Digital infrastructure provider Applied Digital (NASDAQ: APLD) announced better-than-expected revenue in Q4 CY2025, with sales up 98.2% year on year to $126.6 million. Its non-GAAP loss of $0 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Applied Digital's fourth quarter was marked by strong revenue growth and a positive market reaction, with results exceeding Wall Street expectations. Management credited the rapid energization of the Polaris Forge 1 data center, which began generating lease revenues ahead of schedule, as a key driver. CEO Wes Cummins highlighted the completion of the first of three contracted buildings for CoreWeave and the signing of a major lease with a U.S.-based hyperscaler as instrumental milestones. The company also benefited from robust demand for high-performance computing infrastructure, particularly for artificial intelligence and cloud workloads. Management emphasized that modular, efficient construction and access to low-cost energy in the Dakotas provided a competitive advantage.

Looking ahead, management expects continued growth as additional data center campuses come online through 2026 and 2027, supported by long-term hyperscale leases. Wes Cummins noted that the company is in advanced discussions for further projects in multiple regions, potentially expanding capacity to several gigawatts. The upcoming spin-off of Applied Digital Cloud into the new entity ChronoScale is also expected to enhance strategic flexibility and allow each business to pursue independent growth paths. CFO Saidal Mohmand indicated that Applied Digital’s robust financing structure and liquidity position will be key to funding ongoing expansion while maintaining financial discipline and a strong credit profile.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to rapid execution on major data center projects, new long-term lease agreements, and strong customer demand for AI and cloud infrastructure, with notable progress in both construction and financing activities.

• Data center expansion milestones: The company brought the first phase of its Polaris Forge 1 campus online, energizing 100 megawatts and beginning lease revenues with CoreWeave. Two additional buildings at the site are scheduled for completion, supporting long-term contracts with investment-grade hyperscalers.
• Major hyperscale lease agreements: Applied Digital secured a $5 billion, 15-year lease with a large U.S.-based hyperscaler for its Polaris Forge 2 campus. Together with existing contracts, this represents 600 megawatts of lease capacity and approximately $16 billion in prospective revenue.
• Advanced construction and design: Management highlighted modular construction and flexible data center design, enabling rapid scaling and support for a range of AI and cloud workloads. The approach is intended to provide cost and efficiency benefits, as well as future-proofing against evolving chip architectures.
• Robust financing framework: CFO Saidal Mohmand detailed a multilayered financial structure involving development loans and preferred equity facilities from Macquarie, along with a recent $2.35 billion private note offering. This arrangement allows the company to fund new developments while retaining majority ownership and minimizing reliance on public markets.
• Strategic spin-off and technology investments: The upcoming separation of the cloud business into ChronoScale, as well as investments in liquid cooling technology through Corintis and collaborations with utility partners, are designed to position the company for ongoing growth and leadership in AI-focused infrastructure.

Drivers of Future Performance

Applied Digital’s outlook is shaped by accelerating hyperscale demand, ongoing campus development, and strategic moves to address power and technology requirements in the data center market.

• Pipeline of new projects: Management is in advanced discussions for three additional campuses totaling up to 900 megawatts, with each site designed to eventually scale to two gigawatts or more. The company sees its ability to execute large-scale construction as the key limiting factor, rather than customer demand.
• Long-term lease structure: New and existing contracts increasingly feature favorable terms, such as 15-year noncancelable commitments and make-whole provisions, which provide revenue visibility and mitigate risk from customer cancellations or credit downgrades.
• Execution and supply chain focus: Management identified construction execution, supply chain management, and workforce scaling as critical to delivering projects on time and budget. Refined modular designs and lessons learned from previous builds are expected to support efficiency and on-schedule delivery of multiple concurrent projects.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the ramp-up of lease revenues as additional data center capacity comes online, (2) announcements of new hyperscale contracts or campus expansions, and (3) progress on the ChronoScale spin-off and its ability to secure strategic partnerships. Developments in power sourcing and technology adoption, such as advanced liquid cooling, will also be important markers of execution.

Applied Digital currently trades at $31.55, up from $29.22 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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