Applied Digital Corporation Q2 FY26 Earnings Analysis

- Revenues expected to ramp significantly over the next 12 months as two 150-megawatt buildings come online (Page 2). - Total contracted lease revenue currently approximately $16 billion, with goals to grow total contract value targeting 70% investment grade tenants (Page 7). - Marketing four new development sites totaling approximately 1 gigawatt of grid power capacity, with some sites in advanced negotiation stages (Page 2). - Long-term vision to build a dominant data center region in the Dakotas with multiple hyperscalers and expand strategically across the U.S. (Page 4). - Goal to reach and exceed $1 billion of NOI within 5 years, with new internal leadership targets set at $1 billion and $2 billion NOI levels (Page 4). - Growth driven by scaling platform, expanding campuses, and diversifying customers (Pages 4, 7). - Expectation of adding over 5 gigawatts of critical IT load across campuses over time (Page 7).

- Applied Digital expects significant revenue ramp as new 150-megawatt buildings come online over the next 12 months (Page 2). - The company aims to exceed its long-term goal of $1 billion in Net Operating Income (NOI) within 5 years and set internal targets at $1 billion and $2 billion NOI levels (Page 4). - Management anticipates refinancing down cost of capital over time as they shift from project finance loans to lower-rate ABS or equivalent markets, unlocking shareholder value (Page 4). - CFO Saidal Mohmand mentioned that once construction risk is removed (within 5 years), the firm expects to maintain a prudent capital structure with a leverage ratio of 5 to 6 times NOI, supporting profitable growth (Page 11). - Adjusted net income was positive $33.2 million this quarter, indicating improving profitability (Page 3). - Management expects continued leasing activity and operational expansion across multiple campuses to support earnings growth (Pages 2, 4).

- Base Electron investment: Applied Digital supports Base Electron, an independent power producer building ~1.2 GW natural gas-fired capacity in the Dakotas to supply grid power, expanding data center capacity with reduced risk for Applied Digital shareholders (p.4, p.10-11). - Development of multiple data center campuses: Continuing construction of Polaris Forge 1 and 2 campuses with new buildings (100 MW operating, 2x150 MW in progress at PF1; 200 MW at PF2), plus Delta Forge 1 (300 MW AI factory campus, operational mid-2027) and marketing 4 new sites including 2 unnamed states plus one in North Dakota and Delta Forge 1 in Southern US (p.2, p.4). - Power infrastructure buildout, including substations and transmission, essential for project completion and note financing release (p.10). - Financing strategy: Planned shift from project finance loans to asset-backed securities to lower cost of capital and unlock shareholder value over 5 years (p.4, p.11).

- Applied Digital has completed the majority of equity and debt financing for its first two campuses. - In March, they disclosed a $2.15 billion private offering of 6.75% senior secured notes due 2031 to support 200 MW at Polaris Forge 2. - There is one remaining tranche of debt to place for the final 150 MW building at Polaris Forge 2. - They have access to $4.1 billion in preferred equity from Macquarie Asset Management following an executed lease with an investment-grade hyperscaler. - The company plans to follow a similar approach for debt financing in future projects. - Base Electron, the independent power producer, is raising at least $50 million in financing or planning an IPO; Applied Digital's guarantee on this project ends after that. - Future refinancing is expected to shift from project finance loans into ABS or equivalent markets at lower rates to reduce cost of capital over time.

- Applied Digital has approximately $16 billion in contracted lease revenue. - Current contracted customers include CoreWeave ($11 billion) and an investment-grade hyperscaler ($5 billion). - The company is actively marketing 4 development sites (including Delta Forge 1 and others) with about 1 gigawatt of total grid power capacity in various negotiation stages. - There are 3 sites currently in exclusivity with a hyperscaler, representing about 900 megawatts. - Additional 100 megawatts at Polaris Forge 2 (PF2) remain uncontracted but are expected to be contracted in the near term. - The focus is on obtaining the right customer and contracts rather than rushing for announcements. - The goal is to increase total contract value with 70% investment-grade and 30% other contracts. - Long-term target includes scaling up to 5+ gigawatts of critical IT load across campuses.