Business Context and Reporting Period
Company: Applied Digital Corp. (APLD)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended May 31, 2026
Business Overview: Applied Digital is a U.S.-based designer, developer, and operator of large-scale, purpose-built data centers engineered for high-performance computing (HPC) and artificial intelligence (AI) workloads. The company operates two reportable segments: the HPC Hosting Business and the legacy Data Center Hosting Business (crypto mining). In May 2026, the company completed the separation of its cloud business into a new public entity, ChronoScale Corporation (CHRN), which remains consolidated in Applied Digital's financial statements but is no longer a reportable segment.
Key Financial Metrics
| Metric | Fiscal 2026 | Fiscal 2025 |
|---|---|---|
| Total Revenue | $611.3 million | $228.6 million |
| Net Loss (GAAP) | $(184.3) million | $(231.1) million |
| Net Loss Attributable to Common Stockholders | $(250.3) million | $(233.7) million |
| Adjusted Operating Income (Non-GAAP) | $57.8 million | $2.4 million |
| Adjusted EBITDA (Non-GAAP) | $107.2 million | $19.6 million |
| Cash and Cash Equivalents (Unrestricted) | $1.6 billion | $44.0 million |
| Restricted Cash | $2.4 billion | $72.4 million |
| Total Debt (Long-term + Current) | ~$5.0 billion | ~$688 million |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 167% to $611.3 million, driven primarily by the commencement of operations in the HPC Hosting Business, which generated $385.3 million in revenue (including $270.6 million in services revenue and $114.7 million in rental revenue).
- Segment Performance: The HPC Hosting Business turned profitable, reporting a segment profit of $39.1 million compared to a loss of $12.1 million in the prior year. The Data Center Hosting Business reported a profit of $48.3 million, down from $63.9 million, largely due to the absence of a one-time gain on the sale of the Garden City facility in the prior year.
- Capital Structure: The company significantly expanded its debt capacity to fund construction, issuing $2.35 billion in 9.250% Senior Secured Notes due 2030 and $2.15 billion in 6.750% Senior Secured Notes due 2031. Total long-term debt increased from $677.8 million to $4.96 billion.
- Equity Transactions: The company raised approximately $196.4 million through an At-the-Market (ATM) sales agreement and $815.0 million through the issuance of Series G Convertible Preferred Stock (all of which was subsequently converted to common stock).
- Non-GAAP Improvements: Adjusted Operating Income improved significantly to $57.8 million (11% margin) from $2.4 million (2% margin), reflecting the scaling of the HPC business and the exclusion of ChronoScale results and non-recurring items.
Guidance, Outlook, and Risks
Outlook and Pipeline:
- Contracted Portfolio: As of May 31, 2026, the company has executed long-term leases representing approximately 1,410 MW of contracted critical IT load across five campuses, totaling approximately $36.2 billion in contracted revenue over the initial 15-year base terms.
- Development Pipeline: The company has an active development pipeline of over 3 GW of utility power and an extended pipeline of more than 5 GW. Key projects include Polaris Forge 1 (North Dakota), Polaris Forge 2 (North Dakota), Delta Forge 1 (Southern U.S.), Polaris Forge 3, and Delta Forge 2.
- Liquidity: Management believes existing cash balances ($4.15 billion total cash including restricted), cash flows from operations, and access to capital markets provide sufficient liquidity for at least the next 12 months.
Key Risks and Contingencies:
- Customer Concentration: The HPC Hosting Business relies heavily on a single customer (CoreWeave), which accounted for 59% of total revenue from continuing operations in Fiscal 2026. The Data Center Hosting Business relies on a single crypto mining customer.
- Construction and Execution Risk: Delays in construction, permitting, or utility interconnection could result in missed revenue targets and potential lease terminations.
- Debt Service: The company carries significant debt obligations with restrictive covenants. Failure to meet debt service obligations or covenants could result in an event of default.
- Regulatory Environment: The company faces evolving regulations regarding AI, energy usage, and data center development, which could impact operations and costs.
- ChronoScale Consolidation: The company consolidates ChronoScale, and any delays or issues in ChronoScale's financial reporting could impact Applied Digital's consolidated filings.
Investor Verification Checklist
- Construction Progress: Verify the status of the Polaris Forge and Delta Forge campuses against the "Expected Delivery" dates listed in the contracted lease portfolio table.
- Customer Diversification: Monitor the execution of leases with the "investment-grade hyperscalers" mentioned for Polaris Forge 2, Delta Forge 1, Polaris Forge 3, and Delta Forge 2 to assess reduction in reliance on CoreWeave.
- Debt Covenants: Review the specific financial covenants in the 2030 and 2031 Senior Secured Notes indentures and the 2026 Revolving Credit Facility to ensure compliance.
- ChronoScale Performance: Track the standalone performance of ChronoScale (ticker: CHRN) and the status of its divestiture of the Legacy Ekso business, as this impacts the consolidated results.
- Power Availability: Confirm the execution of utility power agreements for the active and extended pipelines, as power availability is cited as a primary constraint on growth.