providing 526 MW of critical IT capacity in three phases.
The expected 90% profit margin is attributed to the light asset nature of data center operations once the infrastructure is in place.
I see a significant risk in the CoreWeave deal: execution. Just as I think about the scale of funding, planning, and execution Galaxy needs, this company has cleared the first hurdle.
On August 16, Galaxy successfully completed $1.4 billion in project financing for the Helios data center, securing funding needed for the first phase of construction. This makes me more confident about how to eliminate key funding risks and verify the commercial viability of the Helios project.
Cash Flow Equation
Galaxy's current cash flow exposes the instability of its trading business while highlighting why AI infrastructure can offer 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 the reality is more complex. Galaxy's trading business operates on a capital-intensive model, and margin loans require a substantial cash reserve. Most of the $1.18 billion cannot be freely used.
The free cash flow that Galaxy actually generates is minimal. After paying $14.2 million in interest expenses and ongoing operating costs, the core business can barely achieve cash flow breakeven.
This forces Galaxy to rely on the appreciation of the cryptocurrency market, namely its treasury and mining business, to generate funds to support operations amidst inherent cyclicality and unpredictability. CoreWeave's three-phase contract structure and high-margin business characteristics may immediately generate positive cash flow.
While profit margins may not be as high as 90%, even a more conservative profit margin of 40-50% would still be more reliable and stable than the cyclical treasury business.
Unlike the trading business, which requires continuous investment in working capital and technological infrastructure, cash generated from data center operations can be reinvested in expansion or returned to shareholders.
Galaxy's recent Helios project financing helps address cash flow issues. By obtaining dedicated construction funding, Galaxy separates infrastructure development from its operational cash flow needs. This is not achievable in trading business expansion, as the balance sheet capital required for trading business expansion competes directly with other business needs.
Expense Details
The total expenses of the digital asset department amount to $8.714 billion, with trading fees taking the largest share ($8.596 billion). These costs are purely passed on and have little room for increases. Galaxy can hardly optimize these costs, as the spreads in commoditized trading continue to narrow, making these costs unavoidable.
More concerning is that quarterly salary expenses include $18.8 million in stock compensation, which must be paid in cash. This means that Galaxy's cost to retain talent exceeds the earnings generated by its core business ($13 million).
The transformation to AI infrastructure will change this situation. Once facilities are operational, data center operations will require minimal variable costs.
To illustrate more intuitively, Galaxy's entire digital asset business generated $71.4 million in adjusted gross profit in Q2. Under full operation, just the first and second phases of Helios (approximately 400 MW) could potentially generate $180 million in quarterly revenue, with operational complexity and costs being only a small fraction of trading business.
Market Reaction
Within 24 hours of Galaxy's Q2 earnings announcement, its stock price rose slightly by 5% and surged about 17% over the week, only for investors to begin withdrawing funds.
This may be because investors realize that of the $211 million in earnings, $180 million comes from non-cash adjustments and treasury earnings, rather than operational improvements.
Investors may not have fully considered Galaxy's complicated transformation towards AI infrastructure, as significant data center revenue is not expected until the first half of 2026.
I remain optimistic about long-term market sentiment, given the potential for future developments.
According to ERCOT research, the addition of 2.7 GW capacity by Galaxy indicates that the company intends to solidify its position as a long-term infrastructure provider rather than a single-tenant facility operator.
After comprehensive development, Galaxy's operations in Texas can compete with some of the largest hyperscale data center campuses operated by Amazon, Microsoft, and Google. This scale can provide leverage in negotiations with other AI companies while improving operational efficiency, thereby increasing profit margins.
The company's expertise in cryptocurrency provides it with a unique positioning in the emerging field at the intersection of AI and blockchain technology.
Path Forward
Galaxy is making a huge, polarizing bet. If the AI infrastructure transformation succeeds, they will shift from a low-margin trading company to a cash-generating machine. If it fails, they will have spent billions of dollars building expensive real estate in Texas, while their core business gradually shrinks.
$1.4 billion in project financing confirms external confidence, but I am watching two key indicators: Can they really deliver 133 MW of AI-ready capacity before the first half of 2026? Once they start paying actual operating costs, can this 90% profit margin be maintained?
Current operations provide sufficient cash flow to sustain the business, but continued strong performance in the cryptocurrency market is needed for meaningful growth investments. The AI infrastructure opportunity promises continuous and reliable revenue potential, with its success fully dependent on execution over the next 18-24 months.
The recent project financing conclusion has eliminated significant execution risks, but Galaxy must now prove that they can successfully transform cryptocurrency mining infrastructure into enterprise-level AI computing facilities to attract long-term investor bets.
That concludes the overview of Galaxy's Q2 financial report. We will bring another report soon.