Applied Digital's Q1 2026: Contradictions Emerge on Power Expansion, Campus Timelines, and MAM Financing

The above is the analysis of the conflicting points in this earnings call

Date of Call: October 09, 2025

Financials Results

• Revenue: $64.2M, up 84% YOY (vs $34.8M prior year)
• EPS: -$0.11 per share (GAAP); adjusted EPS -$0.03; YOY comparison not provided

Guidance:

• Tenant fit-out revenue expected to ramp significantly next quarter; work continues through calendar 2025.
• Lease income for first 100MW at Polaris Forge 1 expected to begin recognition toward end of calendar 2025.
• Project financing for PF1 (covering both buildings) targeted to complete within the fiscal quarter; ~70% LTC, blended ~SOFR+400–450 bps.
• Polaris Forge 2: first building begins coming online late 2026; campus reaches full 300MW in 2027.
• PF2 lease discussions with an investment-grade hyperscaler are in late stage/near term.
• No additional company equity expected for PF1 (funded by Macquarie + project finance).
• Long-term goal: ~$1B NOI run-rate within 5 years; 700MW under construction; 4GW active pipeline.

Business Commentary:

• Hyperscaler Contracts and Expansion:
• Applied Digital expanded its long-term lease agreements with CoreWeave, increasing the total contract value to approximately $11 billion for Polaris Forge 1.
• The company broke ground on Polaris Forge 2, initially constructing 300 megawatts of critical IT load.

• The growth is attributed to the high demand for AI infrastructure and strategic partnerships with hyperscalers.

• Financial and Project Financing:

• Applied Digital secured an initial $112.5 million draw from a $5 billion Macquarie preferred equity facility for Polaris Forge 1.
• The company is finalizing a project financing process for both buildings at Polaris Forge 1, with expected LTCs around 70% and pricing between 400 to 450 basis points over SOFR.

• These financing structures aim to optimize cost and align with project timelines.

• Pipeline and Supply Chain:

• Applied Digital has a robust multi-gigawatt pipeline with over 700 megawatts currently under construction and potential for additional projects.
• The company secured supply chain capacity for key components like transformers and generators two years ago, mitigating potential lead-time issues.

• This proactive approach ensures the company can meet its aggressive construction timelines and manage demand.

• Blockchain Hosting and Strategic Review:

• Applied Digital operates 286 megawatts of fully contracted capacity in blockchain hosting, with strong Bitcoin prices.
• The company initiated a strategic review of its cloud services business, with its financial results classified as held for sale.
• The strategic review aims to clarify the future path and potential disposition of the cloud services segment.

Sentiment Analysis:

• “Revenues…were $64.2M, up 84% YOY.” “CoreWeave…leases now cover the full 400MW…increasing the total contract value to approximately $11B.” “Secured an initial $112.5M draw from a $5B preferred equity facility with Macquarie.” “We expect a significant increase in revenue from [fit-out] next quarter…followed by…lease income…towards the end of this calendar year.” “We have…700 megawatts currently under construction.”

Q&A:

• Question from Nick Giles (B. Riley Securities): Status and scope of project financing—first 150MW or all 400MW, and key remaining factors?
  Response: Financing is being structured to cover both PF1 buildings; documents are being finalized, aiming for terms in line with peers.

• Question from Nick Giles (B. Riley Securities): Update on power and infrastructure for Polaris Forge 2 and timing?
  Response: Initial ~280MW utility power secured; site remains on track to start in 2026 and reach full capacity in 2027.

• Question from Robert Brown (Lake Street Capital Markets): Timing and likelihood for new hyperscaler commitments at new sites?
  Response: Negotiations are continuous; some deals can close in 90–120 days, with a PF2 contract expected in the near term.

• Question from Robert Brown (Lake Street Capital Markets): What limits scaling PF1 and PF2 to ~1GW each?
  Response: Transmission and broader grid generation are the constraints; power ramps will be matched to build schedules (Ellendale ~1.4GW utility power; Harwood >1GW).

• Question from Mike Grondahl (Northland Capital Markets): How does the $5B Macquarie Asset Management facility change your strategy?
  Response: It enables large-scale build-out with minimized dilution via a subsidiary structure and unlocks $20–$25B total capital when paired with project finance.

• Question from Mike Grondahl (Northland Capital Markets): Expected PF1 project financing terms?
  Response: Target ~70% LTC; mortgage piece ~SOFR+300–335 bps with cash sweep; mezz ~10%; blended ~SOFR+400–450 bps; completion targeted within the fiscal quarter.

• Question from Darren Aftahi (ROTH Capital Partners): Definition of the 4GW active pipeline?
  Response: Projects likely to enter construction within 6–12 months, alongside 700MW already under construction and first 100MW moving to operations this quarter.

• Question from Darren Aftahi (ROTH Capital Partners): Can you resource multiple sites on a ~12-month build timeline?
  Response: Yes—team and supply chain capacity are in place; can run multiple campuses in parallel, including in other states to tap distinct labor pools.

• Question from Logan Lillehaug (Craig-Hallum): Are hyperscalers requiring line of sight to ~1GW per site?
  Response: Typical ask is fast 200MW plus scalability to 1GW; some discussions involve substantially larger single-site deployments.

• Question from Logan Lillehaug (Craig-Hallum): Should PF2 lease economics mirror Ellendale?
  Response: Expect similar return spread; headline rates may differ by tenant credit, but economic spread vs cost of capital should be comparable.

• Question from Michael Donovan (Compass Point): Any changes in lead times/pricing for long-lead equipment?
  Response: Industry lead times are stretching, but APLD pre-secured manufacturing capacity two years ago, limiting its pricing and timing impact.

• Question from Michael Donovan (Compass Point): Will PF1 require additional company funding beyond Macquarie and project finance?
  Response: No; PF1 is expected to be fully funded by project financing and Macquarie.

• Question from Austin Douglas Ortiz (Needham): Any South Dakota updates and timing of power availability?
  Response: Power is available in 2026; the gating item is securing a sales tax exemption for IT equipment.

• Question from Nick Giles (B. Riley Securities): Clarify timing ('within the quarter') and demand drivers into 2027–2028?
  Response: ‘Within the fiscal quarter’; demand should favor proven developers as delays hit new entrants, shifting focus from raw power to execution credibility.