Applied Digital Corporation ((APLD)) has held its Q3 earnings call. Read on for the main highlights of the call.
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New trading tool for APLD bulls/bearsApplied Digital’s latest earnings call struck a cautiously upbeat tone, highlighting rapid growth and operational execution while acknowledging sizable accounting losses and financing risks. Management emphasized surging revenue, positive adjusted profitability, and strong progress on mega‑scale data center campuses, even as noncash write‑downs, higher overhead, and leverage weigh on GAAP results.
Explosive Revenue Growth on Ramping Campuses
Total revenue jumped to $126.6 million, a 139% increase versus the prior quarter as high‑performance computing hosting leases and tenant fit‑out services ramped. Management framed this surge as the early payoff from years of build‑out, with more capacity scheduled to come online, suggesting that current revenue is only a fraction of the company’s potential run‑rate.
Underlying Profitability via Adjusted Metrics
Applied Digital reported adjusted EBITDA of $44.1 million and adjusted net income of $33.2 million, or $0.09 per share, signaling that the core business is profitable on a non‑GAAP basis. These figures exclude large noncash and one‑time items, which management argues better reflect the cash earnings power of its hosting and data center operations.
HPC Hosting Emerges as Primary Growth Engine
High‑performance computing hosting produced $71.0 million in revenue, including $44.1 million of base rent, $18.9 million of tenant fit‑out services, and $8.1 million from power and ancillary charges. The segment generated $17.6 million in operating profit, and management highlighted its first 100‑MW direct‑to‑chip liquid‑cooled building as an early earnings runway for future AI‑focused capacity.
Crypto Data Centers Deliver High Asset Returns
The legacy data center segment, primarily serving crypto customers, generated $37.5 million in revenue, up 7% year‑over‑year. With $13.9 million in operating profit on $119.6 million of assets, management called this the highest return‑on‑asset business in the portfolio, underscoring its continued role as a cash generator during the HPC build‑out.
Construction Execution Across Nearly 1 GW
The company reported substantial progress on large‑scale projects, with Polaris Forge 1’s initial 100‑MW building now operating and two additional 150‑MW buildings under construction. Foundations and fit‑out work at Polaris Forge 2 are ramping, and in total Applied Digital has roughly 900 MW, nearly 1 GW, of capacity under construction, which management says remains on time and on budget.
Financing Position and Liquidity Resources
Applied Digital ended the quarter with $2.1 billion in cash and cash equivalents against $2.7 billion of debt and roughly $1.6 billion of equity, with no major maturities in the next two years. Management noted that most equity and debt financing for its first two campuses is in place, and pointed to $4.1 billion of preferred equity capacity from Macquarie tied to future hyperscale leases.
Enhanced Credit Profile on CoreWeave Lease
The company restructured its CoreWeave lease into a special‑purpose vehicle backed by a $50 million letter of credit and potential parent guarantees. That SPV received an A3 rating, upgraded from non‑investment‑grade, which management believes materially de‑risks roughly 250 MW of leases and should lower the cost of capital for remaining project financing.
Pipeline Expansion and Strategic Realignment
Applied Digital broke ground on Delta Forge 1, a planned 300‑MW campus on more than 600 acres, targeting initial operations in mid‑2027. The firm is also marketing four additional development sites with about 1 GW of potential grid power and reported approximately $16 billion in contracted lease revenue while carving out its cloud business into ChronoScale to pursue more focused funding.
Large GAAP Loss Masks Adjusted Profit
Despite adjusted profitability, the company posted a GAAP net loss attributable to common shareholders of $100.9 million, or $0.36 per share, for the quarter. Management attributed this gap mainly to noncash items and one‑time charges, arguing that the loss is not reflective of the ongoing earnings trajectory as more capacity is leased and energized.
Cloud Segment Hit by Noncash Write‑Down
The cloud segment generated $18.1 million of revenue but recorded a $59.7 million noncash write‑down following a reclassification from held for sale, resulting in a segment loss of $52.2 million. This accounting hit weighed heavily on consolidated results and is part of the rationale for separating the cloud business into the ChronoScale transaction.
SG&A Surge Highlights Cost of Scaling
Selling, general, and administrative expenses rose sharply to $79.7 million, up $57.0 million quarter‑over‑quarter, driven primarily by $39.3 million of stock‑based compensation. Additional pressure came from $8.6 million in professional services and $5.1 million of higher personnel costs, underscoring the overhead required to support rapid expansion and complex financings.
Higher Cost of Revenue and Energy Spend
Cost of revenues climbed by $23.7 million in the quarter, led by $18.0 million tied to tenant fit‑out services as construction ramps and by $4.8 million in higher personnel expenses. Energy costs for hosting rose by $4.1 million and depreciation and amortization increased by $2.0 million, partially offset by lower lease‑related expenses as owned infrastructure replaces earlier arrangements.
Financing and Execution Risks Remain
Management acknowledged one remaining tranche of debt still needs to be placed for the final 150‑MW building at Polaris Forge 1, with no certainty on timing or pricing. The company remains dependent on capital markets and private placements to fund future growth, which could be challenged if credit conditions tighten or project risks are repriced.
Regulatory and Site‑Specific Uncertainty
Applied Digital delayed its planned South Dakota site after failing to secure a tax exemption, highlighting how local policy can shape project economics. Management also cited local moratoriums and utility and approval processes as potential sources of delay for new campuses, adding timing uncertainty to lease signings and revenue ramp‑up.
Leverage Reflects Capital‑Intensive Strategy
With $2.7 billion in debt versus $2.1 billion in cash, the balance sheet reflects the capital‑heavy nature of hyperscale data center development. Management plans to refinance and reduce its cost of capital over time and aims to retain more than 85% common equity in future sites, but current leverage remains meaningful as projects move from construction to cash‑generating status.
Guidance Signals Aggressive Growth and NOI Targets
Looking ahead, management expects revenue to “ramp significantly” over the next 12 months as additional Polaris Forge 1 capacity comes online, Polaris Forge 2 advances, and Delta Forge 1 prepares for mid‑2027 operations, supported by about $16 billion in contracted lease revenue. The company is targeting a portfolio that is roughly 70% investment‑grade, pursuing refinancings to cut its cost of capital, and internally aiming to exceed $1 billion and eventually $2 billion of NOI within five years at a leverage ratio of roughly 5–6 times.
Applied Digital’s call painted a picture of a company leaning hard into the AI and HPC infrastructure boom, with surging revenue, large contracted backlogs, and nearly a gigawatt under construction. For investors, the opportunity is balanced by material GAAP losses, rising costs, and financing and regulatory risks, making execution on funding and project timelines the key variables to watch.