Summary Galaxy Digital has rallied alongside the broader crypto bull run. But the most compelling story lies in its burgeoning data center business. Lots of upside on the table for those willing to stomach execution risks. Galaxy Digital ( GLXY ) , one of the more diverse cryptocurrency conglomerates out there, has notched milestone after milestone since its reverse takeover launch in 2018 by founder/CEO Michael Novogratz. The latest of these include an NASDAQ uplisting earlier this year (note GLXY is also traded over-the-counter ( BRPHF ) and via its Canadian listing (GLXY:CA)), as well as a data center pivot at its Helios facility in West Texas. Both factors underpinned GLXY’s scorching triple-digit % run over the last year. Data by YCharts Today, GLXY’s core business segment is “Digital Assets,” under which Global Markets (investment banking, trading, and prime brokerage) and Asset Management & Infrastructure (exchange-traded funds, alternatives, and staking services) sit. Then comes Treasury & Corporate, which comprises GLXY’s on-balance sheet digital asset holdings and investments. Depending on the broader crypto cycle, Treasury & Corporate can swing between a majorly positive (upcycle) or negative (downcycle) P&L driver. Galaxy Digital Last but not least is data centers, where GLXY has parked its AI data center operation (repurposed from bitcoin mining). While this is a potential ‘crown jewel’ asset, it is only set for revenue generation “in the first half of 2026.” Still, if GLXY makes good on its data center promise, this is a stock poised to benefit from two of the ‘hottest’ megatrends today - digital assets and artificial intelligence. Having also pulled back since its July highs, despite a very solid Q2 report, GLXY is well worth a closer look. Data by YCharts A Strong Q2 For Digital Assets On a headline basis, GLXY ticked a lot of boxes in Q2. For one, the company was in the black for a change - from the gross profit ($299m) and adj. EBITDA ($211m) lines, all the way down to net income ($30.7m). But beneath the hood, this was almost entirely down to its digital asset holdings, which appreciated significantly during the quarter. Galaxy Digital A s for the operating performance, Digital Assets, the only revenue-generating segment currently, offered a few positives as well. Leading the way was Global Markets, where gross profit increased +28% quarter-on-quarter – impressively, against a backdrop of lower trading volumes across the industry. Other highlights were GLXY’s loan book reaching a record ~$1.1bn on “continued demand for margin lending and a growing client base,” as well as its role in the Bitstamp-Robinhood deal on the investment banking side. Galaxy Digital Seemingly less positive within Digital Assets was the Asset Management & Infrastructure Solutions sub-segment, where headline gross profit declined on “lower industry-wide onchain activity.” Digging deeper, the biggest drag was Solana, where GLXY is among the largest staking infrastructure providers. Galaxy Digital While negative at first glance, a lot of the quarter-on-quarter delta was really down to the base effect ( “first half of this year was coming off of a pretty aggressive, localized volume on Solana for things like meme coin launches”) rather than any structural weakness in the staking business. With GLXY also making further progress on custodial integration (e.g., Fireblocks in Q2) and benefiting from a rapidly growing “assets on platform” base, it was really a good quarter all around. Galaxy Digital Also Trending Strongly Into Early Q3 From here, things are shaping up very well for Digital Assets – per management, “July looks by all accounts the best month we’ve had at Galaxy” . Global Markets was the key reason for this, having completed a >$9bn block trade (“one of the largest Bitcoin trades in history” ) – testament to GLXY’s execution capabilities. Meanwhile, a combination of “net inflows” into Asset Management and “organic growth in staking assets” for Infrastructure Solutions, in line with the big rally in ETH, also bodes well for Q3. The big opportunity, though, lies in the “phenomenon of balance sheet companies” (a la Strategy (MSTR)). There aren’t many crypto investment bank/asset management platforms out there at all, so GLXY has a big edge in servicing this growing ecosystem. Momentum has only been accelerating - GLXY has already partnered with “over 20 of those companies” as of Q2, with a lot more to come now that regulatory hurdles are cleared. Of note, management called out “one of the strongest institutional onboarding pipelines we have seen to date” . Galaxy Digital Pondering Data Center Upside Post Phase 3 Option The Data Center segment remains non-revenue generating but no less important. The focus here is entirely on its Helios facility in West Texas. Previously acquired in 2022 for $65m for bitcoin mining, GLXY is transitioning this site into a high-performance data center to capture rapidly growing AI-driven demand for compute. As things stand, GLXY has approval for 800 MW of power from the Texas grid operator, ERCOT, and a combined 2,700MW “under various stages of study” . Galaxy Digital The project is split into three phases - Phase 1 (133MW of critical IT), Phase 2 (260MW of critical IT), and Phase 3 (133MW of critical IT). Following anchor tenant CoreWeave’s ( CRWV ) decision to exercise its Phase 3 option, all of the approved site capacity is now contracted. Delivery, on the other hand, is some way off. Phase 1, previously a bitcoin mining facility, is currently being retrofitted and is targeted to go live throughout H1 2026 ( “in various tranches” ). Phase 2 is a greenfield development that hasn’t yet entered the construction phase, but is targeted to go live in 2027. It’s early days for Phase 3, but for now, management has guided to 2028 delivery. Galaxy Digital On paper, the expansion capacity of the site (up to 3,500MW or “one of the largest AI data center campuses in the world” ) could mean a lot of value creation potential. But financing all of this will be tricky. Yes, GLXY does have >$2.6bn of equity, but it doesn’t have a consistently cash-generative business to fall back on. Also, a lot of its assets are tied up in digital assets and investments. If we were to isolate funding available for immediate drawdown (i.e., cash & stablecoins), capacity is closer to $1.2bn. Note also that this includes the ~$480m raised when GLXY uplisted in May. Galaxy Digital Then, there are some fairly hefty capex requirements. Phase 1 will cost $11–13m per MW, with Phase 2 “slightly higher than the Phase 1 on a per-megawatt basis” ; combined, this could run GLXY well over $4bn. There’s also Phase 3, which, assuming similar economics as Phase 1, could add another ~$1.7bn capex burden. Now, GLXY is responsible for funding all the capex, but clearly won’t be able to cover it all solely with cash & equivalents. Thus, the financing structure, whether through debt or project-level equity financing, will be key. So will the financing costs; considering the risk profile of CRWV and the fact that this is a higher risk build, expect Phase 2 (greenfield) debt financing to run a lot higher than the SOFR + 4.75% for Phase 1 . Against all these costs and incremental risks is the earnings upside, which is also quite substantial. Per the fifteen-year lease agreement terms with CRWV for Phases 1,2, and 3 (526 MW of critical IT load), average annual revenue will run at >$1bn (plus ~3% annual escalations). Meanwhile, EBITDA margins are guided to pace at 90% - very feasible, since operating expenses (excluding GLXY personnel) will be covered by CRWV. Galaxy Digital So, at peak, there’s potential for Data Center to generate >$900bn of EBITDA. Conservatively tacking on a below peer average ~20x multiple, this would imply >$18bn of incremental enterprise value. Even netting out a $5-6bn development outlay and assuming steep Phase 2 financing terms, GLXY should, if the execution goes to plan, come out well ahead. Data by YCharts Of course, there are risks here. For starters, Data Center economics rests on the assumption that AI demand is here to stay and that CRWV, its only tenant, will be able to honor its lease obligations. Also, valuation-wise, the business has terminal value. Last but not least, GLXY, a company with no prior experience building out data centers, will get through without significant delays or cost overruns. At a >$7bn enterprise valuation, though, the market is handicapping a lot of these, so the risk/reward still seems quite attractive. Seeking Alpha Summing Up GLXY isn’t the easiest name to underwrite, given its volatile P&L and crypto-heavy balance sheet. This won't change anytime soon. But for investors willing to stomach the execution risk and the fact that it’s pre-revenue, there’s more than enough upside on the Data Center side to offset these drawbacks. Net-net, I think GLXY is worth a look here.
