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Applied Digital Q3 Loss Wider Than Expected, Revenues Rise Y/Y
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Key Takeaways
Applied Digital posted a wider Q3 loss of 36 cents per share, missing estimates despite strong revenue growth.
APLD revenues jumped 139.3% to $126.6M, driven by HPC tenant services and data center hosting growth.
Applied Digital sees a strong outlook with 600 MW under contract, targeting $1B NOI and capacity expansion.
Applied Digital (APLD - Free Report) reported a loss of 36 cents per share in the third quarter of fiscal 2026, a deterioration from a loss of 16 cents registered in the year-ago quarter. The figure missed the Zacks Consensus Estimate by 260%.
Revenues soared 139.3% year over year to $126.6 million, driven by the ramp-up of HPC tenant fit-out services at Polaris Forge 1 and continued growth in the Data Center Hosting Business. The figure beat the Zacks Consensus Estimate by 68.73%.
APLD’s Segment Performance
The Data Center Hosting Business generated $37.5 million in revenues, up 7% year over year, with both Jamestown (106 MW) and Ellendale (180 MW) operating at full capacity as of Feb. 28. The segment generated approximately $13.9 million in operating profit during the quarter, operating on an asset base of $119.6 million, demonstrating strong operational efficiency.
The HPC Hosting Business contributed $71 million in revenues during the quarter. This included approximately $18.9 million from tenant fit-out services for CoreWeave at Polaris Forge 1, $44.1 million related to base rent, and $8.1 million related to power pass-through arrangements and other ancillary revenue streams. The segment generated an operating profit of $17.6 million.
The company plans to merge its Cloud Services Business with EKSO Bionics Holdings to form ChronoScale Corporation, of which Applied Digital will retain approximately 97% ownership upon closing. Reflecting this, the company consolidated cloud revenues of $18.1 million for the quarter. However, the segment reported a loss of $52.2 million, which included a $59.7 million non-cash write-down following the reclassification of the Cloud Services Business from held-for-sale.
APLD’s Operating Details
Cost of revenues jumped 48% year over year to $72.8 million, primarily reflecting $18 million associated with tenant fit-out services for the HPC Hosting Business and increased energy costs for the Data Center Hosting Business.
Selling, general and administrative expenses surged 251% year over year to $79.7 million. The increase was driven by $39.3 million in stock-based compensation due to accelerated vesting of certain employee stock awards, $8.6 million in professional services primarily related to legal work on discrete transactions and $5.1 million in personnel expenses to support business growth.
Interest expense (income) was interest income, net of $2.4 million, compared with net interest expense of $8.9 million in the year-ago quarter, reflecting a 127% year-over-year decline. The decline was primarily due to an increase of $19.3 million in interest income, driven by higher funds held in interest-bearing demand deposit accounts, and a $3.0 million decrease in finance lease interest associated with the renegotiation of the majority of finance leases during the three months ended Feb. 28, 2026.
The company recognized a $9.4 million gain on the change in fair value of derivatives, comprising a $6.1 million increase on its Babcock & Wilcox common stock warrant and a $3.3 million gain on derivative assets related to preferred units. It recorded a $3.3 million gain on the change in fair value of investments, reflecting a $1.3 million increase in the fair value of its B&W common stock position and a $2.0 million rise in the fair value of its investment in Base Electron, a related party. None of these non-cash gains were present in the year-ago quarter.
APLD’s Balance Sheet and Cash Flows
As of Feb. 28, Applied Digital held cash, cash equivalents and restricted cash of approximately $2.1 billion compared with $2.3 million as of Nov. 30. Total debt stood at approximately $2.7 billion compared with $2.6 million at the end of the second quarter of fiscal 2026. During the quarter, the company entered into a $100 million DevCo Facility with Macquarie Equipment Capital to fund initial development and construction costs for new data center projects.
Operating cash flow was negative $42.9 million for the nine months ended Feb. 28, 2026, reflecting construction scaling and early-stage HPC activity.
APLD Offers Positive Outlook
Applied Digital provided updates reflecting strong growth expectations for its data center portfolio. The company now has 600 MW under contract with two hyperscalers across Polaris Forge 1 and Polaris Forge 2, representing approximately $16 billion in prospective lease revenues over 15 years.
Lease revenues are expected to ramp significantly over the coming quarters as the second 150 MW building at Polaris Forge 1 comes online in mid-2026 and the third 150 MW building follows in 2027. Initial capacity at Polaris Forge 2 is anticipated in 2026, with full build-out expected in 2027.
The company is in advanced discussions with another investment-grade hyperscaler covering approximately 900 MW across three sites in the Dakota and select southern U.S. markets. APLD expects to begin construction on at least one new campus by the end of January 2026, supported by a $100 million development loan facility secured after quarter-end.
Applied Digital anticipates exceeding its long-term goal of $1 billion in NOI within five years. The company plans to spin out its Cloud Services Business and merge it with EKSO Bionics to form ChronoScale, with closing expected in the first half of 2026, and Applied Digital retaining more than 85% ownership.
APLD’s Zacks Rank & Stocks to Consider
Currently, Applied Digital has a Zacks Rank #5 (Strong Sell).
Shares of HSBC have appreciated 36.9% in the past six months. The Zacks Consensus Estimate for HSBC’s 2026 EPS is pegged at $8.12, up by 17 cents over the past 30 days.
Shares of Ameris Bancorp have gained 15.5% in the past six months. The Zacks Consensus Estimate for ABCB’s 2026 EPS is pegged at $6.50, up by 2 cents over the past 30 days.
Shares of American Integrity Insurance Group have lost 18.9% in the past six months. The Zacks Consensus Estimate for AII’s 2026 EPS is pegged at $2.73, unchanged over the past 30 days.
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Applied Digital Q3 Loss Wider Than Expected, Revenues Rise Y/Y
Key Takeaways
Applied Digital (APLD - Free Report) reported a loss of 36 cents per share in the third quarter of fiscal 2026, a deterioration from a loss of 16 cents registered in the year-ago quarter. The figure missed the Zacks Consensus Estimate by 260%.
Revenues soared 139.3% year over year to $126.6 million, driven by the ramp-up of HPC tenant fit-out services at Polaris Forge 1 and continued growth in the Data Center Hosting Business. The figure beat the Zacks Consensus Estimate by 68.73%.
APLD’s Segment Performance
The Data Center Hosting Business generated $37.5 million in revenues, up 7% year over year, with both Jamestown (106 MW) and Ellendale (180 MW) operating at full capacity as of Feb. 28. The segment generated approximately $13.9 million in operating profit during the quarter, operating on an asset base of $119.6 million, demonstrating strong operational efficiency.
The HPC Hosting Business contributed $71 million in revenues during the quarter. This included approximately $18.9 million from tenant fit-out services for CoreWeave at Polaris Forge 1, $44.1 million related to base rent, and $8.1 million related to power pass-through arrangements and other ancillary revenue streams. The segment generated an operating profit of $17.6 million.
Applied Digital Price and Consensus
Applied Digital Corporation price-consensus-chart | Applied Digital Corporation Quote
The company plans to merge its Cloud Services Business with EKSO Bionics Holdings to form ChronoScale Corporation, of which Applied Digital will retain approximately 97% ownership upon closing. Reflecting this, the company consolidated cloud revenues of $18.1 million for the quarter. However, the segment reported a loss of $52.2 million, which included a $59.7 million non-cash write-down following the reclassification of the Cloud Services Business from held-for-sale.
APLD’s Operating Details
Cost of revenues jumped 48% year over year to $72.8 million, primarily reflecting $18 million associated with tenant fit-out services for the HPC Hosting Business and increased energy costs for the Data Center Hosting Business.
Selling, general and administrative expenses surged 251% year over year to $79.7 million. The increase was driven by $39.3 million in stock-based compensation due to accelerated vesting of certain employee stock awards, $8.6 million in professional services primarily related to legal work on discrete transactions and $5.1 million in personnel expenses to support business growth.
Interest expense (income) was interest income, net of $2.4 million, compared with net interest expense of $8.9 million in the year-ago quarter, reflecting a 127% year-over-year decline. The decline was primarily due to an increase of $19.3 million in interest income, driven by higher funds held in interest-bearing demand deposit accounts, and a $3.0 million decrease in finance lease interest associated with the renegotiation of the majority of finance leases during the three months ended Feb. 28, 2026.
The company recognized a $9.4 million gain on the change in fair value of derivatives, comprising a $6.1 million increase on its Babcock & Wilcox common stock warrant and a $3.3 million gain on derivative assets related to preferred units. It recorded a $3.3 million gain on the change in fair value of investments, reflecting a $1.3 million increase in the fair value of its B&W common stock position and a $2.0 million rise in the fair value of its investment in Base Electron, a related party. None of these non-cash gains were present in the year-ago quarter.
APLD’s Balance Sheet and Cash Flows
As of Feb. 28, Applied Digital held cash, cash equivalents and restricted cash of approximately $2.1 billion compared with $2.3 million as of Nov. 30. Total debt stood at approximately $2.7 billion compared with $2.6 million at the end of the second quarter of fiscal 2026. During the quarter, the company entered into a $100 million DevCo Facility with Macquarie Equipment Capital to fund initial development and construction costs for new data center projects.
Operating cash flow was negative $42.9 million for the nine months ended Feb. 28, 2026, reflecting construction scaling and early-stage HPC activity.
APLD Offers Positive Outlook
Applied Digital provided updates reflecting strong growth expectations for its data center portfolio. The company now has 600 MW under contract with two hyperscalers across Polaris Forge 1 and Polaris Forge 2, representing approximately $16 billion in prospective lease revenues over 15 years.
Lease revenues are expected to ramp significantly over the coming quarters as the second 150 MW building at Polaris Forge 1 comes online in mid-2026 and the third 150 MW building follows in 2027. Initial capacity at Polaris Forge 2 is anticipated in 2026, with full build-out expected in 2027.
The company is in advanced discussions with another investment-grade hyperscaler covering approximately 900 MW across three sites in the Dakota and select southern U.S. markets. APLD expects to begin construction on at least one new campus by the end of January 2026, supported by a $100 million development loan facility secured after quarter-end.
Applied Digital anticipates exceeding its long-term goal of $1 billion in NOI within five years. The company plans to spin out its Cloud Services Business and merge it with EKSO Bionics to form ChronoScale, with closing expected in the first half of 2026, and Applied Digital retaining more than 85% ownership.
APLD’s Zacks Rank & Stocks to Consider
Currently, Applied Digital has a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the broader Finance sector are HSBC (HSBC - Free Report) , Ameris Bancorp (ABCB - Free Report) and American Integrity Insurance Group (AII - Free Report) .
While HSBC currently sports a Zacks Rank #1 (Strong Buy), Ameris Bancorp and American Integrity Insurance Group carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of HSBC have appreciated 36.9% in the past six months. The Zacks Consensus Estimate for HSBC’s 2026 EPS is pegged at $8.12, up by 17 cents over the past 30 days.
Shares of Ameris Bancorp have gained 15.5% in the past six months. The Zacks Consensus Estimate for ABCB’s 2026 EPS is pegged at $6.50, up by 2 cents over the past 30 days.
Shares of American Integrity Insurance Group have lost 18.9% in the past six months. The Zacks Consensus Estimate for AII’s 2026 EPS is pegged at $2.73, unchanged over the past 30 days.