American Bitcoin reported a quarterly net income of $126 million on Wednesday, a figure heavily influenced by unrealized gains on its cryptocurrency reserves rather than operational performance. The profit was driven by a $197.3 million noncash gain on its Bitcoin holdings, masking underlying pressures in its core mining business.

Excluding gains from its Bitcoin holdings, the company would have reported an operating loss of approximately $5.5 million. The miner also recorded a separate $64.3 million loss on derivatives. Earnings per share stood at $1.73, beating analysts’ consensus estimate of $0.26, but shares of American Bitcoin (ABTC) closed Thursday down about 15% at $5.31.

Mining margins compress

Operational metrics showed signs of strain as electricity prices climbed. Mining revenue fell 5.5% to $63.4 million from the previous quarter, falling short of analysts’ estimates of $74.35 million. Compared with the same period last year, revenue was nearly unchanged, dropping slightly from $64.2 million to $63.4 million.

The cost to mine one BTC rose about 15% to $42,100, with higher electricity prices cited as the main reason for the increase. Consequently, American Bitcoin’s gross mining profit fell to $25.8 million from $33 million in the previous quarter, and its reported mining margin dropped to 41% from 49%. The company mined 891 BTC during the quarter, down from 932 BTC in the previous three months.

“Despite seasonal power cost pressures, we continued mining Bitcoin at a structural discount to spot,” American Bitcoin CEO Mike Ho said in Wednesday’s earnings announcement. The company held 8,427 BTC at the end of September, up from 3,418 BTC a year earlier.

Competitors pivot to AI

While American Bitcoin focused on expanding its Bitcoin treasury, competitors such as Riot Platforms, MARA Holdings and Core Scientific are investing in artificial intelligence to find new sources of revenue. Riot is building large AI data centers, MARA is expanding into AI while continuing to mine Bitcoin, and Core Scientific has shifted much of its business toward AI data centers.

David Gamble, founder of asset management company Enigma Holdings, which focuses on Bitcoin mining and AI infrastructure, said American Bitcoin’s reported profit does not tell the full story of its mining business. “Ultimately, mining Bitcoin below its market price doesn’t automatically mean you’re creating shareholder value,” Gamble told Cointelegraph. He added that the real competitive advantage in the industry is shifting toward energy infrastructure.

Bitcoin was trading at $76,119, down 5% over the past 24 hours as of 8:50 p.m. UTC.