Applied Digital's revenue runs far past forecasts on tenant build-out work as rent from its AI data centers climbs

Applied Digital's revenue came in at roughly three times what analysts had expected for its latest quarter, mostly because of construction work it bills to the tenants of its AI data centers. Rent from the finished buildings, the steadier income the company is building toward, also kept climbing.

The Dallas-based data-center developer said Wednesday that revenue for its fiscal first quarter, which ended Aug. 31, rose 322% from a year earlier to $341.9 million. Analysts' consensus had been about $111 million to $116 million. Excluding ChronoScale, the cloud-computing company it controls and consolidates, adjusted revenue was $300.4 million.

On the adjusted basis the company prefers, which also leaves out ChronoScale, stock-based pay and changes in the value of some investments, Applied Digital lost $4.1 million, or 1 cent a share. Analysts had forecast a loss of 27 to 30 cents a share. Adjusted earnings before interest, taxes, depreciation and amortization were $64.4 million, against an expected $37 million or so and up from $42.4 million in the previous quarter.

Where the revenue came from

Most of the jump came from tenant fit-out services, the work of equipping data halls to a customer's specifications. That brought in $183.5 million, out of $262.6 million of revenue in the high-performance computing hosting business. The work carries thin margins: services revenue, which includes it, rose $181.8 million from a year earlier, while the cost of those services rose $186.9 million. The whole hosting segment earned $33.4 million of operating profit. Fit-out revenue depends on construction schedules, so it can swing from quarter to quarter. The company did not give a revenue forecast.

Rent is the steadier measure of the business. Base rent rose to $65.8 million from $44.1 million in the previous quarter, as more capacity at the Polaris Forge 1 campus in Ellendale, N.D., came online. Net operating income, the company's measure of rent after property costs, was $58.8 million, up from $39.9 million. The older business that hosts cryptocurrency miners was flat at $37.8 million of revenue.

The loss underneath

Under standard accounting, the net loss from continuing operations attributable to shareholders widened to $221 million, or 76 cents a share, from $18.5 million, or 7 cents, a year earlier. Interest expense rose to $77.4 million from $8 million as the company borrowed to build. Stock-based compensation rose to $66.5 million from $15.5 million, and Applied Digital took a $49.5 million loss on derivatives, mostly from a $56.1 million drop in the value of a warrant on Babcock & Wilcox stock, plus an $11.4 million loss on its Babcock & Wilcox shares.

Debt stood at $6.4 billion at the end of August, up from about $5 billion three months earlier, against $3.7 billion of cash and restricted cash. During the quarter the company sold $1.59 billion of 7% secured notes due 2031 to pay for another 150-megawatt building at Polaris Forge 1 and to repay a $300 million bridge loan.

What it has signed and built

Applied Digital has leases for about 1.41 gigawatts of computing capacity across five campuses in North Dakota, Louisiana and Alabama, worth about $36 billion over their initial terms, or about $86 billion if every renewal option is used. CoreWeave leases Polaris Forge 1; the other four campuses are leased to investment-grade hyperscale cloud companies the release does not name, three of them to the same one. The newest, a 210-megawatt, 15-year lease at Delta Forge 2, was announced in June.

Live capacity at Polaris Forge 1 reached 250 megawatts on Oct. 1, when the second half of its second building was finished. The company expects its North Dakota campuses to be delivering 300 megawatts by the end of 2026, once Polaris Forge 2 in Harwood starts operating. After the quarter ended, it signed an agreement for up to about 1 gigawatt of potential power capacity in Finland, its first step outside the U.S., and agreed to buy power from a planned gas-fired plant of about 1,200 megawatts in North Dakota being developed by Base Electron, a power producer in which it holds about 10%. ChronoScale, about 96% owned, announced plans with Microsoft for a 50-megawatt AI computing deployment in North America.

Chief Executive Wes Cummins pitched the scarcity of sites with power and local support. "We view every new restriction elsewhere as making what we already own harder to replicate," he said.

How the stock has traded

Applied Digital shares closed down 6% at $23.81 on Wednesday before the report and were up about 3% in after-hours trading at 5:29 p.m. Eastern time, while executives were discussing the results on a conference call. The stock had fallen more than 20% over the past three months and remains less than half its 52-week high of $50.73, set in late May. The company has beaten revenue estimates in each of its past four quarters, and the market's response has weakened each time, from a 22% jump after the October 2025 report to a 2.1% decline after the July one.