Applied Digital Corp. (APLD) Q2 2025 Earnings Summary

Executive Summary

• Revenue was $63.9M, up 51% year over year, with Adjusted EBITDA of $21.4M, up 93% YoY; strength came from Cloud Services ($27.7M) and steady Data Center Hosting ($36.2M) .
• GAAP net loss widened to $138.7M as non-cash losses on change in fair value of debt ($87.2M) and conversion of debt ($25.4M) drove the results; net loss attributable to common was $139.4M ($0.66 per share) .
• Management announced a $5.0B perpetual preferred equity financing facility with Macquarie Asset Management (including up to $900M for Ellendale and ROFR on $4.1B across the pipeline), positioning APLD to finance its HPC buildout at the asset level .
• CFO renegotiated GPU lease terms to extend amortization to five years, reducing D&A by $8.5M in Q2 and guiding ~$15M/quarter cloud segment D&A going forward (a positive for reported margins) .
• Catalysts: finalizing hyperscaler leases (management “late-stage” and expects a single customer for Ellendale’s 400MW), asset-level financing rollout with Macquarie, and continued Cloud cluster deployments .

What Went Well and What Went Wrong

• What Went Well
  • Cloud Services revenue surged to $27.7M (+523% YoY), driven by more GPU clusters online; “we remain in late stage negotiations for our Ellendale campus” underscoring demand and strategic progress .
  • Structural financing progress: $5.0B Macquarie perpetual preferred facility to fund HPC assets, recover >$300M equity from Ellendale, and move financing to the asset level .
  • Operational milestones: energization of Ellendale’s main substation transformer and community recognition (DCD Community Impact Award), advancing HPC readiness and local support .
• What Went Wrong
  • Large GAAP losses from non-cash items: $87.2M loss on change in fair value of debt and $25.4M loss on conversion of debt distorted earnings quality and EPS .
  • Cost structure elevated: cost of revenues rose to $52.4M and SG&A to $29.8M as facilities energized and services expanded, pressuring GAAP operating loss (-$18.6M) .
  • Interest expense increased to $7.5M (+186% YoY) from higher finance leases/loans; investors flagged uncertainty around lease signing timing (Feb 15 date clarified as not lease signing) .

Financial Results

Segment revenue breakdown

Key KPIs and balance items

Notes:

• Q2 shows “Net loss” ($138.7M) vs “Net loss attributable to common” ($139.4M), reflecting preferred dividends and share-level items .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO Wes Cummins: “We remain in late stage negotiations for our Ellendale campus… we remain steadfast in our commitment to delivering our 400 MW data center campus on time and within budget.”
• On U.S. power constraints: “there could be a shortfall of approximately 36 GW in power availability for U.S. data centers by 2028… we believe much of the U.S.’s currently available excess power could be under contract within the next few years.”
• CFO Saidal Mohmand: “We renegotiated our GPU lease terms… extend the amortization period to 5 years… reduced segment D&A by $8.5M this quarter… we expect… lower D&A by about $7M per quarter… recognize around $15M per quarter in the cloud segment for D&A.”
• On Macquarie partnership: “The partnership will include a $5 billion perpetual preferred equity financing facility… up to $900 million to Ellendale… ROFR up to an additional $4.1 billion… 15% common equity interest in Applied Digital’s HPC business segment.”

Q&A Highlights

• Single vs multiple tenants: Management expects a single customer to take the entire 400MW Ellendale campus; split remains possible but unlikely .
• Lease timing: Feb 15 date is not a lease signing date; outside date is later; process is thorough for a first-time supplier, but near completion .
• Financing roadmap: Macquarie preferred is the equity layer at the asset level; debt will be project finance (SOFR + 225–250 bps indicated in dialogue), delivering a blended cost of capital below expected yield on cost .
• Pipeline and demand: ~1.6GW of additional campuses with 2026 power; demand and pricing reflect hyperscaler urgency for capacity .
• Accounting optics: Cloud D&A reset (5-year amortization) to better reflect economics and reduce GAAP D&A burden .

Estimates Context

• Wall Street consensus (S&P Global) for Q2 FY2025 EPS and revenue was not retrievable at this time due to data limits. Values retrieved from S&P Global were unavailable for this report.
• Without consensus, we cannot classify beats/misses. However, the company reported revenue up 51% YoY and Adjusted EBITDA up 93% YoY, driven by Cloud Services expansion and operational scaling in hosting .

Key Takeaways for Investors

• Revenue momentum continues with Cloud Services scaling to $27.7M and Hosting steady at $36.2M; watch for additional cluster deployments and customer mix updates .
• Non-cash debt-related fair value and conversion charges drove the GAAP loss; underlying Adjusted EBITDA trends remain constructive ($21.4M) .
• The $5.0B Macquarie facility is transformative, shifting financing to the asset level and supporting multi-gigawatt HPC buildout; expect clearer capital structure and reduced parent-level dilution .
• D&A relief from 5-year GPU amortization should improve reported results and margin optics in coming quarters (~$15M/quarter Cloud D&A guided) .
• Lease finalization and tenancy clarity for Ellendale (target: single customer for 400MW) are near-term stock catalysts; any signed lease and project financing announcements likely rerate the narrative .
• Macro tailwinds: U.S. power scarcity and hyperscaler urgency support pricing and long-term demand; APLD’s power pipeline and design readiness are strategic advantages .
• Risk monitor: elevated interest expense from leases/loans, timing uncertainty on lease execution, and continued reliance on large customers; balance sheet now stronger with $314.6M cash and $479.6M debt .

Additional Relevant Q2 2025 Press Releases

• Closed $150M senior secured note with Macquarie Equipment Capital, refinancing prior facility and removing parent guarantees/cross-collateralization .
• Completed $450M 2.75% Convertible Senior Notes due 2030; net proceeds ~$434.5M with ~$84M share repurchases and capped call transactions .
• Ellendale HPC development milestone: energized on-site main substation transformer .