Marathon Digital Holdings (MARA) saw its shares drop by up to 8% in after-hours trading yesterday (Thursday). This decline followed the company's announcement that its second-quarter revenue fell short of Wall Street expectations.

Operational Issues Impact Revenue

The company reported revenue of $145.1 million, missing the FactSet estimate of $157.9 million. Marathon attributed the revenue shortfall to operational issues that affected its bitcoin mining capabilities and the impact of recent halving events on the mining sector.

“During the second quarter of 2024, our BTC production was impacted by unexpected equipment failures and transmission line maintenance at the Ellendale site operated by Applied Digital, increased global hash rate, and the April halving Halving Halving represents a phenomenon when crypto mining rewards are cut in half. Cryptocurrency networks that run on Proof-of-Work (PoW) algorithms require the computers (nodes) that uphold them to solve complex equations that are used to confirm transactions. This process is known as mining. In exchange for their work, these nodes are given rewards in the form of the crypto token that belongs to that particular network. For example, on the Bitcoin network, halving happens regularly at preset interva Halving represents a phenomenon when crypto mining rewards are cut in half. Cryptocurrency networks that run on Proof-of-Work (PoW) algorithms require the computers (nodes) that uphold them to solve complex equations that are used to confirm transactions. This process is known as mining. In exchange for their work, these nodes are given rewards in the form of the crypto token that belongs to that particular network. For example, on the Bitcoin network, halving happens regularly at preset interva Read this Term event,” said Fred Thiel, the firm's CEO, in a statement.

Marathon Digital faces a $138 million penalty for breaching a contract with Michael Ho, the Chief Strategy Officer of Hut 8, as reported by Finance Magnates. Ho, who developed Marathon's Bitcoin mining expansion strategy, is the aggrieved party. Marathon sought Ho's expertise to scale its operations, which resulted in this costly legal issue.

Setting New Mining Power Record

Despite these challenges, Marathon Digital reported achieving a record mining power of 31.5 exahash per second (EH/s) during the second quarter. The company's adjusted EBITDA also turned negative, recording a loss of $85.1 million compared to a gain of $35.8 million in the same period last year. The loss was largely due to unfavorable fair value adjustments of its digital assets and a decrease in the amount of bitcoin mined.

Looking ahead, Marathon Digital aims to reach a hashrate Hash Rate A hash rate is the measure of a cryptocurrency miner’s performance and a key security metric. In the context of mining, the more hashing or computing power in a given network, the greater its security and its overall resistance to attackMining hashrate is a key security metric. The more hashing (computing) power in the network, the greater its security and its overall resistance to attack. Hash rate is also a measurement of the output of a device that is used to add transactions to a blockchain A hash rate is the measure of a cryptocurrency miner’s performance and a key security metric. In the context of mining, the more hashing or computing power in a given network, the greater its security and its overall resistance to attackMining hashrate is a key security metric. The more hashing (computing) power in the network, the greater its security and its overall resistance to attack. Hash rate is also a measurement of the output of a device that is used to add transactions to a blockchain Read this Term of 50 EH/s by the end of the year and plans to increase this further in the following year.

In the second quarter, the company sold 51% of the bitcoin it mined to cover operational expenses. Recently, Marathon announced a significant purchase of $100 million worth of bitcoin on the open market and has revised its strategy to hold all of its bitcoin on its balance sheet. The company now holds over 20,000 BTC.

“During the quarter, we organized the internal structure of the business to better align with our growth opportunities, sharpen our strategic focus, bolster accountability, and accelerate our speed and agility as we scale,” said Thiel.