Core Insights - Applied Digital reported strong financial results for the fiscal second quarter of 2025, with revenues of $63.9 million, representing a 51% increase year-over-year, driven by growth in cloud services and data center hosting segments [13][14] - The company announced a strategic partnership with Macquarie Asset Management, which includes a $5 billion perpetual preferred equity financing facility, aimed at supporting the development of its high-performance computing (HPC) data center campus in Ellendale, North Dakota [9][10] - The demand for data center capacity is expected to grow significantly, with a projected shortfall of approximately 36 gigawatts in power available for U.S. data centers by 2028, positioning Applied Digital favorably to capitalize on this trend [18][19] Financial Performance - Revenues for the fiscal second quarter were $63.9 million, up from the previous year, with the Data Center Hosting segment generating $36.2 million and the Cloud Services segment contributing $27.7 million [13] - Cost of revenues increased to $52.4 million, primarily due to the growth in business operations [14] - The net loss attributable to common stockholders was $138.7 million, influenced by a loss on the conversion of debt and changes in fair value [15][16] Business Developments - The company has 286 megawatts of data center capacity for cryptocurrency clients, fully contracted and operating at full capacity [4] - Applied Digital is constructing a 400-megawatt campus in Ellendale, North Dakota, with a significant milestone reached in December 2024 [5][6] - The partnership with Macquarie will allocate up to $900 million for the Ellendale campus and provide the right of first refusal for an additional $4.1 billion for future projects [10][11] Market Positioning - Applied Digital aims to establish itself as a leader in the Tier 3 data center infrastructure sector, leveraging its strategic partnerships to enhance its market position [12][19] - The company is well-positioned to meet the growing demand for high-performance computing and AI applications, with ongoing evaluations of new opportunities in its pipeline [5][19] - The strategic investments from Macquarie and others validate the company's vision and approach, lowering the cost of capital and accelerating development [19]

Core Insights - Applied Digital reported a significant revenue growth of 67% to $60.7 million for the fiscal first quarter 2025, driven by cloud services and data center hosting segments [9][10] - The company is in advanced discussions for a lease with a US-based hyperscaler for its Ellendale HPC campus, which is expected to start with an initial capacity of 100 megawatts, with plans for future expansion [5][19] - The balance sheet has improved significantly due to strategic investments, with cash and equivalents totaling $86.6 million and shareholders' equity nearly doubling to $241.8 million [10][11] Business Developments - Construction of the Ellendale HPC campus is on schedule, with plans to expand capacity to 400 megawatts [5][12] - The data center hosting business currently operates at full capacity with 286 megawatts dedicated to cryptocurrency clients [6] - The cloud services segment is experiencing growth, with six clusters online and plans to deploy additional clusters in the second half of fiscal year 2025 [6][7] Financial Performance - The adjusted EBITDA for the quarter increased to $20 million, while the adjusted net loss was $21.6 million, or $0.15 per share [10] - Depreciation and amortization expenses rose significantly to $34.4 million, impacting overall costs [9] - The company incurred $4.1 million in expenses for facilities not yet generating revenue, which are expected to offset costs in the future [10] Market Position and Strategy - The company aims to become a leading platform for building and operating multiple HPC data centers at scale, capitalizing on rising demand from hyperscalers [14][15] - Recent investments and strategic partnerships are expected to enhance market visibility and support growth initiatives [5][15] - The company is exploring opportunities for heat recirculation in its facilities, potentially collaborating with agricultural sectors to utilize waste heat [48]

Core Insights - Applied Digital has experienced significant stock performance, with shares increasing approximately 250% over the past year, driven by strong revenue growth and advanced discussions with hyperscalers for data center capacity [1][2][8] Company Overview - Applied Digital operates as a specialized real estate company focused on AI infrastructure, recently announcing a spin-off of its cloud computing business to merge with EKSO Bionics, forming a new entity called ChronoScale [3] - The company builds and operates data centers specifically designed for AI workloads, leveraging its historical experience in Bitcoin mining to secure access to low-cost power [4] Financial Performance - In fiscal Q2, Applied Digital reported a revenue increase of 250% to $126.6 million, with the high-performance computing (HPC) segment contributing $85 million, primarily from tenant fit-out services [5] - The data center hosting business saw a 15% revenue growth to $41.6 million, with an operating income of $16 million [6] - Adjusted net income was reported at $0.1 million, with adjusted EBITDA rising to $20.2 million from $6.1 million year-over-year [7] Growth Prospects - The company is in advanced discussions for 900 megawatts of power across multiple sites, which is expected to drive future growth [8] - Current HPC capacity is at 100 megawatts, with plans to expand to 400 megawatts for CoreWeave by the end of 2027, and an additional 200 megawatts commitment from another customer [9] - Financing is in place for these projects, which are anticipated to yield significant growth if returns and operating leverage are demonstrated [10]

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]

Financial Data and Key Metrics Changes - Revenues for Q3 2025 were $52.9 million, up 22% compared to the prior year, driven by growth in the cloud services business due to additional GPU clusters [21] - Cost of revenues increased by $2.1 million to $49.1 million, primarily due to business growth and additional services provided [23] - Net loss attributable to common stockholders was $36.1 million, or $0.16 per share, while adjusted net loss was $17.8 million, or $0.08 per diluted share [24][25] - Adjusted EBITDA increased by 878% to $10 million [25] - The company ended the quarter with $261.2 million in cash and $689.1 million in debt [27] Business Line Data and Key Metrics Changes - Data center hosting segment generated $35.2 million in revenue, while cloud services contributed $17.8 million [21] - Cloud services revenue declined sequentially due to a shift to an on-demand model, which caused technical hurdles that have since 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] - The Ellendale campus is viewed as a strategic asset with significant expansion opportunities beyond the initial 400 megawatts of critical IT load [12] Company Strategy and Development Direction - The company is exploring strategic options for its cloud services business, driven by customer perceptions of competition and potential transition to a data center REIT structure [15][16] - The construction of the first building at the Ellendale campus is on schedule, expected to generate revenue in Q4 2025, with additional buildings planned for 2026 and 2027 [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business due to strong Bitcoin prices and ongoing discussions with financial institutions for leasing opportunities [9][11] - The company remains confident in its growth trajectory and the positive trends across its business [17] Other Important Information - The company has deployed nearly $1 billion in assets over the past year, focusing on data center construction [18] - The high cost of capital remains a challenge, but recent financing arrangements have strengthened the company's financial position [19][20] Q&A Session Summary Question: Update on the split between on-demand and contracted for cloud services - Four of the six clusters remain in reserve contracts, while two have moved to on-demand, generating small revenue [33] Question: Long-term fit of the BTC hosting business - BTC assets are expected to fit into a restructure, with a long-term match between HPC data center capacity and Bitcoin hosting capacity [34] Question: Impact of Macquarie and SMBC on leasing momentum - Increased interest has been noted, with improved comfort levels regarding construction and operational capabilities [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 a month for the first building [44] Question: Status of Bitcoin hosting contracts - Approximately two years remain on the contracts, with some risk of non-renewal [46] Question: Remaining steps to complete the Ellendale facility - The facility is expected to be operational by Q4 2025, with remaining CapEx focused on finishing touches and backup power systems [51] Question: Plans for selling the cloud business - The process has just started, with no specific updates or expectations provided at this time [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' views - There are no hard requirements from potential lessors regarding the sale process [83]