Business Context and Reporting Period
Applied Digital Corp. (APLD) is a designer, builder, and operator of high-performance data centers for AI, cloud, and blockchain workloads. This Form 10-Q covers the quarterly period ended November 30, 2025. The Company operates two primary segments: Data Center Hosting (crypto mining) and HPC Hosting (AI/Cloud). The Cloud Services Business was classified as discontinued operations during the prior fiscal quarter.
Key Financial Metrics
| Metric | Three Months Ended Nov 30, 2025 | Six Months Ended Nov 30, 2025 |
|---|---|---|
| Total Revenue | $126.6 million | $190.8 million |
| Net Loss (GAAP) | $(14.5) million | $(31.4) million |
| Net Loss Attributable to Common Stockholders | $(19.1) million | $(37.6) million |
| Operating Loss | $(31.0) million | $(53.2) million |
| Adjusted EBITDA | $20.2 million | $20.7 million |
| Cash and Cash Equivalents | $1.91 billion | $1.91 billion |
| Restricted Cash | $205.1 million | $205.1 million |
| Total Debt (Long-term + Current) | $2.61 billion | $2.61 billion |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 250% year-over-year for the quarter (from $36.2M to $126.6M) and 176% for the six-month period. Growth was driven by the HPC Hosting segment, specifically tenant fit-out services and rental revenue from the newly energized ELN-02 facility at Polaris Forge 1.
- Cost Structure: Cost of revenues increased 344% year-over-year for the quarter, primarily due to $69.5M in tenant fit-out expenses for HPC projects. SG&A expenses rose 119% due to increased stock-based compensation ($23.8M increase) and professional services.
- Discontinued Operations: The Cloud Services Business, previously a loss driver, generated a net income of $12.1M for the quarter and $21.4M for the six months, compared to losses in the prior year.
- Financing Activity: The Company significantly expanded its balance sheet, raising $2.35 billion via a Senior Secured Notes offering in November 2025 and $562.5 million through a joint venture with Macquarie Asset Management (MAM). This resulted in a net increase in cash of $2.17 billion over the six-month period.
Guidance, Outlook, and Risks
- Outlook: Management expects sufficient liquidity to meet obligations for at least the next 12 months. Construction continues on Polaris Forge 1 (400MW total capacity) and Polaris Forge 2 (200MW initial capacity).
- Recent Developments:
- Entered a non-binding term sheet to combine the Cloud Services Business with EKSO Bionics to form "ChronoScale Corporation."
- Secured a $65 million revolving credit facility (undrawn as of period end).
- Granted significant equity awards (4.5M PSUs, 1.5M RSUs) to CEO Wes Cummins in January 2026.
- Risks:
- Legal Proceedings: A putative securities class action lawsuit remains stayed pending a motion to dismiss; a derivative lawsuit was dismissed without prejudice.
- Regulatory: Evolving regulations regarding AI energy usage and transparency (e.g., California's Transparency in Frontier AI Act, EU AI Act).
- Construction & Execution: Risks related to completing HPC facilities on time and securing power/permits.
Investor Verification Checklist
- Debt Covenants: Verify compliance with the new 9.25% Senior Secured Notes indenture, specifically regarding restricted payments and additional indebtedness.
- Joint Venture Terms: Review the Amended and Restated Unit Purchase Agreement with MAM regarding the 12.75% dividend rate on preferred units and the 1.80x liquidation preference.
- Discontinued Operations Sale: Monitor the progress of the proposed business combination for the Cloud Services Business with EKSO Bionics.
- Stock-Based Compensation: Assess the impact of the significant increase in stock-based compensation ($44.6M for six months) on future dilution and cash flow.
- Capital Expenditures: Confirm the burn rate for the $818.5M in investing cash outflows and the timeline for revenue recognition from new HPC facilities.