Core Scientific, Inc. (CRWV) Earnings Call Transcript & Summary

Good morning. My name is Eric, and I'll be your conference call operator today. At this time, I would like to welcome everyone to the CoreWeave acquisition of Core Scientific Conference Call. [Operator Instructions] I would now like to turn the conference over to Deborah Crawford, Vice President and Head of Investor Relations. Please go ahead.

Thank you. Good morning, and thank you for joining us on such short notice. Joining me on the call today are Mike Intrator, CEO; Brannin McBee, Chief Development Officer; Nitin Agrawal, CFO; and Nick Hoover, VP Corporate Development. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements within the meaning of the U.S. securities laws. Forward-looking statements are based on current information and management's expectations as of this date. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in today's press release, the accompanying investor presentation and CoreWeave's and Core Scientific's filings with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. Given the timing of today's announcement, we ask that all questions remain focused specifically on the details of the announcement. The press release and an investor presentation are available on our website at investors.coreweave.com. A replay of this call will also be available on our Investor Relations website. And now I'd like to turn the call over to Mike.

Thanks, Deborah, and good morning, everyone. We appreciate you taking the time to join us on today's call on such short notice. I'm excited to announce that CoreWeave has signed an agreement to acquire Core Scientific, one of the leading HPC infrastructure providers, an all-stock transaction. Under the terms of the merger agreement, Core Scientific's stockholders will receive 0.1235 newly issued shares of CoreWeave Class A common stock for each share of Core Scientific common stock based on the fixed exchange ratio. This acquisition accelerates our strategy to deploy AI and HPC workloads at scale and is an important part of solidifying our growth trajectory. We expect it to deliver significant efficiencies and optimization benefits to CoreWeave. During our IPO process earlier this year, we laid out a goal of increasing ownership of critical elements of the AI cloud platform, driving operational efficiency and lowering our cost of capital. This acquisition is an integral part of the execution of that strategy. Owning Core Scientific's high-performance data center infrastructure enables us to significantly enhance operating efficiencies and derisk our future expansion. By controlling the foundational layer of our AI cloud platform, we will enhance the scale, performance and expertise we provide and our customers need to unleash the full potential of artificial intelligence. I'll share some further details on the acquisition and our rationale. But first, I'd like to thank Adam Sullivan and the entire Core Scientific team. We believe that the benefits of this proposed acquisition will accrue to the combined shareholders. And together, we will better serve the business needs and goals of our current and future customers. Accelerating AI infrastructure deployment at scale. Let me review what it means for our platform, scale and delivery. We are acquiring one of the largest high-performance compute platforms in the U.S. Core Scientific has a total of 1.3 gigawatts of existing gross power capacity. Of that, approximately 840 megawatts are tied to CoreWeave's active HPC contracts across 5 sites. The remaining 500 megawatts are allocated across 3 cryptocurrency mining data centers, which we have the option to either convert into HPC or divest. We now also have access to more than 1 gigawatt of expansion capacity. All in, this acquisition gives us control of more than 2 gigawatts of gross power across 9 distinct sites, significantly strengthening our position as the AI hyperscaler. This acquisition is more than just added capacity. It is a strategic step forward verticalizing our data center footprint, helping us future-proof revenue growth and enhancing core profitability. There are 4 key expected strategic benefits of this acquisition. First, operational efficiency. We expect to drive significant cost savings by streamlining core business operations, eliminating third-party lease obligations and unlocking greater control over fixed infrastructure costs. Second, greater financial flexibility. Our direct ownership of the data center footprint will unlock infrastructure-specific financing strategies to support capital expenditure we have already committed to via existing contracts with Core Scientific, ultimately reducing our cost of capital and improving our balance sheet efficiency, power ownership and optionality. We will gain greater control over a critical and scarce power footprint, along with the optionality to repurpose the existing capacity to meet our clients' evolving needs. And finally, expanding our expertise. This acquisition brings on more than 300 employees with unique expertise in power procurement, construction and site management. This isn't just about expanding capacity, it's about strengthening our end-to-end AI technology stack by bringing us further down the infrastructure layer, where control, efficiency and execution matters most. By utilizing deep infrastructure engineering expertise of Core Scientific, with CoreWeave's cutting-edge AI HPC operations and software, we are uniquely positioned to tackle the next generation of architectural challenges of AI data centers. This powerful combination of talent allows us to innovate at the base layer, optimizing performance, efficiency, scalability and economics. This acquisition gives us direct control over the design, architecture and execution of our builds, enabling faster, tailored deployments for high-density AI workloads at scale, all this while improving cost efficiency and visibility into delivery time lines. Now I'd like to turn it over to Nitin, who will talk more about what we expect to see in terms of impact on our financials. Nitin?

Thank you, Mike. I want to start by briefly reviewing the details of the transaction and some of the key financial impacts we expect to see. As Mike mentioned, this is an all-stock transaction. Upon closing and under the terms of the agreement, which has been approved by the Board of Directors of each company, Core Scientific's shareholders will receive a fixed exchange ratio of 0.1235 shares of CoreWeave common stock for each share of Core Scientific common stock held. As of July 3, 2025, the agreed upon exchange ratio implies a total equity value of $9 billion. This figure is calculated on a fully diluted basis and reflects CoreWeave's 5-day volume-weighted average price. The final equity value will be determined at the time of closing. The transaction is expected to close in the fourth quarter of 2025, subject to customary closing conditions, including regulatory approvals and approval by Core Scientific's stockholders. Following the close, Core Scientific's shareholders are expected to own less than 10% of the combined company. Now let's talk about financial impact and synergies potential. As a result of eliminating third-party lease obligations, operational efficiencies and greater financing flexibility, this transaction is expected to deliver meaningful financial benefits once fully integrated. First, we'll see the immediate elimination of more than $10 billion in future lease liability overhead, costs that were otherwise committed across existing contractual sites over the next 12 years. Including the elimination of lease overhead and a more streamlined and efficient operational model, we anticipate $500 million in fully ramped annual run rate cost savings by the end of 2027. Second, the deal is expected to be leverage neutral to CoreWeave while enhancing access to a broader set of infrastructure financing sources at lower cost of capital. Third, the portfolio includes crypto mining assets, which present medium-term optionality to repurpose or divest in alignment with our long-term strategy. Beyond the near-term cost synergies, this transaction also delivers significant capacity upside optionality and unlocks more efficient financing pathways, both of which are central to a long-term infrastructure and capital strategy. Let's break that down into the 2 core components. First, the 1 gigawatt of potential gross power expansion. It includes 700 megawatts plus of incremental power available across existing CoreWeave sites, supporting rapid scalable AI infrastructure deployment and an incremental 100-megawatt capacity at non-CoreWeave site, adding further geographic and deployment flexibility. It also includes 350 megawatts of additional digital asset mining capacity that can be converted for HPC use or potentially divested, creating flexibility in how we allocate power. Second, nearly $5 billion in committed CapEx is now unlocked for more efficient financing. This transaction is a leverage-neutral acquisition with no material incremental CapEx required. By owning the underlying infrastructure, we can attract new and diverse sources of capital, including infrastructure-oriented vehicles that can replace traditional debt or equity financing. As a result, we expect to drive down our cost of capital significantly, unlocking financing structures only made possible through direct asset ownership. As Mike said at the top, this is an exciting day for CoreWeave, and I also want to welcome our new Core Scientific colleagues and look forward to partnering in the closing process and integration as we move forward a larger, stronger and a more capable company. Operator, we'd like to now open up for questions.

[Operator Instructions] Your first question comes from the line of Keith Weiss with Morgan Stanley.

Congratulations on the proposed transaction. Really exciting expansion of the CoreWeave story. I was hoping you could dig in a little bit more on the expanded sort of power available to you guys, both in terms of like the current facilities that are being used by Bitcoin miners, what's the time frame that we could expect that maybe that could get shifted over to high-performance computing? And the additional gigawatt of power, can you talk to us a little bit more about that? Is that commitment that Core Scientific already had with utilities? Or what's the nature of that additional sort of gigawatt on top of that?

Yes. So thank you for the question, and thanks for joining the call. I'd like to kind of talk through this a couple of different ways. So the way that the portfolio of assets work, we can step in and begin the process of repurposing specific pieces of the infrastructure almost immediately upon the close of this. And so we'll have a more robust kind of time line of what that schedule will look like. As you go across the portfolio, some of the assets are easier and can be converted more quickly, some of them will take a little bit longer. With regards to the power, the way that the power works is there are components of the power that are currently under contract, under PPAs. There are also components of the power portfolio that they have and ultimately, we will have the ability to kind of scale the facility and thereby bringing on more power into the infrastructure. And so we're really excited. We think that it really fits hand in glove with our expansion strategy. It fits hand in glove with our continued scale.

Your next question comes from the line of Brad Zelnick with Deutsche Bank.

Congratulations on the deal. Mike and Nitin, you talked about this deal opening up new financing strategies and reducing your overall cost of capital, which is obviously very important. Can you expand further on this and maybe dimensionalize the impact that you're expecting this to have on your cost of capital?

Yes. So maybe I'll start with that, and then Nitin can hop in as we go here. By consolidating Core Scientific under our umbrella as a single company, you've located the data centers as well as the financing obligations in a single company, which will allow us to more efficiently go out to the market and finance the data centers in a much more standard configuration than how we've been financing them on a go-forward basis. We haven't gone out there to do the financing, but what we have seen from other infrastructure in terms of the step function of offers where we can finance the obligations that we currently have versus what we've been able to do at other facilities. It's several hundred basis points spread in the cost of capital. We're pretty excited about it. We think it is a pretty material step function in the efficiency of our balance sheet. Nitin, anything to add on that?

No, Mike, that was well answered.

Your next question comes from the line of Brent Thill with Jefferies.

Michael, just in terms of the proprietary nature of what you're getting here, what's different and unique versus their competitors? How would you differentiate the underlying components of that foundation versus what you saw from others?

Yes. So there's a few aspects of it. There's timing, what data center infrastructure can we bring on when and how does that fit into our scaling. The scale of it is obviously extremely material and allows us to kind of continue the pace of building and scaling our solutions for the largest, most demanding consumers of the infrastructure. There is an ongoing component of the existing in-sourcing of these contracts, which allow us to have impact on our margins at CoreWeave in a very, very kind of effective and streamlined fashion. So -- and we have a very long partnership. We've been working with Core Scientific really since the very beginning of our company being founded. And so it's very exciting to work with these guys. We know them very well. They know us very well. And we think it's a wonderful opportunity to be able to extend our offering in terms of the up the stack and down the stack approach. And earlier this year, you saw us go in and acquire Weights & Biases, and you've watched us go through the integration process. It's been a wonderful process working with them as we bring the 2 companies closer and closer together. That was an up-the-stack solution for us. And Core Scientific being long-standing partners with us, this is a down-the-stack opportunity for us. And like I said, it's really just a great partner for us to kind of continue to build and expand our footprint.

The next question comes from the line of Tyler Radke with Citi.