Applied Digital - Earnings Call - Q4 2025

Executive Summary

• Q4 FY25 revenue of $38.0M grew 41% YoY and modestly beat S&P Global consensus ($38.01M actual vs $37.12M estimate; +$0.9M) as hosting capacity ran at full utilization; Primary EPS (S&P methodology) was -$0.03 vs -$0.17 consensus, a significant beat driven by lower interest expense and improved operating leverage in hosting (consensus values marked with *; see S&P Global note below).
• Strategic step-change: two 15-year CoreWeave leases (250MW) signed during the quarter (~$7B contracted revenue), and an additional 150MW option exercised post-quarter that would bring total to 400MW and ~$11B contracted revenue if finalized; first 100MW building targeted to be operational in calendar Q4’25.
• Directional guide: management expects a significant sequential revenue increase beginning in the quarter ending Aug 2025 from Polaris Forge 1 “technical fit-out” (customer-funded at a small margin) ahead of lease revenue commencement; project financing expected to close in ~4–10 weeks from the call date.
• Balance sheet and funding: ended Q4 with $120.9M cash and $688.2M debt; subsequently raised ~$268.9M via ATM and Series G preferred, improving liquidity to support build-out.

What Went Well and What Went Wrong

• What Went Well

  • Signed two transformative 15-year leases with CoreWeave (250MW, ~$7B revenue) and noted post-quarter exercise of a 150MW option that would take capacity to 400MW and ~$11B total contracted revenue if finalized: “These long-term leases mark a defining moment for Polaris Forge 1” — CEO Wes Cummins.
  • Operational progress and cost advantages: first 100MW liquid-cooled facility on track for 2H’25; design targeting PUE of 1.18 and near-zero water, with management estimating a 100MW customer could save ~$2.7B over 30 years vs other regions.
  • Interest expense fell sharply YoY ($4.5M vs $13.8M), aiding EPS outperformance despite higher SG&A; Adjusted EBITDA turned positive to $1.0M.

• What Went Wrong

  • SG&A inflation: $28.1M (+115% YoY), driven by $9.4M higher stock-based comp (accelerated vesting and PSUs), +$3.4M personnel, and +$2.3M other expenses (insurance, software).
  • Core non-GAAP profitability remains thin in the quarter (Adjusted EBITDA $1.0M; Adjusted net loss -$7.6M), reflecting transition-stage cost structure and ramp timing.
  • Cloud Services reclassified as discontinued operations; strategic alternatives remain under review (added uncertainty and reporting complexity).

Transcript

Operator (participant)

Good afternoon and welcome to Applied Digital's fiscal fourth quarter 2025 conference call. My name is John and I will be your operator today. Before this call, Applied Digital issued its financial results for the fiscal fourth quarter ended May 31, 2025, in a press release, a copy of which has been furnished in a report in 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 Seidal Mohmand. Following the 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, operator. Hello everyone and welcome to Applied Digital's fiscal fourth quarter 2025 conference call. Before management begins formal remarks, we'd like to remind everyone that some statements we're making today may be considered forward-looking statements under 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, that could cause actual results and events to differ materially from those described in the forward-looking statements. For more detailed risks, uncertainties, and assumptions related to our forward-looking statements, please see the disclosures and earnings release and public filings made with the Securities and Exchange Commission or SEC. We disclaim any obligation or 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 also discuss non-GAAP financial measures and encourage you to read our disclosures and the reconciliation tables to the applicable GAAP measures and earnings release carefully 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 in the Risk Factors section of our annual report on Form 10-K and our quarterly reports on Form 10-Q. You may access Applied Digital's SEC filings for free by visiting the SEC website at www.sec.com. I would like to remind everyone that this call is being recorded and will be available for replay via link available in the Investor Relations section of Applied Digital's website. Now I'd like to turn the call over to—

Wes Cummins (CEO and Chairman)

Thanks, Matt, and good afternoon, everyone. Thank you for joining our fourth 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 compute industry. Before turning the call over to our CFO, Seidal Mohmand, for a detailed review of our financial results, I'd like to share some recent developments across our business. Let me start with an update on our HPC data center hosting segment. During the quarter, we signed a transformative 15-year lease agreement with CoreWeave, the AI hyperscaler, to deliver 250 MW of critical IT load at our Ellendale, North Dakota campus, now named Polaris Forge 1.

These agreements are expected to generate approximately $7 billion in contracted revenue over the lease terms and to position Applied Digital as a leader in AI and HPC infrastructure. Last week, CoreWeave exercised their option for an additional 150 MW in a third building at Polaris Forge 1, underscoring the campus's potential as a scalable hub for next-generation AI workloads. These long-term leases mark a defining moment for Polaris Forge 1, one of North America's most ambitious data center projects. Purpose-built for artificial intelligence and high-performance computing, the campus combines massive power capacity with rapid deployment and is designed to scale up to 1 GW, with the first 100-MW facility scheduled to be operational in Q4 of 2025, the second 150-MW facility coming online in mid-2026, and the third 150-MW facility planned.

Polaris Forge 1 serves as a launchpad for the future of AI infrastructure, and we believe validates our vision to deliver reliable, power-dense solutions and become a category leader in designing and building AI factories. Building on the momentum from these leases and the surging demand for AI infrastructure, we're actively marketing our multi-gigawatt pipeline to a diverse group of customers. We believe one of our key strengths over the past two years has been refining our process by reducing the number of SKUs by approximately 50% and consolidating our suppliers. We believe our proprietary building design offers greater flexibility, and we've developed a repeatable process with minimal customization supported by a strong supply chain. As a result, we believe we've reduced our projected build times from 24 months to 12-14 months, allowing us to deliver on large scale commitments faster and more efficiently than before.

At the same time, we're highlighting the many advantages of building in the Dakotas along with our unique design that features an innovative closed-loop direct-to-chip liquid cooling system. This design seeks to achieve a projected PUE of 1.18 and near zero water consumption intended to ensure exceptional efficiency and sustainability. We like this location for its abundant low-cost energy, some of which is generated from stranded power with over 200 days of free natural cooling, we have calculated that a 100 MW data center customer could save up to $2.7 billion over a 30-year period as compared to the current industry data centers in other regions. Our strategic decisions in location and design are intended to position us to grow dramatically within the Dakotas and across other regions within our pipeline. Besides CoreWeave, we have completed the diligence and onboarding process with two other investment-grade North American hyperscalers.

This is an accomplishment that cannot be overstated. We have learned over the past two years that the onboarding, internal approval, and contracting process with hyperscalers is longer and more complex than originally anticipated. We believe that the market-leading experience gained from this process and signing our first leases will benefit us as we continue to engage potential tenants and execute on our pipeline. We also expect to benefit from this competitive advantage as new entrants to the market confront the time, money, and effort it takes to overcome these industry idiosyncratic barriers to entry for other players. For us, we feel we are now in a position to do business with these companies in the future with a much shorter negotiating and contracting completion process.

In fact, we are currently in various stages of negotiation with several investment-grade hyperscalers for large capacity campuses other than our Polaris Forge 1 campus, with one of those negotiations being in an advanced stage. Given our past experience, we know these large and complex lease agreements require multiple levels of approval, making it difficult to determine when and if any of them will be finalized. Now turning to our data center hosting business, we currently operate 286 MW of fully contracted data center hosting capacity for our cryptocurrency customers across two locations in North Dakota. Bitcoin prices remain strong, which is positive for our customers, and we remain optimistic about the business and its future prospects. Next, let's discuss our cloud services business, which provides high-performance computing infrastructure for AI applications.

As announced on our prior quarterly call, our Board of Directors determined that we would be reviewing strategic alternatives for this business. This process is ongoing, and we will provide an update as soon as we have more details to share with shareholders. With that, I will now turn the call over to our CFO Seidal Mohmand to walk through our financials.

Seidal Mohmand (CFO)

Thanks Wes and good afternoon everyone. Now that we've signed the leases for Polaris Forge 1, we're actively working with our financing partners to finalize the project financing for these data centers, which we expect to occur over the next 4-10 weeks. Since the end of the quarter, we've raised approximately $270 million between our ATM and Series G preferred stock. Combined with the significant equity we already have in the campus, we believe this puts us in a very strong position as we seek to wrap up the new financing package. Now let's turn to the quarter. Please note that unless otherwise specified, the figures we are about to discuss reflect continuing operations only and exclude the cloud services business. Revenues for the fiscal fourth quarter of 2025 were $38 million, up 41% year-over-year over the prior comparable period.

This increase was driven predominantly by an increase of capacity online in our data center hosting business. Cost of revenues increased $7.5 million-$30.2 million from the prior comparable period. This increase was also driven by an increase of capacity online in our data center hosting businesses. SG&A expense increased $15 million-$28.1 million. The increase was driven by the company's overall business growth, which included an increase of $9.4 million in stock-based compensation due to accelerated vesting of certain employee stock awards and expenses related to the PSUs. $3.4 million of personnel expense also increased, largely driven by increases in headcount to support the business, and $2.3 million of other expenses, mainly software expenses and insurance premiums. This quarter our depreciation and amortization expense increased to $4.1 million compared to $3.6 million in the same period in 2024. Interest expense decreased $9.3 million-$4.5 million.

Net loss attributable to common stockholders was $26.6 million or $0.12 per basic and diluted share. The adjusted net loss attributable to common stockholders was $7.6 million or $0.03 per diluted share. Our adjusted EBITDA was $1 million for the quarter, and we provided a reconciliation for these metrics in the press release earlier today. Moving to our balance sheet, we ended the fiscal fourth quarter with $120.9 million of cash, cash equivalents and restricted cash along with $688.2 million in debt. As noted earlier, this does not include the additional $268.9 million in proceeds from our ATM and Series G preferred stock offering that occurred post quarter. Turning to guidance, we historically have not provided specific forward-looking guidance. However, given some of the near-term dynamics related to the CoreWeave leases, we will provide some directional guidance for the next quarter.

We expect revenue to increase significantly sequentially beginning in the quarter ending August 2025 due to the technical fit-out of our first Polaris Forge 1 building. Note, our customer pays the cost of this fit-out with a small margin to the company. This fit-out revenue will largely be recognized in both the current fiscal quarter as well as the quarter ending November 30, 2025. This is before the actual lease revenue for the facility begins to be recognized. With that, I'll turn over the call to Wes for closing remarks.

Wes Cummins (CEO and Chairman)

Over the past two years, we've sought to build strong relationships with nearly all major hyperscalers and demonstrated our advanced building capabilities by passing what we believe is some of the most rigorous technical due diligence and processes imposed by them in the industry. As a result, we've established relationships with several hyperscalers, which should position us for future projects. With the CoreWeave lease, we believe we're now roughly halfway toward our internal goal of generating $1 billion in annual net operating income over the next five years. Over the next three to five years, we feel confident this is achievable thanks to what we believe to be our competitive advantages for our multi-gigawatt pipeline, proven design and construction expertise, and strong relationships with hyperscalers who appear to be more active than ever in pursuing land, power, and data center capacity.

Overall, we see this as just the beginning for Applied Digital as we help drive the future of AI and high-performance computing infrastructure, and we remain very optimistic about the road ahead. We welcome your questions at this time.

Operator (participant)

Operator, thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, 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 polling process, please press Star followed by the number two. If you're using a speakerphone, please lift the handset before pressing any keys. Your first question comes from the line of Nick Giles from B. Riley Securities. Your line is now open.

Nick Giles (Senior Research Analyst)

Thanks, operator. Good afternoon, everyone. My first question was just how we should think about development cadence over the course of 2026, and just wondering if there's a window where you could be breaking ground on a second campus, or would this be more of a 2027 groundbreaking on a site other than Polaris Forge 1?

Wes Cummins (CEO and Chairman)

Hi. Thanks, Nick. We do expect to break ground, and work has already started for that on one additional campus and potentially two before the end of this year.

Nick Giles (Senior Research Analyst)

Got it. Okay. Thanks, Wes. Maybe just my second question would be I think you provided a range on the financing for four to 10 weeks. We're just curious if you could add any additional color, what would be the largest gating items at this point, or what could ultimately take you to either end of that range.

Wes Cummins (CEO and Chairman)

I'll say something first, Nick, and then turn it to Seidal. I think the biggest gating item in my mind right now in the process is just how things generally slow down in the last part of August before they turn back on in September in the industry in general. I'll turn it over to Seidal for any comments he would like to.

Seidal Mohmand (CFO)

I think that's fair, Wes. I would also add you're also relying on professional service providers to think about consultants who will provide construction reports as well as lawyers getting through documents and attorney documents. That can always add some lag. We have a good team as well as a great identified lead banking partner who's both incentivized to get this done on an expedited time frame. Given there's a lot to do, people are excited in the space in general.

Nick Giles (Senior Research Analyst)

Great. Thank you for the update and continue. Best of luck.

Wes Cummins (CEO and Chairman)

Thanks, Nick.

Operator (participant)

Your next question comes from the line of Rob Brown from Lake Street Capital Markets. Your line is now open.

Rob Brown (Founding Partner and Senior Equity Research Analyst)

Good afternoon. Congratulations on all the progress.

Wes Cummins (CEO and Chairman)

Thanks, Rob,.

Rob Brown (Founding Partner and Senior Equity Research Analyst)

you talked about one customer being in advanced negotiations and part of your large pipeline. Could you give us a sense of is this the customer that you've gotten through a lot of the onboarding work and it's really down to the contract negotiation at this point, or just give us a sense of where that's at.

Wes Cummins (CEO and Chairman)

Yeah. There's, we don't want to give a lot of detail on it, Rob, to identify the customer, but it is an investment-grade North American hyperscaler that we're in advanced negotiations with. That's a pretty small group, and we're having ongoing discussions with, you know, four, five, six of the hyperscalers for the campuses that we're working on both in the Dakotas and outside of the Dakotas. I would say that things have accelerated from that perspective just in the market in general in the past month. Yeah. Okay, great.

Rob Brown (Founding Partner and Senior Equity Research Analyst)

On the Ellendale facility, I think you're doing fit out starting this coming quarter. What's left to complete on that building, or is it really just getting the fit out and the customer started to load in the facility?

Wes Cummins (CEO and Chairman)

Yeah, it's mostly fit-out, which is underway. The customer will bring gear on site and cabling, you know, racking and cabling. That's really what's left. The expectation is, you know, in calendar Q4 of this year, that'll start to ramp up in kind of October through November.

Rob Brown (Founding Partner and Senior Equity Research Analyst)

Okay, great. Thank you.

Wes Cummins (CEO and Chairman)

Thanks, Rob.

Operator (participant)

Your next question comes from the line of Mike Grondahl from Northland Securities. Your line is now open.

Mike Grondahl (Head of Equity Sales, Trading, and Research)

Hey, Wes and Seidal. Hey. First, congratulations on the 150 MW option signed by CoreWeave and related to the first 250 MW from CoreWeave, the 100 MW building and the 150 MW building. How are terms looking on that project financing? Are those kind of coming in with how you expected, any color you could give us there?

Wes Cummins (CEO and Chairman)

Yeah, they're largely coming in as expected. I'll let Seidal give any details that he wants to give on that, but it's largely for me as expected. Yeah, correct.

Seidal Mohmand (CFO)

This is, you know, call it known within the industry for similar financings for this type of tenant. Think about it. If you're investment grade, you're somewhere in the high, high twos. Think about it. Low silver plus low fours is generally where the cost is coming for this type of tenant as well as loan to cost or LTCs in the 70% range. That is what we're seeing in the market and it's becoming somewhat universal.

Mike Grondahl (Head of Equity Sales, Trading, and Research)

Got it. You know, thinking of the 100 MW, then the 150 MW and then the second 150 MW, do you have rough go live dates for each of those buildings?

Wes Cummins (CEO and Chairman)

Yeah, the first hundred, as we mentioned, is Q4 of this year, then mid 2026 for the second building, the 150 MW, and then first half of 2027 for the following 150 MW. Rob, sorry, Mike, these are in calendar quarters.

Mike Grondahl (Head of Equity Sales, Trading, and Research)

Got it. That continues to progress. Okay. Hey, thanks guys and congratulations.

Wes Cummins (CEO and Chairman)

Thanks, Mike.

Operator (participant)

Your next question comes from the line of Darren Aftahi from ROTH. Your line is now open.

Darren Aftahi (Managing Director and Senior Research Analyst)

Hey guys, thanks for taking my questions and congrats as well. A question on building two. I know you said you guys have already broken ground, and I know you've invested a lot of money for the campus in general. The time frame looks like it's 12 months from now, plus or minus. I guess, is that an aggressive time frame? If there's any slippage, are you penalized in terms of a credit against the lease, or just kind of help me if you're a month or two late on that with CoreWeave, how that kind of works out. My second question. There's a lot of commentary in the release in your white paper that you wrote about the Dakotas. I'm just kind of curious. Beyond South Dakota, are you more partial to looking at places where PUEs are super attractive, maybe like the southern part of the U.S.? Any color on that would be helpful.

Wes Cummins (CEO and Chairman)

Thanks. Sure, Darren. So on building two, we got the most recent pictures from the campus today that the building's actually being erected now. There's been a significant amount of work done already from foundation and dirt work. The building is actually going up and it's going quickly and feel great about that timeline. As I'd mentioned in the script, we've worked really hard and the team's worked really hard over the past year streamlining what we do. We significantly reduced the number of components to different suppliers so that we have a very repeatable, streamlined process that's designed to be deployed in about half of the time that we did building one. There's a lot of learning for us in building one and some in a design that's much more flexible as well. A higher liquid air mix so that different tenants require different liquid air mixes.

Also designed to lower cost as well. Feel good about where that is. Especially, we're in the middle of the summer there and the building's already going up, so we'll be enclosed for construction and fit out in the winter. There are just standard lease, there are late delivery penalties for us. To your point, on other campuses, it's not exclusively the Dakotas. We. We feel really good in North Dakota. We have the site in South Dakota we've been working on, but we have multiple campuses, large campuses in North Dakota. We have workforce there, we have GC there that we worked really well with. We're really comfortable with all of the pieces of the puzzle of North Dakota.

Obviously, the fiber with the new line coming through as well is really enhancing the fiber connectivity in the state. We mostly in MISO, but go really all the way to the southern part of the country as well. But we're. We're primarily focused in North Dakota right now.

Darren Aftahi (Managing Director and Senior Research Analyst)

Got it. Thank you.

Operator (participant)

As a reminder, if you have a question, please press Star one. Your next question comes from the line of George Sutton from Craig-Hallum Capital Group. Your line is not open.

George Sutton (Partner and Co-Director of Research)

Thank you. My congrats as well. Wes, you mentioned that the hyperscalers are more active than ever. I'm curious because some of them are seeming to want to own their own infrastructure. Are we talking about scenarios where you would own the campus like Ellendale, or are we talking in some cases about powered shells?

Wes Cummins (CEO and Chairman)

No, and thanks for the congrats. Right now we're very focused on full stack. We want to own the full building, we want to do operations, and that's really all of the negotiations and the interest that we're fielding. There is a preference, and there always has been with hyperscalers, to do self builds or powered shell. When conditions are tight, they'll typically do colo agreements like the ones that have and the ones that we're seeking to have in the future. Right now, George, we're really sticking with the full stack colo versus powered shell.

I don't. It might be interesting for us if we blended a campus with some full stack and some powered shell, but right now I don't have a lot of interest in just a powered shell. I don't think it's necessarily a great business model as a public company, maybe more so as a private company. On the powered shell side, great.

George Sutton (Partner and Co-Director of Research)

Relative to what you're defining as the Dakota Advantage, I'm just curious, have you made any progress in South Dakota relative to the sales tax, since that's a very key gating item to deals?

Wes Cummins (CEO and Chairman)

Yeah, we have not. That's likely something in the next legislative session next year. Right now we're focused on another large campus in North Dakota, where we're in the advanced negotiations, and then a campus in the southern U.S. and MISO as well.

George Sutton (Partner and Co-Director of Research)

Perfect. Thank you very much.

Wes Cummins (CEO and Chairman)

Thanks, George.

Operator (participant)

There are no further questions at this time. I will now turn the call over to Wes Cummins. Please continue.

Wes Cummins (CEO and Chairman)

Great. Thanks everyone for joining, and I look forward to speaking to you in October.

Operator (participant)

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.