0001144879-26-000048
SEC filingRevenue surged to $611M driven by new HPC hosting segment, while adjusted EBITDA improved to $107M.
Applied Digital Corporation is a U.S.-based designer, developer, owner, and operator of large-scale, purpose-built data centers engineered to support high-performance computing (HPC) workloads, including artificial intelligence and machine learning. The company designs, builds, and operates high-performance, sustainably engineered data centers—referred to as AI factories—and delivers capacity to investment-grade hyperscalers under long-term lease and hosting arrangements. Applied Digital has evolved from a blockchain hosting company into a purpose-built HPC data center platform organized around its proprietary AI factory model. The legacy blockchain hosting operations represent a smaller, single-customer component expected to decline in significance.
The company operates through two reportable segments: the HPC Data Center Hosting Business (HPC Hosting Business) and the Blockchain Data Center Hosting Business (Data Center Hosting Business). The cloud services business is no longer an operating or reportable segment following a May 2026 transaction. The HPC Hosting Business designs, constructs, owns, and operates next-generation data centers for high-density GPU and other accelerated-compute infrastructure. The Data Center Hosting Business is a legacy line providing energized infrastructure for a single crypto mining customer under a contract with approximately one and a half years remaining.
Applied Digital's key platforms are its AI factory campuses: Polaris Forge 1 (Ellendale, ND; 400 MW contracted with CoreWeave), Polaris Forge 2 (Harwood, ND; 200 MW with investment-grade hyperscaler), Polaris Forge 3 (northern US; 300 MW with high investment-grade hyperscaler), Delta Forge 1 (southern US; 300 MW with high investment-grade hyperscaler), and Delta Forge 2 (southern US; 210 MW with high investment-grade hyperscaler). As of May 31, 2026, the company had 1,410 MW contracted critical IT load across five campuses, representing approximately $36.2 billion in total contracted revenue over initial 15-year base lease terms. Additionally, ChronoScale, a consolidated entity owning the cloud business, trades on Nasdaq under 'CHRN'.
The company markets its HPC capacity through direct long-term lease and hosting arrangements with investment-grade hyperscalers and other compute customers. The HPC Hosting Business has three customers, each with approximately 15-year leases (take-or-pay, non-cancellable). The anchor tenant for Polaris Forge 1 is CoreWeave, with 400 MW. Two other investment-grade hyperscalers have contracted capacity at other campuses. The Data Center Hosting Business serves a single crypto mining customer with a remaining term of roughly one and a half years. Customer concentration is material in both segments.
The market for HPC and AI data centers is competitive. Competitors include established data center owners and operators such as Digital Realty Trust and Equinix, hyperscalers developing their own capacity, independent developers, and other power-advantaged developers—particularly companies that have expanded from blockchain hosting into HPC infrastructure. Named competitors include IREN Limited, Cipher Digital Inc., TeraWulf Inc., Hut 8 Corp., Riot Platforms, Inc., CleanSpark, Inc., HIVE Digital Technologies Ltd., Core Scientific, Inc., Bitdeer Technologies Group, Galaxy Digital Inc., Fermi Inc., Keel Infrastructure Corp, and MARA Holdings. In the legacy Data Center Hosting Business, competition comes from other blockchain hosting providers.
Applied Digital's growth strategies include continued expansion of HPC hosting capacity through build-outs at existing and future locations, securing scalable power sites by developing a pipeline of power sources with favorable regulations, integrating power assets via evaluation and acquisition, and standardizing its AI factory platform for repeatable 12-18 month build cycles per 100-150 MW facility. The company emphasizes long-term contracted revenue with high-quality counterparties on a take-or-pay basis, control of power-advantaged sites, purpose-built high-density design, and a standardized repeatable AI factory model that has been qualified by major hyperscalers.
As of May 31, 2026, Applied Digital employed approximately 256 full-time employees across design, engineering, IT, operations, construction, administration, finance, and marketing. The company grants service-based restricted stock unit awards vesting over three years and performance-based RSUs to align employee interests with long-term objectives. Benefits include comprehensive health coverage, paid parental leave, paid time off, and life and disability insurance. The company emphasizes diversity, equity, and inclusion, and has a non-discrimination and anti-harassment policy.
For fiscal year 2026, total revenue rose 167% to $611.3 million from $228.6 million in fiscal 2025, primarily due to the commencement of the HPC Hosting Business, which contributed $385.3 million in revenue. Services revenue increased 119% to $496.6 million, driven by $270.6 million in tenant fit-out services for the HPC segment, while data center rental and other revenue added $114.7 million from the HPC segment's first data center. Gross profit surged to $157.7 million (25.8% margin) from $11.8 million (5.2% margin) as the mix shifted to higher-margin HPC services. Operating loss widened to $236.5 million from $72.2 million, largely due to $219.3 million in stock-based compensation and a $59.7 million loss on classification of held for sale for the cloud business. Net loss from continuing operations improved to $183.3 million from $231.1 million, benefiting from a $75.8 million gain on derivative fair value change. Adjusted EBITDA, which excludes ChronoScale and non-recurring items, turned positive at $107.2 million (18% of adjusted revenue) versus $19.6 million (9%) in the prior year.
The Data Center Hosting Business generated $154.4 million in revenue, up 7% from $144.2 million, but segment profit fell 24% to $48.3 million as the prior year included a $25.0 million gain on sale. The HPC Hosting Business, newly operational in fiscal 2026, reported $385.3 million in revenue and segment profit of $39.1 million, swinging from a $12.1 million loss. The HPC segment's performance reflects tenant fit-out services and rental income from the 100MW Polaris Forge 1 facility, with additional capacity under construction. Adjusted revenue, excluding ChronoScale, was $539.7 million, underscoring the core business shift toward HPC infrastructure.
Management expects continued expansion of HPC capacity, with Polaris Forge 1 reaching full 400MW contracted with CoreWeave, and Polaris Forge 2 and Delta Forge 1 campuses under development. The company raised $2.35 billion in 9.250% senior secured notes due 2030 and $2.15 billion in 6.750% senior secured notes due 2031 during the year, alongside $1.8 billion from the MAM unit purchase agreement. As of May 31, 2026, cash and equivalents stood at $1.6 billion (unrestricted), with $2.6 billion restricted. The company expects sufficient liquidity from operations, customer payments, and capital markets to fund construction and operations for at least 12 months. No specific quantitative guidance was provided, but the pipeline of hyperscaler leases suggests sustained revenue growth as new data centers come online through calendar 2027.
The balance sheet shows a dramatic transformation. Cash and cash equivalents surged to $1.59B (from $44M), and restricted cash reached $2.38B, totaling $4.15B in cash and restricted cash. Total assets grew to $9.93B from $1.87B. Total debt (current and long-term) rose to $4.98B from $0.69B, driven by $2.35B in 9.25% Senior Secured Notes due 2030, $2.15B in 6.75% Senior Secured Notes due 2031, and a $300M bridge loan. Shareholders' equity increased to $1.72B from $0.50B.
No purchase commitments or contractual obligations were disclosed in the Notes section. The only commitments mentioned are the debt repayment schedule (FY27: $16.6M; FY28: $196.6M; FY29: $290.8M; FY30: $295.7M; FY31: $4.19B; thereafter $312M) and the parent completion guarantees for the Ellendale Facilities and the 2031 Notes projects.
Capital expenditures totaled $2.87B (469% of revenue), largely for data center construction and equipment. Treasury stock repurchases were $31.4M in fiscal 2025 (no new repurchases in fiscal 2026). Preferred stock dividends of $6.3M were paid. The company issued $4.5B in senior secured notes and repaid $375M of the SMBC loan, resulting in a net debt increase of $4.28B. No common stock buyback authorization was noted.
No segment financial data is provided in the Notes. The company reports two segments: Data Center Hosting and HPC Hosting, but revenue and operating income by segment are not disclosed in the provided text. All operations are domestic.
Applied Digital's revenue is heavily dependent on two customers: one in HPC hosting (59% of revenue) and one in data center hosting (25%). Losing either would severely impact financial results. The HPC segment is expected to grow as new campuses come online, but concentration risk remains high due to the limited number of hyperscalers.
The company requires substantial capital to fund construction of data center campuses. It has used ATM offerings and convertible preferred stock (Series G) for funding, diluting existing stockholders. High debt levels (including convertible notes) impose restrictive covenants and debt service obligations. Failure to refinance or raise additional capital could impair growth and liquidity.
Delays in completing Polaris Forge and Delta Forge campuses could prevent timely lease commencement and revenue recognition. Construction risks include supply chain issues, labor shortages, permitting delays, and cost overruns. The company also faces risks from power availability and third-party supplier dependencies.
U.S. trade policy, including tariffs on construction materials, could increase project costs and timelines. The evolving regulatory landscape for AI and cryptoassets (both domestic and international) may impose compliance costs or restrict customer operations. Environmental regulations, particularly regarding emissions and water usage, could also impact operations.
Rapid advancements in AI model efficiency could reduce demand for high-power density data centers, while technological obsolescence of crypto mining hardware may pressure customer viability. The company must continually invest to keep pace with changing requirements.
Past material weaknesses in internal control over financial reporting have been remediated, but the company acknowledges the risk of future deficiencies, which could lead to misstatements or SEC sanctions.
Several directors and officers have interests in related entities (ChronoScale, Base Electron), posing potential conflicts. The company has mitigation measures (Audit Committee approval) but cannot guarantee avoidance of detrimental decisions.
The stock has been volatile due to market factors, short seller attacks, and dilution from equity issuances. The convertible notes and prepaid forward transactions may affect stock price and create arbitrage activity.
The provided document excerpt does not include the Consolidated Statements of Cash Flows. Only the audit reports and balance sheet were provided up to page 71. Therefore, no cash flow figures can be extracted.