Earnings Call Insights: Applied Digital Corporation (APLD) Q2 2026
Management View
- Wes Cummins, Chairman and CEO, highlighted a series of milestones, stating, “Polaris Forge 1 reached ready-for-service, energizing 100 megawatts on schedule and completing the first of 3 contracted buildings.” He added that the remainder of the AI factory campus is expected to be completed by the end of 2027, with the site hosting 400 megawatts for CoreWeave and representing approximately $11 billion in prospective lease revenue over 15 years.
- Cummins announced, “We also announced a roughly $5 billion 15-year lease with a U.S.-based investment-grade hyperscaler for 200 megawatts at Polaris Forge 2.” He noted that this project is advancing on schedule, with initial capacity expected in 2026 and full build-out in 2027.
- Cummins stated, “Together, these agreements represent 600 megawatts of lease capacity and approximately $16 billion in prospective lease revenue across our North Dakota campuses.” He also cited increased inbound demand and advanced discussions with another investment-grade hyperscaler.
- Cummins emphasized the company’s strategic focus on the Dakotas for low-cost, abundant energy and scalable expansion, and described modular, efficient data center designs supporting multiple AI and cloud architectures.
- On business evolution, Cummins said, “We have significantly evolved our construction and design capabilities… reducing construction timelines and lowering overall cost.”
- CFO Saidal Mohmand stated, “This quarter represents a major inflection point for Applied Digital. After two years of construction and over $1 billion invested in our first 100-megawatt data center, we have now begun to generate lease revenues.”
- Mohmand explained, “We have agreements in place with top-tier financial institutions that allow us to execute this repeatable and capital-efficient framework.”
- Cummins also announced the launch of Applied Digital Cares, a new community initiative, and detailed a non-binding Letter of Intent to spin out Applied Digital Cloud with EKSO Bionics to form ChronoScale, which is expected to close in the first half of 2026. Cummins said, “Applied Digital is expected to own over 80% of ChronoScale.”
Outlook
- Cummins stated, “We now expect to surpass our long-term goal of $1 billion in NOI within 5 years.”
- The Dakota campuses are expected to maintain a strategic advantage through low-cost energy and regulatory benefits, with further announcements of additional locations anticipated in other advantaged regions.
- Mohmand noted continued ramping of lease revenues over the next quarter and “meaningful revenue growth over the coming 18 to 24 months” as 600 megawatts of buildings come online.
Financial Results
- Mohmand reported, “Revenues for the fiscal second quarter of fiscal ’26 were $126.6 million, up 250% from $36.2 million in the prior year.”
- The increase was mainly driven by $73 million from tenant fit-out services for the HPC Hosting Business and $12 million in lease revenue from the CoreWeave lease at Polaris Forge 1.
- The Data Center Hosting segment generated $41.6 million in revenue, with segment operating profit of roughly $16 million.
- Reported cost of revenues was $100.6 million, with SG&A at $57 million, impacted by $23.8 million in stock-based compensation, $4.7 million in professional service expenses, and $1.2 million in personnel expenses.
- Interest expense for the quarter was $11.5 million, and net loss was $31.2 million or ($0.11) per share. Adjusted net income was $100,000 or $0.00 per share. Adjusted EBITDA totaled $20.2 million.
- The company ended the quarter with $2.3 billion in cash, cash equivalents, and restricted cash, $2.6 billion in debt, and approximately $2.1 billion in total equity.
Q&A
- Nick Giles, B. Riley Securities: Asked about growth appetite for the cloud business and ChronoScale. Cummins responded that ChronoScale’s relationship with Applied Digital and access to large-scale data center facilities is a key advantage for deployments, but declined to share future operational specifics.
- Giles also asked about the agreement with Babcock & Wilcox. Cummins explained the solution enables earlier power delivery, stating, “If you get in line for natural gas — traditional natural gas turbine right now… we’re probably not getting delivery until 2031, 2032. For that equipment, we need power earlier than that.”
- Darren Aftahi, ROTH Capital: Asked about lease landscape and pre-lease financing. Cummins commented, “Pricing has been stable to slightly better over the past 6 months… we’re getting more favorable terms in other aspects of the contract.” On pre-lease financing, Cummins said the company proceeds with construction when it has a “high degree of confidence” in securing leases.
- Robert Brown, Lake Street: Inquired about the ChronoScale spinout timeline and growth. Cummins described a process aiming for a first-half 2026 close and cited significant growth opportunity in the compute market.
- Mike Grondahl, Northland: Questioned the breadth of advanced site discussions. Cummins replied, “We’re in advanced discussion on 3 sites in 900 megawatts,” and described the pipeline as “robust,” with scaling capability being the main focus.
- George Sutton, Craig-Hallum: Asked about the qualification process with hyperscalers. Cummins said, “Out of those 6, we’re through that process with 5 of those.”
- John Todaro, Needham: Queried about execution learnings. Cummins highlighted design and supply chain refinements, noting, “We have a really good handle on our construction time lines.”
- Michael Donovan, Compass Point: Asked about campus expansion potential. Cummins stated, “Every one of our campuses has the potential to go to at least a gigawatt. And some significantly beyond a gigawatt.”
Sentiment Analysis
- Analysts expressed strong interest in growth initiatives, expansion, and contract pipeline, with a generally positive and sometimes probing tone about risk and execution.
- Management maintained a confident tone in prepared remarks, using phrases such as “We now expect to surpass our long-term goal” and highlighted execution and strategic positioning. During Q&A, the tone remained positive, with openness about challenges and opportunities, but with increased detail and some caution regarding contract finalization and execution.
- Compared to the previous quarter, the current call reflected higher confidence in growth and execution capabilities, with both analysts and management focusing more on expansion and pipeline breadth.
Quarter-over-Quarter Comparison
- The Q2 2026 call showed increased confidence in surpassing the $1 billion NOI target, up from simply reiterating it in Q1.
- Strategic focus shifted from pipeline building to scaling execution and capital efficiency, with more detailed discussion of modular design and supply chain improvements.
- Analysts in Q2 focused more on lease terms, site breadth, and the ChronoScale spinout, while Q1 questions were more centered on financing and power infrastructure timelines.
- Key metrics showed significant revenue growth and segment profitability improvements, as well as expanded capital and liquidity positions.
- Management’s tone evolved from cautious optimism to assertive confidence, while analysts maintained a constructive but more growth-focused line of inquiry.
Risks and Concerns
- Management pointed to execution risks, especially around construction timelines and supply chain, but cited mitigation through modular design and supply agreements.
- Cummins cautioned that contract finalization is never assured until signed, signaling a risk of delays or changes in pipeline realization.
- Analysts raised questions about expansion capacity, growth pace, and execution reliability, reflecting concern over scaling limits and market competition.
Final Takeaway
Applied Digital’s Q2 2026 call highlighted the company’s progress in securing major hyperscale leases and expanding its data center footprint, with $16 billion in prospective lease revenue now under contract or advanced discussion. Management projects surpassing $1 billion in net operating income within five years, driven by rapid execution, modular construction, and robust financing structures. The spinout of Applied Digital Cloud as ChronoScale is positioned to address the accelerating AI compute market. While execution and contract risks remain, the company’s strengthened balance sheet, advanced pipeline, and strategic positioning in the Dakotas support a confident outlook for sustained growth and shareholder value creation.