Fermi Q3 Earnings Call Highlights

Key Points

• Fermi agreed to a preliminary 600-megawatt power arrangement with an unnamed investment-grade hyperscaler for 2027 at Project Matador, including a $200 million prepayment and plans for early site work. A definitive long-term lease is still being negotiated, with another $90 million also under discussion.
• The hyperscaler arrangement replaces a TensorWave lease that will not proceed and shifts Fermi toward a “Powered Land+” model, where customers build and operate their own data centers. Fermi is targeting initial power availability in late Q2 or early Q3 2027 and says talks with multiple hyperscalers could cover its planned 2.2 gigawatts of capacity.
• Fermi ended the quarter with about $316 million in cash and restricted cash and $958 million in debt; quarterly capital expenditures were $133 million. Management plans to rely increasingly on customer prepayments and project-level financing as construction advances.

Fermi NASDAQ: FRMI said it reached agreements with an unnamed investment-grade hyperscaler for 600 megawatts of 2027 power capacity at its Project Matador campus in Texas, while a previously announced lease with TensorWave will not move forward.

The new arrangement includes a $200 million prepayment agreement and a framework for early construction and site development. Fermi and the customer are still working toward a definitive long-term lease, executives said on the company’s third-quarter 2026 earnings call.

Chief Commercial Officer Anna Bofa said the agreement requires the full $200 million wire by November 13 and that Fermi aims to begin mobilizing at the site by December 1. She said the parties were “very far along” in lease negotiations but did not provide a date for signing.

Chairman Marius Haas said an additional $90 million was being negotiated on top of the prepayment. He said those negotiations were expected to be finalized in the coming days.

Shift Toward Direct Hyperscaler Deals

Chief Executive Officer Lee McIntire said the TensorWave transaction was a complex turnkey lease involving multiple parties and third-party credit support. He described the new arrangement as simpler: the customer would build its own data centers, reducing Fermi’s construction capital needs.

Haas declined to provide details about the TensorWave negotiations or identify which party ended the transaction. He said the hyperscaler arrangement offered a faster power ramp and earlier access to capital than the prior deal.

Fermi is targeting initial power availability in late second quarter or early third quarter of 2027, Bofa said. She added that the customer’s first building is targeted for that period, with up to eight buildings planned as power capacity ramps.

The company’s preferred Powered Land+ model provides customers with power, land and supporting campus infrastructure, while customers construct and operate their own facilities. Bofa said Fermi is also discussing additional capacity in 2028 with the hyperscaler.

More broadly, Bofa said active discussions with multiple investment-grade hyperscalers could absorb Fermi’s planned 2.2 gigawatts of capacity if they result in definitive agreements. The company’s longer-term strategy is to anchor the campus with four to five hyperscalers that can expand over time, she said.

Project Spending and Financing

Chief Financial Officer Rob Masson said Fermi ended the quarter with approximately $316 million in cash equivalents and restricted cash, including $286 million in unrestricted cash. Debt stood at $958 million, net of discounts and issuance costs, following a $430 million convertible senior notes offering in July.

Third-quarter operating cash outflow was $54.5 million, while capital expenditures were $133 million, down from $185 million in the second quarter. Property, plant and equipment increased by about $120 million during the quarter to approximately $1.67 billion.

Masson said the company had $126 million of remaining equipment commitments, of which $112 million would be funded through equipment facilities over the remainder of 2026, 2027 and into 2028. Fermi plans to rely more on customer prepayments and project-level financing as construction advances, he said.

The CFO did not provide the incremental spending required for the 600 MW arrangement. He said Fermi expects its Powered Land+ costs to fall within a market benchmark range of $3.9 million to $5.1 million per megawatt of total power capacity, while noting that the company has already invested substantially in the project. Management said the benchmark figures were not terms of the proposed hyperscaler lease.

Permits and Equipment

McIntire said Fermi has air permits for 6 gigawatts and has secured more than 2 gigawatts of generation equipment. Bofa said the site has the permitting required so far for a customer to begin construction and take power.

Project Matador is on land leased from the Texas Tech University System. Asked whether the 99-year lease was locked in, Bofa said Fermi, Texas Tech and the hyperscaler were working together to meet the lease requirements and that Fermi fully anticipated doing so.

Masson also said an October amendment to the company’s turbine warehouse facility removed a November 10 lease deadline and the risk of lenders marketing the turbines for sale after that date. Fermi paid approximately $25 million in amendment fees, he said. The amendment also kept the minimum principal payment at 5% of the loan balance rather than increasing it to 10%, which Masson estimated would avoid more than $55 million in potential required principal payments over the next three quarters.

McIntire said the company’s near-term priorities include finalizing the hyperscaler lease, converting other prospective customers into tenants, protecting liquidity and delivering first power in 2027.

About Fermi (NASDAQ:FRMI)

Fermi Inc. develops energy and data-center infrastructure intended to support artificial intelligence and other high-performance computing needs. Its business centers on planning and building integrated campuses that pair large-scale power resources with data-center facilities. The company's flagship development is Project Matador, a planned campus in the Texas Panhandle near Amarillo. The project is designed to combine data centers with a mix of power-generation and energy-storage resources; it remains a development project rather than an established portfolio of operating facilities.

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