American Bitcoin, the Eric Trump-backed mining company, reported quarterly net income of $126 million on Wednesday, but the headline figure rests largely on paper gains as its core mining economics deteriorate — a gap that raises questions about its long-term strategy even as major rivals pivot toward artificial intelligence.

The profit was driven by a $197.3 million noncash gain on the company's Bitcoin (BTC) holdings — an increase in the market value of the coins it holds rather than cash earned from operations. Beneath that, mining revenue fell 5.5% quarter-over-quarter to $63.4 million, while the cost to produce one BTC climbed roughly 15% to $42,100.

According to its financial statements, American Bitcoin would have posted an operating loss of approximately $5.5 million had the gains on its Bitcoin holdings been excluded. The quarter also carried a separate $64.3 million loss on derivatives.

“Despite seasonal power cost pressures, we continued mining Bitcoin at a structural discount to spot,” CEO Mike Ho said in Wednesday's earnings announcement.

Earnings per share came in at $1.73, well above analysts' consensus estimate of $0.26, according to Yahoo Finance data. Bitcoin itself was trading at $76,119, down 5% over the past 24 hours as of 8:50 p.m. UTC, per CoinGecko data, and shares of American Bitcoin (ABTC) closed Thursday down about 15% at $5.31.

The results underscore a growing split among Bitcoin miners. While American Bitcoin doubles down on mining and holding BTC, competitors including Riot Platforms, MARA Holdings and Core Scientific are investing in AI to develop new sources of revenue.

Mining margins narrow

David Gamble, founder of asset management firm Enigma Holdings, which focuses on Bitcoin mining and AI infrastructure, told Cointelegraph that the reported profit does not tell the full story of the company's mining business.

“Ultimately, mining Bitcoin below its market price doesn't automatically mean you're creating shareholder value,” Gamble said.

Gross mining profit fell to $25.8 million from $33 million in the previous quarter, and the reported mining margin contracted to 41% from 49%, meaning the company retains a smaller share of mining revenue after direct costs.

The $63.4 million in quarterly revenue also missed analysts' estimates of $74.35 million, according to Yahoo Finance data — a shortfall of nearly 15%. The company produced 891 BTC during the quarter, down from 932 BTC in the prior three months, and attributed the rise in mining costs mainly to higher electricity prices.

“I don't necessarily think their accumulation strategy is flawed, but I do think it raises questions about long-term sustainability,” Gamble said, pointing to increasing mining difficulty and the need to keep investing in newer, more efficient technology to stay competitive. Bitcoin's mining difficulty adjusts as computing power enters or leaves the network, and miners that fall behind on hardware efficiency typically see their per-coin costs climb.

Year over year, revenue was nearly flat, slipping from $64.2 million to $63.4 million. Reported profit, by contrast, surged from $3.5 million to $126 million, largely reflecting gains on the company's Bitcoin holdings.

Rivals turn to AI as American Bitcoin builds reserves

American Bitcoin's hold-and-mine approach stands out at a time when its competitors are racing into AI. Riot is building large AI data centers, according to its latest earnings. MARA is expanding into AI while continuing to mine Bitcoin, and Core Scientific has already shifted much of its business toward AI data centers.

American Bitcoin, meanwhile, continues to accumulate BTC. Its reserves stood at 8,427 BTC at the end of September, up from 3,418 BTC a year earlier.

“The real competitive advantage in this industry is shifting toward energy infrastructure,” Gamble said. “It's no longer just about how much Bitcoin you can mine or how much hashrate you can deploy.”

He explained that Bitcoin miners and AI companies are competing for the same power supply, and that in some locations AI data centers can generate more revenue than Bitcoin mining. Still, he cautioned that repurposing is not straightforward.

“That doesn't mean every mining facility can simply transition into AI,” he said. “You still have to account for depreciation, equipment replacement, financing costs, and the opportunity cost of deploying that capital elsewhere.”

The coming quarters will show whether seasonal power cost pressures ease, how American Bitcoin's margins absorb them, and how much revenue its rivals' AI buildouts begin to generate.