Applied Digital Q2 Earnings Call Highlights

Key Points

• Applied Digital signed two North Dakota hyperscaler leases totaling 600 megawatts—Polaris Forge One (400 MW for CoreWeave, ~$11 billion over ~15 years) and Polaris Forge Two (200 MW, ~$5 billion)—and says inbound demand has increased with advanced discussions on additional sites totaling ~900 MW.
• Fiscal Q2 revenue jumped to $126.6 million (up 250% YoY) driven by turnkey fit-out services and partial CoreWeave lease recognition; cash-basis lease revenues were about $8 million, adjusted EBITDA was $20.2 million, and GAAP net loss was $31.2 million.
• The company has built a financing framework—drawing $900 million from a Macquarie preferred equity facility and issuing $2.35 billion of 9.25% secured notes—to support campus builds (ending the quarter with $2.3 billion cash vs $2.6 billion debt), and plans to spin out Applied Digital Cloud into Chronoscale (APLD expected to own >80%) targeting H1 2026.

Applied Digital NASDAQ: APLD executives highlighted new lease milestones, the start of lease revenue generation, and a growing development pipeline during the company’s fiscal second-quarter 2026 earnings call. Management also discussed financing activity supporting its North Dakota campuses and provided updated commentary on market demand, construction execution, and a planned cloud business spinout.

Data center campus milestones and hyperscaler leases

Chairman and CEO Wes Cummins said the quarter included “several important milestones” across the company’s high-performance computing (HPC) data center and hosting business. Polaris Forge One reached “ready for service,” with 100 megawatts energized on schedule and the first three contracted buildings completed.

Cummins said the remainder of the Polaris Forge One “AI factory campus” is expected to be completed by the end of 2027 and is planned to host 400 megawatts for CoreWeave. He described that agreement as representing approximately $11 billion in prospective lease revenue over about 15 years.

The company also announced a 15-year lease described as roughly $5 billion with a “U.S.-based investment-grade hyperscaler” for 200 megawatts at Polaris Forge Two. Cummins said Polaris Forge Two is a $3 billion project near Harwood, North Dakota, with initial capacity expected in 2026 and full build-out in 2027.

Combined, management said the two North Dakota campus agreements represent 600 megawatts of lease capacity and approximately $16 billion in prospective lease revenue.

Demand commentary and additional pipeline

Cummins said inbound demand increased meaningfully after securing two hyperscale leases in the region. He said the company is in “advanced discussions with another investment-grade hyperscaler across multiple regions,” including additional locations in the Dakotas and select southern U.S. markets, while cautioning there can be no assurance of future contracts.

In the Q&A, Cummins said pricing for the company’s lease discussions has been “stable to slightly better” over the last six months and characterized the overall contracting environment as more favorable. He emphasized that terms beyond headline pricing—such as cancellation provisions and transferability—have improved, citing contracts that are “really non-cancelable for 15 years,” with a make-whole structure if a customer cancels for convenience.

Asked to quantify “advanced discussions,” Cummins said the company was in advanced discussions on three sites totaling 900 megawatts. He also told analysts he is increasingly focused on the company’s ability to scale construction execution across multiple sites, rather than demand, describing execution and supply chain as the more relevant constraints.

Financial results: revenue growth, lease accounting, and profitability metrics

CFO Saidal Mohmand called the quarter “a major inflection point,” noting that after two years of construction and over $1 billion invested in the first 100-megawatt data center, the company has begun generating lease revenues. Mohmand said lease revenues are expected to ramp over the next quarter, with two campuses under construction simultaneously representing 600 megawatts expected to come online over calendar 2026 and 2027.

For the fiscal second quarter, Mohmand reported:

• Revenue of $126.6 million, up 250% from $36.2 million in the prior year, driven primarily by $73 million from turnkey fit-out services tied to the HPC hosting business and $12 million of recognized revenue from the commencement of the first CoreWeave lease at Polaris Forge One (partial-quarter lease revenue).
• Cash basis lease revenues of approximately $8 million, with Mohmand attributing the difference versus recognized revenue to ASC 842 straight-line lease accounting over 15 years. He said the company aims to provide annual clarity on the difference going forward.
• Data center hosting segment revenue of $41.6 million, up 15% year-over-year. Mohmand said the segment operates 286 megawatts of customer ASICs across two North Dakota facilities, and that the quarter’s growth was primarily driven by increased capacity online.
• Segment operating profit of roughly $16 million for the data center hosting business in the quarter, which Mohmand compared against a $131 million asset base.

Cost of revenues totaled $100.6 million versus $22.7 million in the prior quarter, with Mohmand attributing about $69.5 million of the increase to tenant fit-out services for the HPC hosting business. SG&A was $57 million versus $26 million, driven in part by $23.8 million of stock-based compensation from accelerated vesting of certain employee awards, higher professional services (including legal), and increased personnel costs to support growth.

Interest expense was $11.5 million versus $2.9 million, and net loss was $31.2 million, or $0.11 per share. On an adjusted basis, Mohmand reported adjusted net income of $0.1 million (approximately $0 per share) and adjusted EBITDA of $20.2 million.

Financing framework and balance sheet

Mohmand detailed a “repeatable and capital-efficient framework” supported by agreements with financial institutions. He described a first step of drawing on a development loan facility with Macquarie Equipment Capital to fund pre-lease construction; the company made its first draw under the $100 million facility after the fiscal first-quarter end.

As a second step, Mohmand described accessing Macquarie Asset Management’s $5 billion preferred equity facility following an executed lease with an investment-grade hyperscaler. He said the company has drawn $900 million from that facility to support Polaris Forge One and Two and expects to use a similar structure for future projects, describing it as a way to use third-party capital for a majority of upfront investment while retaining majority ownership and reducing reliance on public capital markets.

On debt, Mohmand said the company completed a $2.35 billion private offering of 9.25% senior secured notes due 2030 to finance the first two of three buildings at Polaris Forge One supporting the CoreWeave leases and to refinance existing debt. He added that the company’s goal is to refinance at lower rates once buildings are operational and said the team is exploring options to reduce the cost of debt for the third building.

Applied Digital ended the quarter with $2.3 billion in cash, cash equivalents, and restricted cash versus $2.6 billion in debt (most maturing in 2030) and about $2.1 billion in total equity, Mohmand said. He noted these figures did not include $382.5 million in proceeds from financings completed after quarter-end.

Chronoscale cloud spinout and technology initiatives

Cummins also discussed the board’s decision to spin out Applied Digital Cloud. He said the company entered a non-binding letter of intent to combine Applied Digital Cloud with Exo to form Chronoscale, a dedicated GPU-accelerated compute platform. The proposed transaction is intended to separate the cloud platform from the data center business so each can scale independently with “greater strategic and capital flexibility.”

On the call, Cummins said the cloud business generates over $60 million in trailing 12-month revenue with $313 million in assets, and that Applied Digital is expected to own over 80% of Chronoscale upon an anticipated closing in the first half of 2026. In response to an analyst question, he said the transaction is expected to proceed as a merger, with a definitive agreement anticipated late in the month or early February, followed by a shareholder vote. He suggested timing could be as early as March, but said April or May is a more likely expectation.

Separately, Cummins highlighted initiatives focused on powering and cooling high-density AI infrastructure. He discussed work with utilities and strategic partners, including Babcock & Wilcox Enterprises, describing a natural-gas-based steam turbine approach intended to bring power online sooner than traditional turbine lead times, which he said could extend to 2031 or 2032 if ordered today. He also said Applied Digital led and invested $15 million in a $25 million funding round for Correntis, which he described as supporting advanced liquid cooling solutions for future higher-power-density chips.

About Applied Digital NASDAQ: APLD

Applied Digital NASDAQ: APLD is a technology company specializing in the development and operation of large-scale digital infrastructure and sustainable Bitcoin mining solutions. Through its integrated platform, the company designs, builds and manages turnkey data center facilities while also providing comprehensive hosting services for cloud, colocation and enterprise computing needs. Applied Digital's modular approach to facility design enables rapid deployment of capacity and streamlined integration of power, cooling and network connectivity.

In addition to its data center business, Applied Digital operates a network of Bitcoin mining sites that leverage vertically integrated capabilities, including hardware procurement, mining farm engineering, energy management and real-time performance monitoring.