Core Insights - Applied Digital Inc. has shifted its focus from cryptocurrency mining hosting to artificial intelligence (AI) and high-performance computing (HPC) workloads, reflecting a strategic pivot in its business model [1][11] - The company is currently constructing its first AI data center in Ellendale, North Dakota, with plans for additional facilities, aiming to meet the growing demand for AI data center capacity [7][8] - Applied Digital's stock has experienced volatility, with a significant drop in value despite the hype surrounding AI data centers, raising questions about the company's execution and ability to secure major clients [2][11] Company Performance - For fiscal Q3 2025, Applied Digital reported an earnings per share (EPS) loss of $0.08, which was better than consensus estimates by $0.02, while revenues grew 22.1% year-over-year to $52.92 million, falling short of the expected $64.82 million [9][10] - The Data Center Hosting business generated $35.2 million, down 7% year-over-year, while the Cloud Services business saw a significant increase of 220% year-over-year to $17.8 million, although this segment is planned for sale [10] Industry Context - The demand for AI data centers is being driven by major hyperscalers like Meta, Microsoft, Amazon, Alphabet, and Oracle, all of which are investing heavily in expanding their AI data center capabilities [6][5] - AI data centers require specialized infrastructure to handle higher electrical capacities and advanced cooling solutions, differentiating them from traditional data centers [4][3] Future Outlook - Macquarie Asset Management plans to invest $5 billion to support Applied Digital's AI data center initiatives, which will help build up to 2 GW of capacity [4] - Analysts have set a 12-month stock price forecast for Applied Digital at $10.67, indicating a potential upside of 170.73% from the current price of $3.94 [9]

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Core Insights - The article highlights the strong buy rating initiated for Applied Digital Corporation (NASDAQ: APLD) due to its potential in the HPC AI data center market [1] Company Analysis - Applied Digital Corporation is positioned to become a leading provider in the high-performance computing (HPC) and artificial intelligence (AI) data center sector [1] - The stock has shown positive movement since the initiation of coverage, indicating investor interest and confidence in the company's growth potential [1] Industry Context - The focus on HPC and AI data centers reflects a growing trend in the technology sector, where demand for advanced computing solutions is increasing [1]

Financial Performance - Applied Digital (APLD) reported a third-quarter fiscal 2025 loss of 16 cents per share, which was wider than the Zacks Consensus Estimate of a loss of 11 cents, compared to earnings of 52 cents per share in the same quarter last year [1] - The company generated revenues of $52.9 million for the third quarter, reflecting a 22.1% year-over-year increase, although it missed the Zacks Consensus Estimate by 16.75% [2] - The Cloud Services business revenues increased by 220% year over year to $17.8 million, but saw a sequential decline of 35.7% due to a shift in contract models [3] Business Segments - The Data Center Hosting segment generated $35.2 million in revenues, representing a 7% year-over-year decline [3] - The High-Performance Computing (HPC) Data Center Hosting business is negotiating with multiple U.S.-based hyperscalers to lease up to 400 MW of capacity, including ongoing construction at the Ellendale HPC data center [4] Cost Management - Selling, general and administrative expenses decreased by 24.3% year over year to $22.7 million [6] - Adjusted EBITDA for the quarter was $10 million, a significant improvement from a loss of $1.3 million year over year [6] - Adjusted operating loss narrowed to $8.8 million from a loss of $23.4 million in the previous year [6] Strategic Initiatives - The board of directors approved a plan to divest the Cloud Services Business to focus on core data center operations [7] - APLD secured a $375 million financing arrangement with Sumitomo Mitsui Banking Corporation to repay outstanding debts and fund the development of new data center buildings [8] - The company maintains a strategic partnership with Macquarie Asset Management, which has the right to invest up to $5 billion for the expansion of next-generation data centers [9] Balance Sheet - As of February 28, 2025, APLD had cash, cash equivalents, and restricted cash totaling $261.2 million against a debt of $689.1 million [10]

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Core Viewpoint - Applied Digital Corp (APLD) shares fell significantly after the company reported disappointing fiscal third-quarter earnings, with revenue and adjusted EBITDA falling short of market expectations [1][2]. Financial Performance - The company reported revenue of $53 million, which was below the consensus estimate of $65 million [2]. - Adjusted EBITDA was reported at $10 million, falling short of the consensus of $18 million [2]. Future Outlook - Applied Digital indicated that it expects 200 megawatts (MW) to come online in 2026, surpassing previous expectations of 100 MW [1]. - Management suggested that the prior estimate of $1 million EBITDA per MW was conservative and expressed optimism about better lease economics starting in 2024 [3]. - The company is reportedly in discussions with major hyperscalers and smaller entities to expedite lease timelines and improve economic conditions [3]. Analyst Commentary - Analyst John Todaro reiterated a buy rating on the stock but reduced the price target from $11 to $10 following the earnings report [1]. - The company plans to divest its Cloud Services segment due to technical difficulties impacting performance [2]. Stock Performance - Following the earnings announcement, shares of Applied Digital declined by 27.19%, trading at $3.91 at the time of publication [3].

Financial Data and Key Metrics Changes - Revenues for Q3 2025 were $52.9 million, up 22% compared to the prior year [21] - Cost of revenues increased by $2.1 million to $49.1 million from the prior comparable period [23] - Net loss attributable to common stockholders was $36.1 million or $0.16 per share [24] - Adjusted net loss was $17.8 million or $0.08 per diluted share, with adjusted EBITDA increasing 878% to $10 million [25] Business Line Data and Key Metrics Changes - Data center hosting segment generated $35.2 million in revenue, while cloud services segment contributed $17.8 million [21] - Cloud services revenue declined sequentially due to a shift to an on-demand model, but technical issues have been resolved [22] Market Data and Key Metrics Changes - The company operates 286 megawatts of fully contracted data center hosting capacity, running at full capacity [9] - Bitcoin prices remain strong, positively impacting customer sentiment and business prospects [9] Company Strategy and Development Direction - The company is exploring strategic options for its cloud services business, driven by competitive dynamics and potential transition to a data center REIT structure [15][16] - Significant investments have been made, including a $5 billion potential investment from Macquarie Asset Management and a $375 million financing arrangement with Sumitomo Mitsubishi Bank [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business and its future prospects, particularly in the high-performance computing industry [9] - The company is focused on completing construction on schedule and within budget, with plans for future expansions [28] Other Important Information - The company ended Q3 with $261.2 million in cash and $689.1 million in debt [27] - Construction for the first building is expected to generate revenue in Q4 2025, with subsequent buildings planned for 2026 and 2027 [13] Q&A Session Summary Question: Update on the split between on-demand and contracted cloud services - Currently, four of six clusters are in reserve contracts, while two have moved to on-demand, generating some revenue [33] Question: Long-term fit of the BTC hosting business - BTC assets are expected to align with HPC data center capacity, allowing for dynamic load adjustments [34] Question: Impact of Macquarie and SMBC on leasing momentum - Increased interest has been noted, with improved comfort levels among potential customers due to world-class financing partners [42] Question: Expected capital needs over the next 12 to 18 months - Capital expenditures are in line with past projections, running between $30 to $50 million per month for the first building [44] Question: Status of Bitcoin hosting contracts - Approximately two years remain on existing contracts, with some risk of non-renewal [46] Question: Remaining steps to complete the L&A facility - The facility is expected to be operational by Q4 2025, with remaining expenditures primarily for finishing touches and equipment deployment [51] Question: Plans for selling the cloud business - The process has just started, with various potential structures being evaluated [56] Question: Existing hyperscalers' disposition towards data center builds - Demand remains stable, with ongoing discussions with multiple hyperscalers [64] Question: Pricing trends for data center services - Pricing has been stable over the last 90 days but has increased year-over-year [69] Question: Sale process and potential lessors' requirements - There are no hard requirements for the sale process, but it is seen as the right time to separate the cloud business [83]

Company Performance - Applied Digital Corporation reported a quarterly loss of $0.16 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.11, and an improvement from a loss of $0.52 per share a year ago [1] - The company posted revenues of $52.92 million for the quarter ended February 2025, missing the Zacks Consensus Estimate by 16.75%, but showing an increase from $43.35 million in the same quarter last year [2] - Over the last four quarters, the company has surpassed consensus EPS estimates only once [2] Stock Movement and Outlook - Applied Digital Corporation shares have declined approximately 30.8% since the beginning of the year, compared to a decline of 8.8% for the S&P 500 [3] - The company's earnings outlook is mixed, with current consensus EPS estimates at -$0.11 on revenues of $77.43 million for the upcoming quarter and -$0.96 on revenues of $252.89 million for the current fiscal year [7] Industry Context - The Financial - Miscellaneous Services industry, to which Applied Digital Corporation belongs, is currently ranked in the top 19% of over 250 Zacks industries, indicating a favorable outlook compared to lower-ranked industries [8]

Applied Digital Corporation (APLD) Q3 2025 Earnings Conference Call April 14, 2025 05:00 PM ET Company Participants Operator - Conference Call OperatorMatt Glover - Representative, Gateway GroupWes Cummings - Chairman and CEO, Applied DigitalSaidal Mohamed - CFO, Applied Digital Conference Call Participants Nick Giles - Analyst, B. Riley SecuritiesThomas Shunsky - Analyst (on behalf of Brett Knobloch, Cantor Fitzgerald)Rob Brown - Analyst, Lake Street Capital MarketsDarren Astahi - Analyst, Broad Capital Pa ...

Business Operations - As of February 28, 2025, the Data Center Hosting Business operates at full capacity with a 106 MW facility in Jamestown and a 180 MW facility in Ellendale, North Dakota[170]. - The HPC Hosting Business is constructing a 369,000-square-foot facility in Ellendale, expected to provide ultra-low cost and efficient liquid-cooled infrastructure for HPC applications[173]. - The company is negotiating leases for up to 400 MW capacity with multiple US-based hyperscalers, including the Ellendale HPC Facility under construction[175]. Financial Performance - The Cloud Services Business generated $17.8 million and $71.3 million in revenue during the three and nine months ended February 28, 2025, respectively, accounting for 34% of total revenue for the fiscal quarter[171]. - Total revenue for the three months ended February 28, 2025, was $52.9 million, a 31% increase from $40.3 million for the same period in 2024[221]. - Revenue increased by $64.6 million, or 58%, from $111.0 million for the nine months ended February 29, 2024 to $175.6 million for the nine months ended February 28, 2025[233]. Expenses and Losses - Cost of revenues increased by $2.1 million, or 4%, from $47.1 million to $49.1 million for the same comparative periods[223]. - Selling, general and administrative expenses decreased by $7.3 million, or 24%, from $30.0 million to $22.7 million for the three months ended February 28, 2025[224]. - Net loss attributable to common stockholders for the three months ended February 28, 2025, was $36.1 million, compared to a net loss of $62.8 million for the same period in 2024[219]. Adjusted Metrics - Adjusted EBITDA for the nine months ended February 28, 2025, was $51.4 million, representing 29% of revenues, compared to $19.7 million, or 16% of revenues, for the same period in 2024[220]. - Adjusted operating loss for the three months ended February 28, 2025, was $8.764 million, compared to $23.448 million for the same period in 2024, reflecting a significant improvement[263]. - Adjusted net loss attributable to common stockholders for the nine months ended February 28, 2025, was $51.976 million, compared to $33.301 million for the same period in 2024, indicating an increase in losses[263]. Debt and Financing - The company entered into a promissory note for an initial borrowing of $15 million, with subsequent borrowings of up to $110 million, and an accordion feature allowing for an additional $75 million[178]. - The company completed a private offering of 2.75% Senior Unsecured Convertible Notes due 2030, raising $450 million, with net proceeds of approximately $435.2 million after expenses[186][187]. - As of February 28, 2025, total debt obligations are projected at $871.9 million, with significant payments due in FY 2027 and beyond[286]. Regulatory and Compliance - The company is committed to maintaining compliance with evolving regulatory frameworks affecting HPC, cloud, and blockchain hosting services[167]. - The regulatory landscape for digital assets remains complex, with ongoing discussions in Congress regarding comprehensive legislation to regulate digital assets[166]. Leadership Changes - The company welcomed a new Chief Operating Officer and experienced a transition in its executive team, with significant changes in leadership roles[176][177]. Cash Flow and Liquidity - As of February 28, 2025, the company had unrestricted cash and cash equivalents of $68.7 million and a working capital deficit of $119.3 million[265]. - The company expects to have sufficient liquidity for at least the next 12 months, but may face challenges in raising additional funds[288]. Shareholder Activities - The company increased the number of authorized shares of common stock to 400 million and preferred stock to 10 million[193]. - The company has the option to sell up to $250 million of common stock to YA Fund under the Standby Equity Purchase Agreement[197]. - A private placement of 53,191 shares of Series F Convertible Preferred Stock raised $50 million, with all shares converted into approximately 7.6 million common stock shares by February 28, 2025[277].