Applied Digital - Earnings Call - Q3 2025
April 14, 2025
Executive Summary
- Q3 FY2025 revenue was $52.9M, up 22% YoY but down 17% QoQ on cloud revenue normalization and seasonal power costs; GAAP EPS was $(0.16) while Adjusted EPS was $(0.08).
- Against S&P Global consensus, revenue missed ($62.9M* vs $52.9M) while Primary EPS beat (estimated $(0.108)* vs actual $(0.08)); prior two quarters both beat on revenue and Primary EPS.
- Strategic pivot: Board approved plan to sell the Cloud Services Business to reduce customer friction and potentially lower cost of capital ahead of a contemplated future REIT path.
- Financing momentum: Closed $375M facility with SMBC and advanced Macquarie $5B preferred facility; liquidity at quarter-end was $261.2M cash and restricted cash, with $689.1M debt, supporting the Ellendale HPC campus build.
- Near-term stock narrative catalysts: pending Ellendale lease update, Cloud sale process progress, and October “turn-on” target for the first 100MW building driving visibility to revenue ramp.
Note: Estimates marked with “*” are values retrieved from S&P Global.
What Went Well and What Went Wrong
What Went Well
- Financing de-risked: “APLD HPC Holdings LLC closed a $375 million financing with Sumitomo Mitsui Banking Corporation… used to advance development of the first and second data center buildings at the Ellendale HPC Campus”.
- Strategic focus and customer alignment: Management will separate the Cloud Services Business to reduce friction with prospective hyperscaler tenants and potentially enable a future REIT transition; “we believe separating the Cloud Services Business… better serves the long-term interests of our shareholders”.
- Execution milestones: Ellendale construction on schedule, equipment landed, and tariffs not materially impacting build cost for Building 1; target October power-up and service commencement in 2H CY2025.
What Went Wrong
- Sequential cloud revenue decline: Cloud Services revenue fell to $17.8M (from $27.7M in Q2) due to moving capacity from reserve contracts to multi-tenant on‑demand and technical issues during the transition (subsequently resolved).
- Hosting margin compression: Management cited seasonal power cost increases as a driver of margin compression in data center hosting during the quarter.
- Elevated financing costs and non‑cash charges: Interest expense rose to $8.9M (+87% YoY), and non‑cash losses on warrants and extinguishment of debt weighed on GAAP loss metrics.
Transcript
Operator (participant)
Good afternoon and welcome to Applied Digital's Fiscal Third Quarter 2025 Conference Call. My name is Jerome, and I'll be your operator today. Before this call, Applied Digital issued its financial results for the fiscal third quarter ended February 28, 2025. In a press release, a copy of which will be furnished in a report on a Form 8-K filed with the SEC and will be available in the Investor Relations section of the company's website. Joining us on today's call are Applied Digital's Chairman and CEO, Wes Cummins, and CFO, Saidal Mohmand. Following their remarks, we will open the call for questions. Before we begin, Matt Glover from Gateway Group will make a brief introductory statement. Mr. Glover, you may begin.
Matt Glover (Senior Managing Director)
Thank you, Jerome. Good afternoon, everyone, and welcome to Applied Digital's Fiscal Third Quarter 2025 Conference Call. Before management begins formal remarks, we would like to remind everyone that some statements we're making today may be considered forward-looking statements under the securities laws and involve a number of risks and uncertainties. As a result, we caution you that there are a number of factors, many of which are beyond our control, which could cause actual results and events to differ materially from those described in the forward-looking statements. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in earnings release and public filings made with the Securities and Exchange Commission, or SEC. We disclaim any obligation or any undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.
We will also discuss non-GAAP financial metrics and encourage you to carefully read our disclosures and the reconciliation tables to the applicable GAAP measures in our earnings release as you consider these metrics. We refer you to our filings with the SEC for detailed disclosures and descriptions of our business, as well as uncertainties and other variable circumstances, including but not limited to risks and uncertainties identified under the captioned risk factors in our annual report on Form 10-K and our quarterly report on Form 10-Q. You may get Applied Digital's SEC filings for free by visiting the SEC website at www.sec.gov. I would like to remind everyone that the call is being recorded and will be made available for replay via a link available in the investor relations section of Applied Digital's website. Now, I'd like to turn the call over to Applied Digital's Chairman and CEO, Wes Cummins.
Wes.
Wes Cummins (Chairman and CEO)
Thanks, Matt, and good afternoon, everyone. Thank you for joining our Third Quarter 2025 Conference Call. I want to start by expressing gratitude to our employees for their continued hard work and service in supporting our mission of providing purpose-built infrastructure to the rapidly growing high-performance computing industry. Before turning the call over to our CFO, Saidal Mohmand, for a detailed review of our financial results, I'd like to share some recent developments across our business. Starting with our data center hosting business, we currently operate 286 MW of fully contracted data center hosting capacity for our currency clients across two locations in North Dakota, both of which are running at full capacity. Bitcoin prices remain strong, which is positive for our customers, and we remain optimistic about the business and its future prospects.
In our HPC Hosting segment, we have achieved significant milestones in advancing our strategic objectives, including two transactions with globally renowned financial institutions. The first transaction with Macquarie Asset Management, one of the world's largest infrastructure investors, upon closing will allow Macquarie to invest up to $5 billion in capital to support the development of Applied Digital's next-generation data centers. We believe this investment underscores Macquarie's strong confidence in the scalability and value of our platform. The second was a $375 million financing arrangement with Sumitomo Mitsui Bank Corporation, one of Japan's top three banking groups and a global leader in data center financing. We believe this arrangement reflects the trust leading financial institutions placed in the value of our data center's land assets and power infrastructure pipeline. Macquarie and SMBC are playing instrumental roles in ongoing discussions with customers to lease the Ellendale campus.
Their support is especially valuable amid the current cross-currents in the industry and broader economy. We believe the Ellendale campus represents a highly strategic industry asset with significant expansion opportunities beyond the initial 400 MW of critical IT load. Importantly, our construction remains on schedule for our first building, and we expect it to be ready for service and ready to begin generating revenue in the calendar fourth quarter of 2025. Nearly all the equipment for this building is landed, giving us not only confidence in the schedule, but it also means tariffs will not materially impact our build cost. Construction is underway for the second building, which will be 150 MW of critical IT load. This building is expected to be ready for service at the end of calendar Q2 of 2026 and ready to begin generating revenue.
Building 3, also 150 MW, is in planning stages and is expected to be ready for service in calendar Q1 of 2027. The power is secured for all three buildings, as is the supply chain. Lastly, we expect to provide an update on leasing discussions in the near term. At that time, we will share updated views on the potential economics of the campus. Next, let's discuss our cloud services business, which provides high-performance computing power for AI applications. After careful consideration, our board of directors has determined that reviewing strategic options for this business is in the best interest of shareholders. This decision is driven by several factors. First, our discussions with potential customers regarding leasing our data center business is it is clear that our cloud business is typically viewed as a competitor. While this has not derailed any discussions, it is a point of friction.
We also believe that if we were to transition to a data center REIT in the future, this would lower our cost of capital, as investors typically assign higher multiples to data center businesses due to their stability and long-term growth potential. Further recent industry developments, including a large competitor completing their IPO, make this an opportune time for us to explore strategic options. In summary, we're encouraged by the positive trends across our business and remain confident in our growth trajectory. With that, I'll turn the call over to our CFO, Saidal Mohmand, to walk you through our financials. Saidal?
Saidal Mohmand (CFO)
Thanks, Wes, and good afternoon, everyone. Let me begin by highlighting some of our recent financial announcements before providing a detailed overview of the quarter. Over the past year, the company has deployed nearly $1 billion in assets, with a significant portion allocated to the construction of our data centers. While our construction teams have done a tremendous job delivering projects on time and within budget, one of the key challenges has been a high cost of capital. Reducing our cost of capital has been one of my top priorities since stepping in as CFO. We began this process with a $450 million convertible note at 2.75%, followed by the strategic transaction from Macquarie Asset Management, providing potential access to up to $5 billion in capital. Most recently, we secured a $375 million financing arrangement with SMBC at highly attractive rates.
We believe these transactions have not only strengthened our financial position but have also ensured we have the necessary capital to continue funding our data center build-out, as well as positioning us as a strong strategic partner for potential customers as they evaluate future data center development. Now, let's turn to the quarter. Revenues for the fiscal third quarter of 2025 were $52.9 million, up 22% over the prior comparable period. This increase was primarily driven by continued growth of our cloud services business due to the deployment of additional GPU clusters. In total, our data center hosting segment generated $35.2 million in revenue, while our cloud services segment contributed $17.8 million. Our cloud services business revenue declined sequentially from last quarter due to us placing some of our capacity into an on-demand model, a shift from reserve contracts.
With this change, we experienced some technical hurdles as we moved from a single-tenant to a multi-tenant configuration. Importantly, those technical issues are now resolved. Cost of revenues increased $2.1 million-$49.1 million from the prior comparable period, primarily driven by the growth in the business as more facilities were energized and additional services were provided to customers. SG&A expenses decreased to $7.3 million-$22.7 million, primarily due to GPU cluster deployments, as they are now revenue-generating, and the associated depreciation and amortization is now captured as a part of cost of revenues. This quarter, our depreciation and amortization expenses decreased to $18.8 million, compared to $26.2 million in the same period in 2024. Of the current quarter amount, $14.4 million was attributable to DNA and our cloud segment.
Interest expenses increased from $4.1 million to $8.9 million, primarily driven by an increase in finance leases and interest-bearing loans between periods. Net loss attributable to common stockholders was $36.1 million, or $0.16 per basic and diluted share. Adjusted net loss attributable to common stockholders was $17.8 million, or $0.08 per diluted share. Our adjusted EBITDA increased 878% to $10 million. Now, a few items impacted our adjusted EBITDA this quarter compared to Q2 of this year. As we mentioned, early in the quarter, we transitioned some of the GPU capacity to on-demand but encountered technical issues moving from a single-tenant to a multi-tenant environment. Those issues have since been resolved. We also experienced margin compression in our data center hosting business due to expected seasonal fluctuations in power cost.
Now, moving on to our balance sheet, we ended the fiscal third quarter with $261.2 million in cash, cash equivalents, and restricted cash, along with $689.1 million in debt. Now, with that, I'll turn over the call to Wes for closing remarks.
Wes Cummins (Chairman and CEO)
Thank you, Saidal. While securing our lease for our Ellendale campus is taking longer than expected, customer interest remains high. Additionally, the Macquarie and SMBC transactions have elevated our status in the industry. Although we cannot control the macro environment, we can continue to build our campus on time and within budget. We believe our 100 MW liquid-cooled data center is uniquely positioned to come online as industry demand accelerates. Furthermore, our 1.4 GW pipeline remains one of the most compelling offerings in the market as customers continue to invest heavily in future capacity. We're proud of the progress achieved this quarter and look forward to sharing further updates as the year unfolds. We welcome your questions at this time. Operator?
Operator (participant)
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have any questions, please press star, followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the following process, please press star, followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. We have a question coming from the line of Nick Giles from B. Riley Securities. Your line is now open.
Nick Giles (Senior Research Analyst)
Good afternoon, everyone. First, on the sale of the Cloud Services Business, can you remind us what the updated split would be between on-demand versus contracted and how you're thinking about total value there?
Wes Cummins (Chairman and CEO)
Nick, in the quarter, we had four of our six clusters remaining in reserve contracts and two moved to on-demand. The two in on-demand generated a small amount of revenue later in the quarter. As Saidal mentioned, we have rectified the technical issues there and expect that to ramp up in the current quarter. That is the split currently.
Nick Giles (Senior Research Analyst)
Got it. Just to clarify, none of the clusters today are in Applied Digital Data Centers, so there would not be a structure where you would still operate some of the capacity for those GPUs, correct?
Wes Cummins (Chairman and CEO)
That's correct.
Nick Giles (Senior Research Analyst)
Great. My second question was just on the BTC Hosting business. Where does this business fit in the long term, and especially as you remain focused on converting to a REIT structure later down the road?
Wes Cummins (Chairman and CEO)
Yeah. I think the BTC assets will fit in a REIT structure. I think there is a long-term match between HPC Data Center capacity and Bitcoin Hosting capacity. Nick, when you look at the sites that we're operating, let's look at Ellendale specifically. 400 MW of critical IT load moves to 530 of total utility load. That won't be all of that power needs to be available at all times. Typically, these run in the 70%, maybe at the high end, 80% of capacity on an average basis. That leaves a significant amount of power that would go unused. I think that's a really great match for Bitcoin facilities that have that ability to dynamically adjust the load at a site. I would expect that to remain at Ellendale for us.
I would expect, actually, for us to take a hard look at that at new sites as well to potentially add some Bitcoin capacity to be matched with the HPC capacity. I look at those businesses as effectively one business.
Nick Giles (Senior Research Analyst)
Got it. That's very helpful, Wes. I'll turn it over for now, but continue best of luck.
Wes Cummins (Chairman and CEO)
Thanks.
Operator (participant)
Thank you. Your next question comes from the line of Brett Knoblauch from Cantor Fitzgerald. Your line is now open.
Thomas Shenski (Equity Research Associate of Crypto and Blockchain and AI/HPC Infrastructure)
Hi, guys. This is Thomas Shenski on for Brett. Thank you for taking my question. I guess you mentioned Macquarie and SMBC are playing an instrumental role in finding potential leasing partners for Ellendale. I guess with their involvement, are you seeing faster diligence timelines or improved leasing momentum because of their support?
Wes Cummins (Chairman and CEO)
I think the way I would, excuse me, phrase that is that we've seen more interest. With the people who are already there, I think it has significantly increased the comfort level of our ability to complete construction and operate facilities with kind of world-class financing partners in the mix.
Thomas Shenski (Equity Research Associate of Crypto and Blockchain and AI/HPC Infrastructure)
Awesome. Great. Just on CapEx, I guess, can you provide an update on your expected capital needs over the next 12-18 months and whether the current construction of Ellendale is being built in line with past projections of CapEx?
Saidal Mohmand (CFO)
Yep. This is Saidal speaking. In terms of CapEx projections, you are correct. It is in line with past projections. We will always measure whatever impact, if any, tariffs will have for the second and third buildings and adjust accordingly. As of now, it is in line. We have prior have kind of pointed out in terms of the CapEx cadence, you are running anywhere from $30 million-$50 million a month in terms of actual CapEx for the first building.
Thomas Shenski (Equity Research Associate of Crypto and Blockchain and AI/HPC Infrastructure)
Awesome. Thanks. One more, if I may, on the Bitcoin Hosting business. I guess, could you provide clarity on when those contracts are up for expiration and if you see any risk in your large client potentially rolling off at the expiration of those contracts?
Wes Cummins (Chairman and CEO)
There's always risk of non-renewal. I don't expect that to be the case. I believe at Ellendale, we have roughly two years left on those contracts. I have to double-check that. Jamestown is roughly the same.
Thomas Shenski (Equity Research Associate of Crypto and Blockchain and AI/HPC Infrastructure)
Awesome. Thank you, guys.
Wes Cummins (Chairman and CEO)
Thanks.
Operator (participant)
Thank you. Your next question comes from the line of Rob Brown from Lake Street Capital Markets. Your line is now open.
Rob Brown (Senior Research Analyst)
Hi. My first question is on kind of the remaining steps to complete the Ellendale facility. I think you said that kind of fourth quarter would be running. What is sort of left there and how much CapEx is left to go just in that facility?
Saidal Mohmand (CFO)
Yeah. I think the good guidepost for CapEx spend is generally for a tier-three data center anywhere in the range of $10 million-$13 million per megawatt. We're building 100 MW of critical IT load for the Ellendale, the first building. When I think about what's left, as you can see from some of our social media updates, the building and a lot of the OFCI, the equipment is landed. Right now, it's a lot of what I'd like to call the finishing touches, as well as building out the generator plant, the backup power gen, etc. I'd refer to in our queue, a lot of the PP&E, particularly from the segment disclosures, showed the spend and the assets as of February on the balance sheet.
Wes Cummins (Chairman and CEO)
Rob, just to add to that, we have been, I believe, since February, commissioning equipment at the facility. You go through a fairly lengthy commissioning process. The facility will start landing IT equipment in either the July-August timeframe. You have the deployment of the IT equipment. This equipment, as you probably know, requires a significant amount of cabling and networking. You will have that piece of it as well to go for our customer. We will, just to think about that, we should start landing equipment, like I said, July, August, and then start cabling, racking cabling, and have this ready to go. The expectation is to start actually turning on in October.
Rob Brown (Senior Research Analyst)
Okay. Excellent. In terms of selling the Cloud business, what's sort of your sense on the plans there? You start marketing it now and hope to have it sold by kind of year-end or any kind of inside-outside in terms of timeline there?
Wes Cummins (Chairman and CEO)
That process, Rob, has just started. I do not think we are prepared to give any update or any expectation on what that might be. I think there are a lot of different ways that could go and a lot of different structures that we could participate in. I would not think of it as just a sale. We are evaluating everything there. I think it is just too early for us to give any real meaningful comments on that.
Rob Brown (Senior Research Analyst)
Understand. Okay. Thank you. I'll turn it over.
Operator (participant)
Thank you. Your next question comes from the line of Darren Aftahi of Roth Capital Partners. Your line is now open.
Darren Aftahi (Managing Director and Senior Research Analyst)
Hey, guys. Thanks for taking my questions. On the AI Cloud business, did you get any inbounds pre-making this announcement about putting the asset up for sale?
Wes Cummins (Chairman and CEO)
I can't make a comment on that, Darren.
Darren Aftahi (Managing Director and Senior Research Analyst)
Fair enough. A clarification, moving from single-tenant to multi-tenant and the technical issues, was that a prior interquarter in the February quarter you guys just reported, meaning it's kind of trued up starting the May quarter?
Wes Cummins (Chairman and CEO)
Yes. The issues were resolved there in, I think, the first or second week of March. It should be resolved for the majority of the May quarter.
Darren Aftahi (Managing Director and Senior Research Analyst)
Got it. Just one last one, if I may. The existing hyperscalers you've been talking to sort of post-Macquarie, has this position about data center build changed at all, just given kind of the current macro environment? Maybe has anything changed in the last three to four, five weeks? Thanks.
Wes Cummins (Chairman and CEO)
Yeah. I would not say it changed in that timeframe necessarily. What I would say in general, Darren, is for the last year for us, and then I have talked to a lot of CEOs that have been operating in this space for a lot longer than we have. When you are dealing with a group of five or six potential customers, maybe seven potential customers, it is a fairly concentrated market from that perspective. You have just kind of patterns of one of those companies is very aggressive and one is not very aggressive in the market. I would say what we have seen over the past year and one of the things that has taken longer for us to get to where we want to be on the final lease is just you see demand rotate between the hyperscalers.
What I would say overall is we see demand at least what it was, if not higher than it was three months ago when we had our call in January. It's not always the same players. You just see it kind of rotate between. There are a lot of, I think, pretty obvious dynamics in the market where you could guess as to why that is. There are some really big end users of GPU capacity that have a lot of plans that have been announced over the past few months. I think that's one of the things that drives it. My understanding is it's also just not uncommon for some of these to consume a lot of data center capacity, take a break, and then come back.
Darren Aftahi (Managing Director and Senior Research Analyst)
Thanks.
Operator (participant)
Thank you. Your next question comes from the line of Mike Grondahl of Northland Securities. Your line is now open.
Mike Grondahl (Head of Equities, Director of Research, and Senior Research Analyst)
Hey, guys. Thanks. While you covered demand a little bit, Wes, for the 100 MW, are you still talking to multiple hyperscalers for that, or has that been kind of narrowed down to one hyperscaler you're negotiating with? If you could talk a little bit about pricing trends the last 90 days, what are you seeing?
Wes Cummins (Chairman and CEO)
I would say, let me hit pricing first. On pricing, I would say the last 90 days have been fairly stable. I would say if you look on a year-over-year basis, it has increased year-over-year. That is to our comment of updating kind of our financial expectations for the campus versus what I think the last time we talked about that was roughly a year ago when we gave an update on the leasing activity there. Pricing is up year-over-year, but I would say generally stable on the data center front in the last 90 days. To the other question about who we are talking to, I would just defer that. We have made a lot of progress over the past three months since our last call. We continue to have multiple discussions.
What I would say about that is there's ongoing discussions with basically all of the hyperscalers, and it's not necessarily just Ellendale. We have discussions about our campus in South Dakota as well as other campuses where we've also made a significant amount of progress on pushing forward with campus number two for ourselves. Those conversations are just constant. I won't comment on how far down the path we are with one in particular.
Mike Grondahl (Head of Equities, Director of Research, and Senior Research Analyst)
Got it. Then the decision to pursue a sale of the Cloud business, you kind of talked about some of your hyperscale customers kind of view that as a friction point or potential competition. You talked about how it does not fit into the REIT structure and the recent CoreWeave IPO. Would you say there was a fair bit of pressure from your hyperscale potential customers to exit that business? I am just trying to understand if that was a little bit more external-driven or internal-driven.
Wes Cummins (Chairman and CEO)
I would say your last comment there is a fair comment. Also, we've spoken publicly about this a fair amount that we've structured these as two separate businesses. They're two separate businesses. It's two different customer bases. Now we think is the time to separate those businesses, whether that be from those types of pressures or just what's going on in the market. You've had a couple of GPU cloud businesses come public in the past six months. I think it's just the right time for us. We've always structured these that they would eventually be separate businesses, and we just think it's the time to move towards that separation.
Mike Grondahl (Head of Equities, Director of Research, and Senior Research Analyst)
Got it. Do you still see that cloud business is roughly $110 million-$120 million annual business EBITDA?
Wes Cummins (Chairman and CEO)
Yeah. After the on-demand portion ramps back up, it should be, I expect it to be in that neighborhood where it was back in the previous quarter. The piece of on-demand is increasing the customer base. Typically, you get higher pricing for on-demand versus reserve contracts. I do think if you look at the H100s that we have, as those reserve contracts all roll off, those will go into an on-demand model. You can do reserve contracts, in my opinion, on newer generation. You could do some reserve contracts. You're not doing two years again, but you could probably do six months or maybe one year of additional reserve contracts. I think this market is just moving more and more to an on-demand model. We have started adapting to react to that.
Mike Grondahl (Head of Equities, Director of Research, and Senior Research Analyst)
Got it. Hey, thank you.
Wes Cummins (Chairman and CEO)
Absolutely.
Operator (participant)
Thank you. Your next question comes from the line of George Sutton from Craig-Hallum. Your line is now open.
George Sutton (Senior Research Analyst)
Thank you. Just a question on the sale process. With your potential lessors having issues with the ownership, are they good with an in-process sale? Would they require a definitive agreement? I'm just curious how significant they would view this.
Wes Cummins (Chairman and CEO)
George, I'll be clear. There's no hard requirements on any of this. Like I said, I think this is just the right time for us to do this for both of the businesses, quite frankly. It enables the cloud business to continue to grow, whether in a separate form from the combined company, and then allows us to really focus on the large-scale data center business.
George Sutton (Senior Research Analyst)
Gotcha. I know you've been carrying some third-party data center capacity that was unused. I'm curious how that part is involved in this process.
Wes Cummins (Chairman and CEO)
Yeah. That can go or I will tell you that third-party data center capacity that's at 2023 pricing, in my view, is a very valuable asset that we have. We've been asked about from third parties about getting that capacity from us. I view that as one of the big assets of this business is anyone who takes that business has immediate growth potential with available data center capacity that is at attractive pricing. Like I said, it's 2023 pricing versus 2025 pricing.
George Sutton (Senior Research Analyst)
Gotcha. Okay. Appreciate it. Thank you.
Wes Cummins (Chairman and CEO)
Absolutely.
Operator (participant)
Thank you. Your next question comes from the line of John Todaro of Needham. Your line is now open.
John Todaro (Senior Analyst)
Hey, Darren. Thanks for taking my question. Two here, and maybe we'll start with the AI Cloud business. 2023 pricing, that's interesting. How long is, I guess, left on those leases? What other piece would effectively be in there? There's the GPUs. Is there anything else that would kind of get sold off in that process?
Saidal Mohmand (CFO)
This is Saidal. On the data center leases, they're generally five to seven years with extensions. That's the perception on that. Let's talk about the other assets.
Wes Cummins (Chairman and CEO)
Those are the primary assets, the GPUs and the Data Center capacity. Obviously, teams, some software. Like I said, the business, we built it separate from the Data Center business. There is no real overlap in resources. From that perspective of separating it out, it will be easy for us as a seller and a potential buyer.
John Todaro (Senior Analyst)
Got it. Understood. On the HPC side of things, it sounds like you guys are pretty close to a lease just with those expectations for generating revenue. Is the thinking still that whoever takes the 100 MW at Ellendale does the full 400 MW for the campus? Is that still thinking? If not, kind of that expectation for Building 2, it seems like you're far along with someone, given that that timeline seems a bit aggressive with what, Q2 2026 generating revenue?
Wes Cummins (Chairman and CEO)
Think of that as Q3 2026. Ready for service at the end of Q2. Q3 2026 for rev gen. John, my expectation remains that one customer takes that campus now.
John Todaro (Senior Analyst)
Got it.
Wes Cummins (Chairman and CEO)
Yes. Ellendale campus does grow beyond that 400 MW out in 2028 and beyond. I would not necessarily say that one customer is going to take all of that. I do think for the 400, they do.
John Todaro (Senior Analyst)
Understood. That's helpful. I'll hop back in the queue. Thank you.
Wes Cummins (Chairman and CEO)
Thanks.
Operator (participant)
Thank you. There are no further questions at this time. Turning over back to Wes Cummins for closing remarks.
Wes Cummins (Chairman and CEO)
Thank you, everyone, for joining our earnings conference call. Look forward to speaking with you. I believe this year it'll be in July on the next earnings call. Again, thanks to all of our employees for all their hard work in the past quarter. Thanks again. Speak to you soon.
Operator (participant)
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Thank you.