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Applied Digital Corp. (APLD) Q3 2025 Earnings Summary

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 .

Financial Results

Consolidated Performance (YoY, QoQ, and non-GAAP context)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$60.704 $63.868 $52.921
GAAP EPS ($)$(0.03) $(0.66) $(0.16)
Adjusted EPS ($)$(0.15) $(0.06) $(0.08)
Adjusted EBITDA ($USD Millions)$19.993 $21.363 $10.015
Adjusted Operating Margin (%)(24)% (8)% (17)%

Key deltas and drivers:

  • Q3 revenue down 17% QoQ vs Q2 ($63.9M to $52.9M) on Cloud Services shift to on‑demand and transition issues; YoY growth +22% on GPU cluster deployment .
  • GAAP EPS impacted by higher interest and warrant/debt-related items; Adjusted EPS narrowed sequentially to $(0.08) .

Segment Revenue Breakdown

SegmentQ2 2025 ($USD Millions)Q3 2025 ($USD Millions)
Cloud Services$27.7 $17.8
Data Center Hosting$36.2 $35.2

KPIs and Balance Sheet

KPIQ1 2025Q2 2025Q3 2025
Cash, Cash Equivalents & Restricted Cash ($USD Millions)$86.6 $314.6 $261.2
Total Debt ($USD Millions)$143.6 $479.6 $689.1
Hosting Capacity Operating (MW)286 (106 Jamestown, 180 Ellendale) 286 286
Cloud GPU Clusters (count)6 clusters (1,024 GPUs each) ——

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Ellendale Building 1 – Ready for ServiceCY 2H 2025Building on schedule; lease finalization in late-stage talks (Q2 update) “Ready to begin generating revenue in calendar fourth quarter of 2025”; equipment landing Jul–Aug; turn-on expected in October Maintained timeline with added specificity
Ellendale Building 2 – Ready for ServiceCY Q2 2026 (RFS) / Q3 2026 (Rev Gen)Design stage (Q2) “Expected to be ready for service at the end of calendar Q2 2026 and ready to begin generating revenue” New specific timeline
Ellendale Building 3 – Ready for ServiceCY Q1 2027Not previously specified“Expected to be ready for service in calendar Q1 of 2027” New
Cloud Services Business – Strategic ActionN/A—Board approved plan to sell Cloud Services Business New
Tariffs Impact (Build Cost)Near-termNot detailed“Nearly all the equipment for this building is landed… tariffs will not materially impact our build cost” Clarified (benign)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Hyperscaler Leasing (Ellendale 100MW → 400MW)Finalizing lease; added two buildings in design (Q1); energized main substation transformer; late-stage discussions (Q2) Continued negotiations with multiple hyperscalers; pending lease update; expectation one customer takes the initial 400MW Momentum steady; customer interest higher; still pending close
Financing / Cost of CapitalPrivate placement incl. NVIDIA; $450M converts; MAM $5B preferred facility (Q1/Q2) Closed $375M SMBC facility; liquidity strong; CFO prioritizing cost of capital reduction Improving, de‑risking build-out
Cloud Services StrategyCloud revenue ramp with 6 clusters (Q1); strong growth (Q2) Shift to on‑demand caused revenue decline and technical issues (resolved); initiating sale process to reduce friction with hyperscalers Business model pivot; expect higher on‑demand pricing longer term
Supply Chain / TariffsNot highlightedEquipment landed; tariffs not a material issue for Building 1; power secured for Buildings 1–3 Stable/benign
Hosting Margin & Power CostsNot highlightedSeasonal power costs compressed hosting margins Seasonal margin pressure
BTC Hosting in REITNot highlightedBTC assets seen fitting a REIT structure; dynamic load balancing with unused capacity Strategic complement to HPC over time

Management Commentary

  • “We believe the Ellendale campus represents a highly strategic industry asset… Macquarie and SMBC are playing instrumental roles in supporting our ongoing discussions with customers to lease the Ellendale campus” — Wes Cummins, CEO .
  • “We also believe that if we were to transition into a data center REIT in the future… separating the Cloud Services Business… better serves the long-term interests of our shareholders” .
  • CFO: “Reducing our cost of capital has been one of my top priorities… a $450M convertible note at 2.75%, followed by… Macquarie… and a $375M financing arrangement with SMBC” .
  • On build schedule: “Nearly all the equipment for this building is landed… tariffs will not materially impact our build cost… expectation is to start turning on in October” .

Q&A Highlights

  • Cloud sale and mix: 4 of 6 clusters remained in reserve; 2 moved to on‑demand; on‑demand issues resolved in early March; ramp expected in the current quarter .
  • BTC hosting and REIT fit: Management views BTC assets as fitting within a REIT structure and complementary to HPC given dynamic load flexibility; contracts at Ellendale/Jamestown have ~2 years remaining .
  • Leasing and pricing: Pricing generally stable over the last 90 days and up YoY; discussions with multiple hyperscalers across campuses continue; demand rotating among players .
  • Capex cadence: $30–$50M per month for Ellendale Building 1; Tier 3 DC guidepost $10–$13M per MW; commissioning underway, equipment landing Jul–Aug, turn-on in Oct .
  • Cloud third-party DC capacity: Viewed as a valuable asset at 2023 pricing; interest from third parties; sale process just started .

Estimates Context

MetricQ1 2025 Consensus*Q1 2025 Actual*Q2 2025 Consensus*Q2 2025 Actual*Q3 2025 Consensus*Q3 2025 Actual*
Revenue ($USD)$52.270M*$60.704M*$61.610M*$63.868M*$62.913M*$52.921M*
Primary EPS ($)$(0.287)*$(0.15)*$(0.150)*$(0.06)*$(0.108)*$(0.08)*

Interpretation:

  • Q3: Revenue miss vs consensus; Primary EPS beat.
  • Q1 and Q2: Both revenue and Primary EPS beat.
    Primary drivers of Q3 miss: shift from reserve to on‑demand cloud capacity and transitional technical issues, plus seasonal hosting power costs .

Note: Values marked with “*” retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue downside in Q3 was primarily operational and transitional in Cloud; issues resolved with expectation to ramp on‑demand in the current quarter, supporting near-term estimate revisions for segment mix and margin .
  • The strategic decision to sell Cloud Services may reduce hyperscaler friction, potentially accelerating Ellendale leasing closure and lowering long-term cost of capital; monitor sale process milestones .
  • Financing capacity has improved materially (SMBC $375M, Macquarie preferred facility), de‑risking the build schedule for Buildings 1–3 and underpinning the October turn-on target for the first 100MW .
  • Expect margin volatility tied to power seasonality in hosting until Ellendale AI data center revenue ramps; adjust models for near-term hosting margin compression .
  • BTC hosting complements HPC from a capacity-utilization standpoint; management views BTC assets as REIT-compatible, which may sustain diversified site economics .
  • Leasing update is the top stock catalyst; positive closure terms and pricing would likely re-rate the narrative toward revenue visibility and capital efficiency .
  • Medium term, the build-out cadence and multi-campus pipeline (1.4GW) could drive scale benefits; watch equipment deployment timing (Jul–Aug) and commissioning progress as leading indicators .

Appendix: Additional Q3 Period Disclosures

  • Segment revenue details: Cloud Services $17.8M (+220% YoY; down $9.9M QoQ), Data Center Hosting $35.2M (−7% YoY) .
  • Operating metrics: Cost of revenues $49.1M (+4% YoY); SG&A $22.7M (−24% YoY); interest expense $8.9M (+87% YoY); Adjusted EBITDA $10.0M vs $(1.3)M prior year .
  • Quarter-end liquidity and leverage: Cash and restricted cash $261.2M; total debt $689.1M .
  • Conference call scheduling and replay details .

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