Applied Digital Corp. (APLD) | The Buildout — AI Infrastructure
The Verdict
Applied Digital designs, builds, and operates high-power-density data centers for AI and HPC workloads, alongside a legacy crypto-mining hosting segment and a majority-owned GPU cloud business. It sits upstream in the AI infrastructure buildout: hyperscalers sign long-term leases for powered, cooled facilities that APLD constructs and operates.
| Market Cap | — |
| Revenue (TTM) | $611M |
| Revenue Growth | +183.7% |
| EBITDA Margin (TTM) | -38.5% |
| Net Debt | $3.5B |
| Earnings Beats | 1 of 6 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Signed lease value rose from $7 billion a year ago to $36 billion, with $20 billion added in the most recent quarter.
- Five AI factory campuses are under contract or construction for three separate hyperscalers, totaling 1.41 GW of contracted critical IT load.
- Management expects to reach a $1 billion annual net operating income run-rate a year from now, three years ahead of the original five-year goal.
- CoreWeave lease restructuring created an A3-rated SPV, added a $50 million letter of credit and a parent guarantee, helping price notes at 7%—225 basis points inside the first placement.
- Construction learning curve: the first Polaris Forge 1 building took about 24 months to ready-for-service; the second was under 12 months, and management says all construction projects are on time and on budget.
What We’re Watching
- Polaris Forge 2 first building is expected later in 2026; a delay would push back the next revenue step-up.
- Two expansion options—roughly 100 MW at PF2 and 150 MW at a Delta Forge campus—are in advanced negotiations with no signed date.
- Power is the stated top governor; Base Electron's initial 1.2 GW gas generation is not expected until 2029 and 2030.
- Stock-based compensation was $116.8 million in Q4 FY26, including one-time ChronoScale and performance-unit charges.
The thesis is strengthening on contracted demand and execution credibility, but the current financials remain fit-out-heavy and GAAP-negative. Management delivered the burst of lease signings it had hinted at, accelerated its NOI target, and secured project financing, while still carrying concentration with one unnamed hyperscaler and only a small fraction of contracted capacity live. The key open question is whether APLD can deliver the contracted capacity on schedule and show base rent stepping up from the $44.1 million quarterly level.
Earnings
Revenue reached $293.9 million in the quarter ended May 31, 2026, up 132.1% sequentially, with gross margin at 23.6%. Reported EBITDA was negative $134.0 million and GAAP net loss was $110.3 million; adjusted EBITDA was $42.4 million. The quarter was fit-out-heavy: tenant fit-out services accounted for $152.4 million of HPC revenue, while HPC base rent was flat at $44.1 million.
| Metric | Q4 FY2026 | Q3 FY2026 | Q4 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $294M | $127M | $38M | +673.4% |
| Gross margin | 23.6% | 42.5% | 20.4% | +320bps |
| EBITDA | −$134M | −$65M | −$16M | +722.1% |
| EPS | $-0.40 | $-0.37 | $-0.26 | +53.6% |
| HPC base rent | $44.1M | $44.1M | n/a | — |
| Tenant fit-out services | $152.4M | $18.9M | n/a | +$133.5M QoQ |
We are currently constructing 5 multibillion-dollar AI factory campuses for 3 separate hyperscalers at a scale we believe speaks both to the quality of our platform and to the trust these customers place in our ability to execute.— Wes Cummins, CEO, July 27, 2026
Management tone: Between the April and July 2026 calls, management's tone shifted from patient to materially more confident. Executives moved from emphasizing lease-negotiation discipline to accelerating the long-term NOI target and stating that contracted NOI is already about $2-plus billion on an annual basis. They remained direct on fit-out revenue quality, capex, and supply-chain limits.
Management Guidance
Management does not issue traditional quarterly EPS guidance. Its formal long-term guidance metric is net operating income; on the July 27, 2026 call, management accelerated the goal to a $1B annual NOI run-rate "a year from now," three years ahead of the original five-year target. Management also guided to around $600 million of capex for the upcoming quarter, with a step-up expected as construction advances.
Trajectory
Reported revenue is accelerating, from $64.2 million in Q1 FY26 to $126.6 million in Q2 and Q3, and then to $293.9 million in Q4 FY26, but the Q4 step-up was driven primarily by nonrecurring tenant fit-out services rather than durable lease income. Gross margin expanded while operating and EBITDA margins compressed, reflecting a fit-out-heavy mix and large stock-based compensation. Recurring HPC base rent was flat at $44.1 million in both Q3 and Q4, so the durable lease line has not yet stepped up.
The Model
The model's locked projections put FY+1 revenue at $1,030 million and EBITDA at $288 million, a 28% margin, rising to $1,941 million revenue and $932 million EBITDA, a 48% margin, in FY+2. Near-term estimates are anchored by the contracted capacity ramp and the expected step-up in base rent as buildings reach ready-for-service; the FY+2 figure reflects more of the 1.41 GW contracted book delivering at scale.
| Metric | FY2026 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $611M | $1.0B | $1.9B |
| YoY Growth | — | +68.5% | +88.4% |
| EBITDA | −$236M | $288M | $932M |
| EBITDA Margin | -38.5% | 28.0% | 48.0% |
Projections are the median of 5 independent model runs.
Management does not issue traditional quarterly EPS guidance. Its formal long-term guidance metric is net operating income; on the July 27, 2026 call, management accelerated the goal to a $1B annual NOI run-rate "a year from now," three years ahead of the original five-year target. Management also guided to around $600 million of capex for the upcoming quarter, with a step-up expected as construction advances.
What Could Go Right — and Wrong
- Polaris Forge 2 reaches ready-for-service later in 2026 and base rent begins to step up from $44.1 million per quarter.
- The roughly 100 MW Polaris Forge 2 and 150 MW Delta Forge expansion options are signed at materially higher lease rates, adding to the 1.41 GW contracted book.
- Delta Forge 1 achieves initial operations in mid-2027, bringing another large campus into recurring lease income.
- ChronoScale signs large take-or-pay compute contracts and deploys hundreds of megawatts of compute.
- Base Electron secures financing or lists, moving the 1.2 GW power project toward initial capacity in 2029 and 2030.
- A delivery delay or budget overrun at any campus; management cites industry data that roughly 90% of $1 billion-plus projects are delivered late or over budget.
- The unnamed high-investment-grade hyperscaler that represents about $20 billion of the $36 billion lease book renegotiates or fails to accept capacity.
- Power availability or utility timing slips, delaying contracted capacity delivery.
- Supply-chain bottlenecks: management previously estimated about 700 MW per year of critical IT load and is now building toward about 1.5 GW over the next couple of years.
- Recurring base rent remains flat and total revenue falls as nonrecurring fit-out work completes; Q4 base rent was $44.1 million.
Looking Ahead
Over the next twelve months, APLD's story is about converting signed leases into delivered megawatts. The next delivery test is Polaris Forge 2 later in 2026, followed by initial operations at Delta Forge 1 in mid-2027. In parallel, management is negotiating two expansion options and marketing 1.7 GW of additional capacity, while capex is guided around $600 million in the upcoming quarter.
- Later in 2026Polaris Forge 2 first building online — Tests whether the next campus reaches RFS and starts the next revenue step-up.
- Near termPF2 remaining 100 MW lease — Same-tenant expansion would lift contracted capacity beyond 200 MW.
- Advanced negotiations; no dateDelta Forge 150 MW expansion option — Signed lease at materially higher rates would confirm pricing power.
- Upcoming quarterCapex around $600 million — Tests whether construction spend matches management's guided cadence.
- Mid-2027Delta Forge 1 initial operations — RFS and tenant acceptance would add the first Southern U.S. campus.
Financials
Annual Summary
| Metric | FY2025 | FY2026 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $216M | $611M | $611M | +183.7% |
| Gross Margin | 11.2% | 25.0% | 25.8% | +1,380bps |
| EBITDA | $11M | −$236M | −$182M | -2185.0% |
| EBITDA Margin | 5.2% | -38.5% | -38.5% | 4,378bps |
| Net Income | −$231M | −$244M | −$244M | -5.6% |
| Free Cash Flow | −$797M | −$2.8B | −$3.8B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)25.8%
- EBITDA Margin (TTM)-38.5%
- Net Margin (TTM)-39.9%
- ROIC-4.5%
- SBC / Revenue36.0%
The Company
Applied Digital describes itself as a United States designer, developer, and operator of next-generation data center infrastructure across North America. Its HPC hosting segment designs, constructs, and operates data centers tailored to high-power-density applications like HPC and AI. These are the powered, cooled facilities hyperscalers lease to run AI training and inference, which places APLD upstream in the AI infrastructure buildout.
The company is now constructing five AI factory campuses under contract or construction: Polaris Forge 1, Polaris Forge 2, Delta Forge 1, Polaris Forge 3, and Delta Forge 2. Management describes a repeatable franchise model with roughly 15 to 20 leadership positions per campus reporting to headquarters, and says Applied Digital is an approved supplier with every major hyperscaler. It also operates legacy data center hosting for crypto miners in North Dakota and holds 96% of ChronoScale, the separated GPU cloud business.
Business Segments
Competitive Landscape
APLD's 10-K names Digital Realty, Equinix, and NTT as broad data center providers, and Bitdeer and Riot Platforms among data center hosting competitors. Management's stated differentiation is on-time delivery, power access, and a direct investment-grade hyperscaler lease book.
- Digital RealtyNamed in APLD's 10-K as a broad data center provider.
- EquinixNamed in APLD's 10-K as a broad data center provider.
- NTTNamed in APLD's 10-K as a broad data center provider.
- Named in APLD's 10-K as a data center hosting competitor.
- Riot PlatformsNamed in APLD's 10-K as a data center hosting competitor.
Supply Chain
APLD sits between utilities, power equipment suppliers, and construction partners on one side and hyperscaler tenants on the other. It buys power and construction services, then delivers powered, cooled data center capacity under long-term leases.
More on APLD: Earnings recap