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Applied Digital Q1 Earnings Miss on Higher Costs, Revenues Beat
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Key Takeaways
Applied Digital's Q1 revenues jumped 322%, but higher costs and interest expense widened its loss.
APLD's HPC Hosting generated $262.6M in revenues, led by $183.5M from tenant fit-out services.
Applied Digital had 1.41 GW under lease across five campuses, representing $36B in contracted revenues.
Applied Digital Corporation (APLD - Free Report) reported a first-quarter fiscal 2027 loss from continuing operations of 76 cents per share, wider than the 7-cent loss a year ago. The figure missed the Zacks Consensus Estimate of a 26-cent loss by 192.3%, as higher operating costs, interest expense and fair-value losses pressured results.
Revenues rose 322% year over year to $341.9 million, beating the $134 million consensus by 154.95%. High-performance computing (HPC) tenant fit-out services and new rental revenue led growth. APLD had 1.41 GW of critical IT load under lease across five campuses, representing $36 billion of base-term contracted revenues.
APLD's Q1 HPC Hosting Powers Revenue Growth
The HPC Hosting Business generated $262.6 million in revenues, including $183.5 million from tenant fit-out services, $65.8 million of base rent and $13.3 million from tenant recoveries. Segment operating profit was $33.4 million for the quarter.
Phase 1 of Building 2 at Polaris Forge 1, representing 75 MW, became ready for service on July 1, lifting live capacity at the campus to 175 MW. A second 75 MW phase became ready on Oct. 1, after quarter-end, taking live capacity to 250 MW.
Applied Digital Corporation Price, Consensus and EPS Surprise
Applied Digital's Q1 Hosting Business Holds Steady
The Data Center Hosting Business generated $37.8 million in revenues compared with $37.9 million a year earlier. The 106 MW Jamestown facility and 180 MW Ellendale facility were operating at full capacity as of Aug. 31.
Segment operating profit rose 121% year over year to $13.3 million, primarily reflecting lower cost of revenues from more advantageous power pricing. Reported assets for the business totaled $111.9 million at quarter-end.
APLD's Q1 Cost Base Weighs on Profitability
Services cost of revenues increased 318% year over year to $245.7 million, mainly due to higher tenant fit-out expenses and ChronoScale GPU hardware costs. Data center rental and other cost of revenues totaled $43.9 million, including $22.4 million of depreciation and amortization and $13.3 million of reimbursable tenant recovery expenses.
Selling, general and administrative expenses climbed 289% to $114.7 million. The increase reflected $51.7 million of higher stock-based compensation, $12.1 million of additional professional service expense and $9.9 million of higher personnel costs.
Interest expense surged 866% to $77.4 million, while interest income rose to $35.8 million. APLD also recorded a $49.5 million loss on the change in fair value of derivatives and an $11.4 million loss on the change in fair value of its Babcock & Wilcox investment.
Applied Digital's Adjusted Results Strengthen
Adjusted revenues, which exclude ChronoScale, rose to $300.4 million from $64.2 million. Adjusted operating income was $37.8 million compared with an adjusted operating loss of $3.6 million a year ago, while adjusted operating margin improved to 13% from negative 6%.
Adjusted net loss from continuing operations narrowed to $4.1 million, or 1 cent per share, from $7.6 million, or 3 cents. Adjusted EBITDA increased to $64.4 million from $0.5 million, while net operating income was $58.8 million with an 89% margin.
APLD's Balance Sheet and Cash Flows
Cash, cash equivalents and restricted cash totaled $3.7 billion as of Aug. 31, while debt stood at $6.4 billion.
Operating activities provided $63.9 million of cash compared with $81.5 million used a year ago.
Investing activities used $2.08 billion, largely reflecting $2.07 billion of purchases of property, equipment and other assets. Financing activities provided $1.54 billion, supported by long-term debt borrowings and preferred stock issuance during the quarter.
Applied Digital's Expansion Pipeline Advances
APLD closed $1.59 billion of 7% senior secured notes due 2031 to fund construction of the third 150 MW HPC building at Polaris Forge 1 and repay the $300 million bridge facility. The company also expanded revolving commitments to $430 million during the quarter.
Subsequent to quarter-end, Applied Digital secured up to approximately 1 GW of potential power capacity in Finland and entered a power purchase agreement with Base Electron for capacity and energy from an approximately 1,200 MW natural gas-fired generation facility planned in North Dakota.
Management expects initial Polaris Forge 2 operations to lift the delivered critical IT load across its North Dakota campuses to 300 MW by the end of calendar 2026.
APLD’s Zacks Rank & Stocks to Consider
Currently, Applied Digital has a Zacks Rank #5 (Strong Sell).
View the Zacks #1 Rank List
Image: Bigstock
Applied Digital Q1 Earnings Miss on Higher Costs, Revenues Beat
Key Takeaways
Applied Digital Corporation (APLD - Free Report) reported a first-quarter fiscal 2027 loss from continuing operations of 76 cents per share, wider than the 7-cent loss a year ago. The figure missed the Zacks Consensus Estimate of a 26-cent loss by 192.3%, as higher operating costs, interest expense and fair-value losses pressured results.
Revenues rose 322% year over year to $341.9 million, beating the $134 million consensus by 154.95%. High-performance computing (HPC) tenant fit-out services and new rental revenue led growth. APLD had 1.41 GW of critical IT load under lease across five campuses, representing $36 billion of base-term contracted revenues.
APLD's Q1 HPC Hosting Powers Revenue Growth
The HPC Hosting Business generated $262.6 million in revenues, including $183.5 million from tenant fit-out services, $65.8 million of base rent and $13.3 million from tenant recoveries. Segment operating profit was $33.4 million for the quarter.
Phase 1 of Building 2 at Polaris Forge 1, representing 75 MW, became ready for service on July 1, lifting live capacity at the campus to 175 MW. A second 75 MW phase became ready on Oct. 1, after quarter-end, taking live capacity to 250 MW.
Applied Digital Corporation Price, Consensus and EPS Surprise
Applied Digital Corporation price-consensus-eps-surprise-chart | Applied Digital Corporation Quote
Applied Digital's Q1 Hosting Business Holds Steady
The Data Center Hosting Business generated $37.8 million in revenues compared with $37.9 million a year earlier. The 106 MW Jamestown facility and 180 MW Ellendale facility were operating at full capacity as of Aug. 31.
Segment operating profit rose 121% year over year to $13.3 million, primarily reflecting lower cost of revenues from more advantageous power pricing. Reported assets for the business totaled $111.9 million at quarter-end.
APLD's Q1 Cost Base Weighs on Profitability
Services cost of revenues increased 318% year over year to $245.7 million, mainly due to higher tenant fit-out expenses and ChronoScale GPU hardware costs. Data center rental and other cost of revenues totaled $43.9 million, including $22.4 million of depreciation and amortization and $13.3 million of reimbursable tenant recovery expenses.
Selling, general and administrative expenses climbed 289% to $114.7 million. The increase reflected $51.7 million of higher stock-based compensation, $12.1 million of additional professional service expense and $9.9 million of higher personnel costs.
Interest expense surged 866% to $77.4 million, while interest income rose to $35.8 million. APLD also recorded a $49.5 million loss on the change in fair value of derivatives and an $11.4 million loss on the change in fair value of its Babcock & Wilcox investment.
Applied Digital's Adjusted Results Strengthen
Adjusted revenues, which exclude ChronoScale, rose to $300.4 million from $64.2 million. Adjusted operating income was $37.8 million compared with an adjusted operating loss of $3.6 million a year ago, while adjusted operating margin improved to 13% from negative 6%.
Adjusted net loss from continuing operations narrowed to $4.1 million, or 1 cent per share, from $7.6 million, or 3 cents. Adjusted EBITDA increased to $64.4 million from $0.5 million, while net operating income was $58.8 million with an 89% margin.
APLD's Balance Sheet and Cash Flows
Cash, cash equivalents and restricted cash totaled $3.7 billion as of Aug. 31, while debt stood at $6.4 billion.
Operating activities provided $63.9 million of cash compared with $81.5 million used a year ago.
Investing activities used $2.08 billion, largely reflecting $2.07 billion of purchases of property, equipment and other assets. Financing activities provided $1.54 billion, supported by long-term debt borrowings and preferred stock issuance during the quarter.
Applied Digital's Expansion Pipeline Advances
APLD closed $1.59 billion of 7% senior secured notes due 2031 to fund construction of the third 150 MW HPC building at Polaris Forge 1 and repay the $300 million bridge facility. The company also expanded revolving commitments to $430 million during the quarter.
Subsequent to quarter-end, Applied Digital secured up to approximately 1 GW of potential power capacity in Finland and entered a power purchase agreement with Base Electron for capacity and energy from an approximately 1,200 MW natural gas-fired generation facility planned in North Dakota.
Management expects initial Polaris Forge 2 operations to lift the delivered critical IT load across its North Dakota campuses to 300 MW by the end of calendar 2026.
APLD’s Zacks Rank & Stocks to Consider
Currently, Applied Digital has a Zacks Rank #5 (Strong Sell).
American Assets Trust (AAT - Free Report) , Business First Bancshares (BFST - Free Report) and Civista Bancshares (CIVB - Free Report) are some better-ranked stocks in the broader Zacks Finance sector, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American Assets Trust’s shares have gained 13.4% year to date. AAT is set to report its third-quarter 2026 results on Oct. 27.
Business First Bancshares’ shares have returned 16.4% year to date. BFST is set to report its third-quarter 2026 results on Oct. 26.
Civista Bancshares’ shares have risen 21.8% year to date. CIVB is set to report third-quarter 2026 results on Oct. 22.