CORZ

What is the impact of the revenue decline on the company's profitability margins and earnings per share?

Created August 08, 2025 at 08:17 PM

Short answer:

Because Core Scientific’s total revenue fell from $141.1 million in Q2 2024 to $78.6 million in Q2 2025 (a drop of roughly 44 %), the company’s profitability margins and earnings‑per‑share (EPS) are almost certainly under pressure. With revenue halving while there is no information that operating costs have fallen at the same rate, the net‑income per dollar of sales (i.e., the margin) and the EPS are expected to decline substantially versus the prior‑year quarter.

Why the decline matters for margins and EPS

Metric	2024 Q2	2025 Q2	Change	Implication
Total revenue	$141.1 M	$78.6 M	–44 %	Less top‑line to cover fixed costs (facility, equipment depreciation, staff, etc.).
Digital‑asset self‑mining revenue	$110.7 M	$62.4 M	–44 %	The same percentage drop as total revenue, indicating the core mining business is the primary driver of the decline.

1. Profitability margins (gross, operating, net)

Gross margin – Gross margin is revenue minus the direct cost of producing the mined digital assets (e.g., electricity, hardware depreciation). Fixed electricity contracts, hardware lease payments, and depreciation are largely fixed* over the short term. If those costs stay roughly constant while revenue falls 44 %, the gross margin (gross profit ÷ revenue) will compress sharply.
Operating margin – Operating expenses (sales‑and‑marketing, general & administrative, R&D) are also largely fixed. A 44 % revenue drop without a commensurate expense reduction will push operating margin down even more than gross margin.
Net margin – After interest, taxes, and any non‑operating items, the net margin will likely turn negative or, at best, be a small fraction of the prior‑year level. A 44 % revenue decline typically translates into a far larger percentage decline in net income because many costs do not scale down in line with revenue.

2. Earnings per Share (EPS)

EPS = Net income / Shares outstanding. With net income expected to fall dramatically (and possibly become negative) while the share count remains unchanged, EPS will drop proportionally—often more than the revenue decline itself.
If the company were still profitable in Q2 2024, a 44 % revenue reduction could cut EPS by 30‑50 % (or even more) depending on how much cost‑structure is fixed. If the company moves into a loss‑making quarter, EPS could swing from a positive number in 2024 to a negative figure in 2025.

How to gauge the exact impact (what would be needed)

Data point	Why it matters
Cost of goods sold (COGS) or “cost of mining”	Determines whether gross margin can be preserved despite lower revenue.
Operating expenses (SG&A, R&D, depreciation, lease expense)	Shows how much of the fixed cost base will be absorbed by the lower top line.
Interest expense / tax rate	Affects net income and thus EPS.
Shares outstanding	Needed to convert net income into EPS.
Any one‑off gains or losses	Could offset or exacerbate the decline.

Since the press release only disclosed revenue figures and did not provide a breakdown of expenses, net income, or the share count, we cannot calculate the precise margin percentages or EPS values for Q2 2025. However, the magnitude of the revenue decline (‑44 %) strongly suggests:

Gross margin will narrow (unless the cost of electricity and hardware usage fell proportionally, which is unlikely in the short term).
Operating margin will compress even more because many overhead costs are fixed.
Net margin will likely shrink dramatically, potentially turning negative.
EPS will decline sharply, possibly moving from a modest positive figure in Q2 2024 to a negative or near‑zero figure in Q2 2025.

Bottom‑line take‑away

Revenue decline of ~44 % is a major head‑wind for Core Scientific.
Profitability margins are expected to contract sharply because the cost base (electricity, hardware depreciation, G&A) does not fall at the same pace as revenue.
Earnings per share will fall substantially, and could become negative if the net loss exceeds the prior‑year profit.

To quantify the exact impact, investors would need the company’s full income statement for Q2 2025 (COGS, operating expenses, interest, taxes, and the number of shares outstanding). Until those details are released, the safest assessment is that the revenue slump will materially erode both margins and EPS relative to the same quarter a year earlier.