Core Scientific reported a negative 56% self-mining gross margin in the second quarter, with $21.5 million in revenue against $33.7 million in cost of revenue, resulting in a $12.2 million segment gross loss. The company's colocation business, however, generated $136.7 million in revenue and $80.0 million in gross profit at a 59% margin — enough to cover the mining loss and then some.
The colocation gross profit alone exceeded Core Scientific's $70.0 million total gross profit for the quarter, because losses from mining and other segments dragged down the companywide figure. Core Scientific ended Q2 with significantly fewer miners online than at the end of Q1 and was self-mining at only two sites.
Why the mining margin turned negative
The mining cost of revenue included $17.9 million in power fees and $9.9 million in depreciation and other operating expenses. That means the negative 56% margin is not a cash production cost estimate — it's an accounting measure that includes non-cash charges. The company's self-mining operation is shrinking, and the costs are spread over a smaller base.
Colocation business drives profits
Core Scientific's colocation segment reported $136.7 million in revenue and an 80.0 million gross profit, a 59% margin. The company had 395 MW of billing colocation capacity at quarter-end, which grew to 437 MW by mid-July. That capacity represents approximately $635 million in average annualized colocation GAAP revenue.
Core Scientific's leased customer power capacity is roughly 1.1 GW, tied to more than $24 billion of potential contracted revenue. But actual billing capacity is much lower. The company also has a 15-year agreement with AMD covering about 530 MW across five sites, representing more than $14 billion of potential base contracted revenue.
The $1.16B net loss
Core Scientific reported a $1.16 billion net loss for the quarter, but that figure is misleading. The loss was primarily driven by a $1.05 billion fair-value expense for warrants and contingent value rights due to a rise in the company's stock price — not from operating losses. The underlying business, particularly colocation, remains profitable.
The company is repurposing its remaining mining facilities for high-density colocation 'as circumstances allow.' With nearly 30% fewer miners online than at the end of Q1 and self-mining limited to just two sites, the shift toward colocation is already underway. The question now is how quickly Core Scientific can convert its remaining mining capacity into colocation space — and whether the AMD deal will fully materialize.
