Applied Digital Surges on AI Data Center Growth
Key Points
- Applied Digital’s quarterly revenue jumped 250% to $126.6 million, far above forecasts.
- Long-term AI data center leases now total 600 MW and about $16 billion in prospective revenue.
- Wall Street firms have tagged Applied Digital as a top pick for 2026 with an Outperform rating.
- The company plans to spin off its cloud unit into ChronoScale to focus on AI infrastructure.
Revenue Triples as AI Infrastructure Demand Accelerates
Applied Digital Corp reported fiscal second quarter 2026 revenue of $126.6 million for the period ended November 30, 2025, a 250% increase from $36.2 million a year earlier. The figure easily exceeded analyst estimates that ranged around $86.67 million to $110.3 million. Adjusted earnings per share were breakeven, beating expectations for a loss, while adjusted EBITDA rose to $20.2 million from $6.1 million in the prior-year quarter. The company attributed the surge primarily to its High-Performance Computing (HPC) Hosting Business, which generated $85 million in revenue, including $73 million from tenant fit-out services and $12 million from rental revenue as the first building at its Polaris Forge 1 campus became fully operational. Its legacy Data Center Hosting Business, focused on crypto mining customers, contributed $41.6 million, up 15% year over year, supported by performance improvements at facilities in Jamestown and Ellendale, North Dakota.
Hyperscaler Leases Build Multi-Billion-Dollar Revenue Pipeline
Applied Digital has secured large, long-term contracts that underpin its growth outlook. At Polaris Forge 1, the company has a 400 MW agreement with CoreWeave, representing approximately $11 billion in prospective lease revenue over the term of the leases. At the under-construction Polaris Forge 2 campus near Harwood, North Dakota, it signed an approximately 15-year lease with a U.S.-based investment-grade hyperscaler for 200 MW of AI and HPC capacity, expected to deliver about $5 billion in revenue. Collectively, these agreements bring total leased capacity to 600 MW and aggregate prospective lease revenue to roughly $16 billion before any renewal options. Management said Polaris Forge 1 reached Ready-for-Service during the quarter, delivering 100 MW on schedule and fully energizing the first building, while additional 150 MW facilities at the campus are planned for 2026 and 2027. Applied Digital noted that it is in advanced discussions with another investment-grade hyperscaler for multiple sites totaling 900 MW across the Dakotas and select southern U.S. markets.
Financing, Liquidity and Strategic Partnerships
To support its AI-focused buildout, Applied Digital has assembled a substantial financing framework. During and shortly after the quarter, it drew a total of $900 million from a preferred equity facility with Macquarie Asset Management, part of an arrangement that can provide up to $5.0 billion, with $4.1 billion of preferred equity capacity remaining subject to mutual agreement. The company also completed a $2.35 billion private offering of 9.25% senior secured notes due 2030, issued at 97% of par, with proceeds directed to construction at Polaris Forge 1, repayment of an SMBC loan, and debt service reserves. As of November 30, 2025, Applied Digital reported approximately $2.3 billion in cash, cash equivalents, and restricted cash, $5.2 billion in total assets, and $2.6 billion in debt, with most maturities not due until 2030. Management said this liquidity provides flexibility to complete construction, bring assets online, and generate cash flow to refinance and pay down debt.
Cloud Spinout and ChronoScale Strategy
Applied Digital is reshaping its corporate structure around dedicated AI infrastructure. The company has agreed to spin out its cloud computing business, Applied Digital Cloud, and combine it with Ekso Bionics Holdings to form ChronoScale, an accelerated compute platform focused on GPU-optimized AI workloads. Under the proposed business combination, Applied Digital expects to retain over 80% ownership of the combined entity, with one article citing a 97% stake as the company moves toward a data center real estate investment trust model. Management said separating the accelerated compute platform from the data center ownership and development business is intended to allow each to scale independently, with greater strategic and capital flexibility and distinct growth trajectories. On its earnings call, Applied Digital’s CEO said ChronoScale will benefit from access to the company’s large-scale data center facilities, which is important for deploying GPU-based accelerated compute and attracting customers.
Wall Street Views and Operational Outlook
Analysts have responded positively to Applied Digital’s positioning in the AI infrastructure market. On December 30, Northland reiterated an Outperform rating and $40 price target, naming the stock a top pick for 2026. The firm cited the company’s ability to execute projects on schedule, continued power demand from hyperscalers, and a strong pipeline of power assets as reasons it is strategically placed to outperform peers. Following the latest results, Applied Digital’s shares rose between about 4.8% and 7% in after-hours and extended trading. Management emphasized that the Dakotas offer a compelling region for hyperscalers due to cool climate and abundant energy, and highlighted a first-mover advantage combined with experience in technically complex data center construction. The company also reported investments in technologies such as direct-to-chip liquid cooling and power and thermal infrastructure, and said strong demand and improved contract terms, including non-cancelable 15-year agreements with make-whole provisions, are supporting its long-term development plans.
Key Takeaways
- Applied Digital’s growth is being driven by hyperscaler demand for AI-ready data centers, with multi-year leases providing long-term revenue visibility.
- A large, structured financing platform with Macquarie and a major notes offering underpins the company’s aggressive buildout of Polaris Forge campuses.
- The planned ChronoScale spinout signals a clearer separation between infrastructure ownership and cloud compute services, aligning each business with distinct capital needs and strategies.
References
- 1. https://finance.yahoo.com/news/wall-street-thinks-applied-digital-063156500.html
- 2. https://finviz.com/news/269910/td-cowen-lifts-aflac-afl-target-holds-neutral-view
- 3. https://finance.yahoo.com/news/accenture-acn-strengthens-big-data-063227805.html
- 4. https://finance.yahoo.com/news/evercore-isi-reaffirms-outperform-oracle-063219495.html
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