Applied Digital — Fiscal First Quarter 2027 Earnings Summary

Financial Performance

• Total revenue reached $341.9 million, a 322% increase from the prior year comparable period.
• Net loss attributable to common stockholders was $221.0 million, or $0.76 per basic and diluted share, compared to a net loss of $18.5 million, or $0.07 per share, in the prior year.
• Adjusted revenue was $300.4 million, compared to $64.2 million in the prior year.
• Adjusted net loss was $4.1 million, or $0.01 per diluted share, compared to an adjusted net loss of $7.6 million, or $0.03 per share, in the prior year.
• Adjusted EBITDA was $64.4 million, compared to $0.5 million in the prior year.
• Net Operating Income was $58.8 million.
• Services revenue was $262.8 million, up 225% year-over-year, driven by a $157.2 million increase in tenant fit-out services and $23.0 million in GPU hardware sales.
• Data center rental and other revenue was $79.1 million, compared to $0 in the prior year, as HPC Hosting rental operations commenced in the second quarter of fiscal year 2026.
• Services cost of revenues increased 318% to $245.7 million, primarily due to $151.1 million in tenant fit-out expenses and $22.4 million in GPU hardware costs.
• Selling, general and administrative expenses increased 289% to $114.7 million, driven by $51.7 million in stock-based compensation and $9.9 million in personnel expenses.
• Interest expense increased 866% to $77.4 million, and interest income increased 4,080% to $35.8 million.
• Loss on change in fair value of derivatives was $49.5 million, and loss on change in fair value of investment was $11.4 million.
• Cash, cash equivalents, and restricted cash totaled $3.7 billion as of August 31, 2026.
• Total debt was $6.4 billion as of August 31, 2026.
• Deferred revenue increased to $39.2 million from $4.7 million in the prior quarter.

Guidance and Future Outlook

• The Company expects initial operations at Polaris Forge 2 in Harwood to increase delivered critical IT load across North Dakota campuses to 300 MW by the end of calendar 2026.
• Management anticipates additional hyperscalers entering the Dakotas over time as coastal and metro markets become increasingly constrained and expensive.
• The Company views the scarcity value of established, powered, and community-supported campuses as increasing as new data center development becomes more difficult in certain markets.

Business Segments and Product Lines

• HPC Hosting Business: Revenue totaled $262.6 million for the quarter, including $65.8 million in base rent, $183.5 million in tenant fit-out services, and $13.3 million in tenant recoveries. Segment operating profit was $33.4 million.
• Data Center Hosting Business: Revenue was $37.8 million, materially consistent with the prior year ($37.9 million). Segment operating profit was $13.3 million on $111.9 million in reported assets. Facilities in Jamestown, ND (106 MW) and Ellendale, ND (180 MW) operated at full capacity.
• ChronoScale: Results are consolidated but excluded from non-GAAP measures. Announced a 50 MW AI compute deployment with Microsoft in North America featuring NVIDIA GB300 NVL72 systems and liquid cooling.
• Leases: The Company has leases for approximately 1.41 GW of critical IT load across five campuses, representing approximately $36 billion of contracted revenue over initial base terms, or approximately $86 billion if all renewal options are exercised.
• Polaris Forge 1: Delivered Phase 1 (75 MW) on July 1, 2026, and Phase 2 (75 MW) on October 1, 2026, bringing total live capacity to 250 MW.
• Delta Forge 2: Signed a 210 MW, 15-year lease with a tier-one investment grade hyperscaler, representing approximately $5.2 billion of base-term contracted revenue.

Market and Competitive Landscape

• The Company is positioning itself as a category leader in the design, construction, deployment, and operation of purpose-built AI factories.
• North Dakota is identified as a compelling location due to low-cost power, abundant energy resources, low population density, and climate, offering a strategic advantage over constrained coastal markets.
• Base Electron Corp., in which Applied Digital holds an approximately 10% equity interest, is developing front-of-the-meter generation that could add multiple gigawatts of new power in the Dakotas.
• The Company secured up to approximately 1 GW of potential power capacity in Finland, establishing a foothold in an emerging European AI market.
• Polaris Forge 1 was named Project of the Year by the Mid-America Economic Development Council.

Risks and Challenges

• Risks include the ability to complete construction of data center campuses as planned, including internationally.
• Potential delays in customer acquisition, leasing decisions, and internal approval processes.
• Dependence on principal customers and the ability to execute obligations under lease agreements.
• Risks related to raising additional capital to fund ongoing construction and operations.
• Power or other supply disruptions, equipment failures, and inability to comply with regulations.
• Fluctuations in the fair value of derivatives and investments, such as the B&W common stock warrant and investment.

Management Commentary and Tone

• Wes Cummins, Chairman and CEO, stated the goal is to establish Applied Digital as the category leader in purpose-built AI factories, focusing on large-scale, sustainable campuses and durable contracts with tier-one hyperscalers.
• Management emphasized that the approach involves building with communities, citing the return of over $45 million in electricity credits to local ratepayers and $350,000 in grants to support first responders and schools.
• The tone reflects confidence in the long-term strategy, viewing restrictions in other markets as increasing the scarcity value of their established campuses.
• Management highlighted the strategic importance of power as the gating factor for AI infrastructure and the advantage of the Dakotas' power availability.

Other Key Points

• Closed $1.59 billion of 7.000% Senior Secured Notes due 2031 to fund construction of the third HPC building (150 MW) at Polaris Forge 1 and repay a $300 million bridge facility.
• Entered into a Power Purchase Agreement with Base Electron for capacity and energy from an approximately 1,200 MW natural gas-fired generation facility in North Dakota.
• Through Applied Digital Cares, committed $350,000 in grants across five organizations in Oliver County, North Dakota.
• The Company's HPC Hosting Business leases are with CoreWeave (Polaris Forge 1), an investment-grade hyperscaler (Polaris Forge 2), and a tier-one investment-grade hyperscaler (Delta Forge 1, Polaris Forge 3, and Delta Forge 2).
• ChronoScale is a public company (Nasdaq: CHRN) in which Applied Digital owns approximately 96%.
• The Ekso business at ChronoScale is classified as held for sale and discontinued operations, resulting in a $16.1 million net loss from discontinued operations.