Summary I rate CleanSpark as a 'Hold' due to rising operational risks, especially from increasing electricity costs that may pressure margins in 2025. CLSK's strategy to fund operations by selling mined bitcoin, rather than issuing new equity, should limit shareholder dilution and align value with its bitcoin treasury. Despite a growing hash rate and bitcoin treasury, higher production costs and volatile bitcoin prices create uncertainty for the company's profitability and valuation. With CLSK trading at a 2x premium to its bitcoin holdings, investors must weigh if the operational risks justify paying above the value of its bitcoin assets. CleanSpark ( CLSK ) may be moving into a more challenging environment as the cost to operate may continue to pressure margins going forward. One of the major factors that may impact CleanSpark in 2025 is the cost of electricity, particularly as load demand is increasing across the cloud services providers [CSPs] for data center capacity. Given that CLSK shares are relatively correlated to the direction of bitcoin, an investor must weigh the added operational risk when holding CLSK shares and whether it's worth the premium over CleanSpark's bitcoin treasury. Given the potential operating risks at hand, I am rating CLSK shares with a HOLD rating with no price target. CleanSpark Operations For May 2025, CleanSpark operated at an average of 42.5EH/s while closing the month at 45.6EH/s, bringing daily production to 22.39 bitcoin/day. Driving potential growth going forward, CleanSpark secured an additional 72MW of contracted power, bringing its total capacity to 987MW. Looking ahead to June 2025, management anticipates that CleanSpark can achieve 50EH/s as part of its long-term strategy to scale. In total, CleanSpark produced 694 bitcoin and sold 293.5 bitcoin in the month of May 2025 for a net treasury increase of 400.5 bitcoin. The average selling price for the month of May 2025 was $102,254/coin for a total estimated revenue of $30mm for the month. In April 2025 , CleanSpark sold 401.39 bitcoin at $90,084/coin for a total estimated revenue of $36mm. Unlike competing bitcoin mining operators like MARA Holdings (MARA), management indicated in q2'25 that they intend on keeping CleanSpark a pure play bitcoin mining operator. In the q2'25 Earnings Update , management indicated that they intend to utilize a proportion of monthly bitcoin mining to finance operations, resulting in the expectation of no further dilution from equity issuances. This can be a positive turn for CleanSpark as it allows the organization to manage risk over time, similar to how investment advisors average in and out of positions over time. This may be a prudent approach to managing operations given the volatility risk bitcoin poses to a "HODL" strategy. TradingView Looking ahead to eq3'25, CleanSpark may be faced with margin pressure as a result of higher electricity costs. The Wall Street Journal anticipates that power costs in the US may face upward pressure going into the summer. I had argued in my previous report covering Golar LNG ( GLNG ) that natural gas prices may increase throughout the summer as a result of increased utilization domestically as well as the driving need for the EU to replenish gas reserves. If higher electricity prices reflect this thesis, CleanSpark may be faced with tighter gross margins in the coming months. Looking at the gas strip price for the remainder of 2025, we may experience higher gas prices relative to 2024. CleanSpark Financial Position Corporate Reports CleanSpark reported an increase of 69% year-over-year in the average revenue per bitcoin in q2'25. Despite the improved pricing, gross margins faced significant pressure in the quarter due to the higher cost of production, resulting in a -16% margin deterioration when compared to the previous year's quarter. Accordingly, CleanSpark's cost-per-coin in q2'25 was $42,600, a 26% increase when compared to q1'25. Cost of production was primarily impacted by the increased difficulty to mine in addition to higher power costs. CleanSpark's quarterly GAAP profitability will be impacted by the trading value at the end of the reporting period, potentially creating a murkier picture of CleanSpark's overall financial health. This resulted in a $128mm loss on the fair value of bitcoin, as reported in CleanSpark's statement of operations. Corporate Reports Subsequent to the close of q2'25, CleanSpark has grown its bitcoin treasury to 12,502BTC in May 2025. This amounts to a 4% increase from the close of q2'25 of roughly 12,000BTC in the company's treasury. The spot price of bitcoin has since appreciated by over 24%, potentially positioning CleanSpark for an improved outlook for eq3'25. Despite the interim price appreciation, a lot can change as CleanSpark nears the close of the quarter, which will ultimately determine how bitcoin is valued on the organization's balance sheet. TradingView In the q2'25 earnings call, management made a few interesting comments relating to shareholder returns. The first is the intent to raise capital through the sale of bitcoin rather than equity raises. This can be beneficial to CLSK shareholders as shares can expect to retain a relative shareholder value to bitcoin without the expectation of excessive dilution. The other comment was relating to bitcoin mining and the next bitcoin halving event in 3 years, suggesting that "there is no better time to acquire bitcoin than now." Under this notion, share buybacks may be out of reach as bitcoin halving will occur every 4 years, making this a never-ending cycle until all bitcoin has been mined. Risks Related to CleanSpark Bull Case CleanSpark is steadily increasing its hash rate, nearing its target of 50EH/s. With management's new directive of selling bitcoin to fund operations, shareholder dilution may be minimal going forward, creating a certain appeal to CLSK shares. Bear Case Operating as a pure play bitcoin miner may create certain challenges for CleanSpark as the cost to operate may not be expected to become cheaper. As global data center capacity is expected to grow by a substantial rate over the next 5 years, the price of electricity may experience upward pricing pressure, resulting in tighter margins for CleanSpark. Valuation and Shareholder Value Corporate Reports CLSK shares currently trade at 2x price/BV BTC held in treasury as of May 2025. Ultimately, the value of CLSK shares will be determined by the relative trading value of bitcoin. With the assumption of a growing bitcoin treasury and bitcoin price appreciation, an investor could expect CLSK shares to reflect this trend, assuming the 2x premium holds. Valuing CleanSpark as an organization, extracting value may be challenging for shareholders given the potentially higher cost to operate despite the improving mining yields. Given that CLSK shares are relatively correlated to the direction of bitcoin, an investor must weigh the added operational risk when holding CLSK shares and whether it's worth the premium over CleanSpark's bitcoin holdings. I am rating CLSK Shares with a HOLD rating with no price target. Corporate Reports