APLD Q4 Earnings Call Highlights Contracted AI Expansion

APLD Builds Around Contracted Scale

Chairman and CEO Wes Cummins said Applied Digital now has 1.41 gigawatts of contracted critical IT load across five campuses, supporting approximately $36 billion of base-term lease revenues.

Three recent leases with the same high investment-grade hyperscaler cover 810 megawatts and approximately $20 billion of contracted revenues. Cummins described the concentration as part of a deliberate shift toward durable agreements with financially stronger customers.

Management is also marketing another 1.7 gigawatts across multiple states. Expansion options under negotiation with two existing customers could add 250 megawatts and more than $6 billion of contracted revenue based on current rates and lease durations.

Applied Digital Targets Higher Lease Pricing

Cummins said rental rates have increased during the past six months, creating room for better economics on new campuses and customer expansions.

A Lake Street Capital Markets analyst asked about the proposed 100-megawatt and 150-megawatt expansions. Cummins said both would involve existing customers and should carry materially higher pricing than their current agreements.

During a Northland Securities exchange about development yields, Cummins defended the recent leases as competitive for their scale, duration and customer quality. He added that management uses conservative cost and margin assumptions when evaluating project returns.

APLD Lowers Its Cost of Capital

CFO Saidal Mohmand highlighted financing as a central part of the company’s development model. Applied Digital secured funding for all 400 megawatts at Polaris Forge 1 and 200 megawatts at Polaris Forge 2.

The company issued $2.15 billion of 6.75% senior secured notes and $1.59 billion of 7% senior secured notes. Mohmand said the latter financing priced 225 basis points below the company’s first project bond placement.

Mohmand described a three-part funding structure combining Applied Digital’s balance sheet, Macquarie’s contribution of three-quarters of required project equity and site-specific debt. Management expects investment-grade tenant agreements to support more favorable financing for its next three campuses.

Applied Digital Flags Power and Supply Constraints

Cummins identified power availability and supply-chain capacity as the main limits on growth rather than customer demand.

The company is working with Base Electron on approximately 1.2 gigawatts of natural gas-fired generation in the Dakotas. Management views added generation and regional transmission projects as essential to expanding existing campuses beyond their initial capacity.

Cummins also said the company had previously secured supply-chain capacity for roughly 700 megawatts of annual critical IT load. Applied Digital is now building beyond that level, placing greater importance on equipment availability, construction sequencing and labor planning.

APLD’s Results Reflect an Early Ramp

Fiscal fourth-quarter adjusted revenues were $240.4 million, which beat the Zacks Consensus Estimate of $99.3 million. It incurred a loss of 39 cents per share, which was wider than the Zacks Consensus Estimate of a loss of 18 cents.

HPC hosting generated $203 million of revenues, including $152.4 million from tenant fit-out services and $44.1 million from base rent. Adjusted EBITDA reached $42.4 million, and net operating income was $39.9 million.

Mohmand stressed that quarterly HPC results primarily reflected the first 100 megawatts operating at Polaris Forge 1. The company subsequently brought another 75 megawatts online, taking live capacity at the campus to 175 megawatts.

Applied Digital Keeps Execution Central

Management maintained a confident tone on demand but repeatedly returned to construction discipline. Cummins said all current projects were on time and on budget, while noting that power and supply-chain management remain critical.

Applied Digital now expects to reach a $1 billion annual net operating income run rate within one year, three years earlier than its original target. The company’s priorities remain delivering contracted capacity, financing projects efficiently and expanding existing campuses.

Zacks Signals Remain Cautious

APLD currently carries a Zacks Rank #3 (Hold). That ranking indicates a neutral near-term earnings revision outlook rather than a clear signal of outperformance or underperformance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The stock has a Value, Growth, Momentum and VGM Score of F each, indicating weak characteristics across all four measures. Style Scores work best alongside the Zacks Rank, with A or B grades viewed more favorably. The Zacks Rank can change as analyst estimates are revised following the newly reported results.

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