APLD — FY2026 (Annual) Financial Report Analysis

Overview

Applied Digital's fiscal year ended May 31, 2026 (FY2026) was the year its AI data-center business started earning money. Total revenue rose 167% to $611.3 million, almost entirely because the first 100 MW building at its Polaris Forge 1 campus in North Dakota began operating for its tenant in October 2025. The bottom line went the other way. The net loss from continuing operations attributable to common stockholders widened to $249.2 million from $233.7 million. The main causes were a $220.1 million stock-based compensation bill, up from $22.7 million, and a $59.7 million write-down on the cloud business that is now ChronoScale. The loss per share narrowed to $0.91 from $1.16 only because the average share count rose 37%.

At a glance

• $385.3 million of AI data-center (HPC Hosting) revenue, up from zero, but only $99.8 million of it is rent. The other $270.6 million is "tenant fit-out services": equipment Applied Digital installs for the tenant and bills at close to cost. Rent is the recurring part.
• 91% margin on that rent. Net operating income (rent minus the property costs not passed on to the tenant) was $90.4 million on $99.8 million of base rent. This is the profit level the business model is designed to produce.
• $2.87 billion spent on construction, against $89.7 million of operating cash flow. Borrowing paid for the gap. Debt rose to $5.0 billion from $0.69 billion, and Macquarie put $1.825 billion into the North Dakota development subsidiary through preferred units.

Results in numbers

"Operating margin" is the share of revenue left after running the business, before interest and tax. Here it is negative: costs were larger than revenue.

The fourth quarter (March–May 2026) shows the current run-rate. Revenue was $258.7 million, up 407% from $51.1 million. HPC Hosting supplied $203.0 million of it: $44.1 million of base rent, $152.4 million of fit-out services and $6.5 million of tenant recoveries. HPC segment operating profit was $26.2 million. The net loss to common was $110.6 million, or $0.39 a share, against $0.24 a year earlier. Fourth-quarter SG&A (selling, general and administrative costs) was $165.3 million. $116.8 million of the increase was stock-based compensation, driven by accelerated vesting and by grants made around the ChronoScale separation.

Where the revenue actually came from

AI data centers (HPC Hosting). The company builds large data centers and leases them to customers that run AI chips, on 15-year leases where the tenant pays whether or not it uses the space ("take-or-pay"). It reports two kinds of revenue from this:

• Rent ($99.8 million base rent plus $14.9 million of tenant recoveries, which are costs billed back to the tenant). The 10-K lists $32.2 million of depreciation against this business. Depreciation is the building's cost spread over its useful life.
• Fit-out services ($270.6 million). Applied Digital procures and installs tenant-specific equipment and bills for it. The cost of that work was $258.1 million, which leaves a margin of roughly 4.6%. This revenue is real cash, but it is mostly a pass-through. It rises and falls with how much is being built for a tenant in a given quarter, not with how much capacity is leased.

Segment operating profit for HPC Hosting was $39.1 million, against a $12.1 million loss in FY2025.

Bitcoin-mining hosting (Data Center Hosting). Applied Digital rents powered space to crypto miners at Jamestown (106 MW) and Ellendale (180 MW), both at full capacity. Revenue rose to $154.4 million from $144.2 million. Segment profit fell to $48.3 million from $63.9 million, but only because FY2025 included a one-off $25.0 million gain from released escrow on the sale of the Garden City site. Without that, the segment improved. Management notes that the miner pays for capacity regardless of the bitcoin price. The 10-K adds the risk: that is one customer, with about a year and a half left on its contract, and it accounted for 25% of FY2026 revenue.

ChronoScale. The old GPU cloud business was spun out on May 5, 2026 by combining it with Ekso Bionics. It now trades as CHRN, and Applied Digital owns about 96%. Its revenue fell 15% to $71.6 million because cloud rates were cut. It is still consolidated in the GAAP figures, but every "adjusted" figure the company publishes excludes it.

What the headline numbers hide

• The adjusted profit and the GAAP loss are $285 million apart. Adjusted net income was $36.1 million ($0.11 a share). GAAP was a $249.2 million loss. The reconciliation adds back $219.3 million of stock compensation, $37.0 million of ChronoScale operating losses plus $9.6 million of its interest, and $27.9 million of deal and diligence costs. It also removes $75.8 million of derivative gains (mostly a warrant on Babcock & Wilcox shares) and $10.8 million of investment gains. One detail matters. The adjusted figure starts from the net loss before the $59.7 million allocated to Macquarie's preferred stake and the $6.3 million of preferred dividends, even though the company labels it "attributable to common stockholders". Common shareholders do not receive that $66 million.
• Stock compensation equalled 36% of revenue. $220.1 million is a non-cash charge, but it is a real cost to shareholders through dilution. Part of it was one-off: accelerated vesting and grants around the ChronoScale separation. Part reflects headcount growth and performance awards, which will recur.
• Per-share improvement came from more shares, not a smaller loss. The loss attributable to common grew 6.7%, while weighted shares rose to 275.2 million from 201.2 million. Shares outstanding at year-end were 287.9 million, against 224.9 million a year earlier, after 51.0 million shares were issued on conversion of the Series G preferred and $196.4 million was raised through at-the-market stock sales.
• Interest cost is mostly out of sight for now. Interest expense, net was only $29.5 million. Gross interest of $85.3 million was offset by $55.7 million of interest income on the cash pile, and another $39.6 million of interest was capitalised. Capitalised interest is added to the cost of buildings under construction instead of being expensed. The cash-flow statement shows $263.4 million of interest actually paid in the year. Year-end debt was $5.0 billion, including senior secured notes carrying 9.25% (due 2030) and 6.75% (due 2031) coupons. As buildings are finished, capitalisation stops and more of that cost will reach the income statement.
• Positive operating cash flow came with help from working capital. The $89.7 million inflow, against a $184.3 million net loss, mostly reflects non-cash charges added back (stock compensation, the write-down, depreciation) and a $106.2 million rise in accrued liabilities. Accounts receivable rose to $56.3 million from $6.8 million, more than 8x, while revenue rose 2.7x. That is consistent with large fit-out billings late in the year, but it is worth checking in the next filing.
• Concentration is extreme. One HPC customer was 59% of revenue and the crypto miner 25%. Polaris Forge 1's operating building is leased to CoreWeave. Its leases now sit in a CoreWeave special-purpose subsidiary, backed by CoreWeave guarantees and a $50 million letter of credit.
• One-offs in both years. FY2026 carried a $59.7 million loss when the cloud business was written down after it stopped qualifying as held for sale, plus the $86.6 million of derivative and investment gains. FY2025 carried $119.0 million of losses on converting and revaluing debt, and the $24.6 million Garden City gain. Neither year's GAAP net loss is a clean run-rate.

Takeaway: The year's revenue growth is mostly low-margin construction pass-through. The economics that matter are $99.8 million of rent earned at a 91% property-level margin from one 100 MW building. FY2027 will show whether that template can be repeated across 1.4 GW before interest on $5 billion of debt, and stock-based pay, absorb it.

Outlook

The company gave no revenue or earnings guidance. Its stated build schedule:

• Polaris Forge 1 (CoreWeave, 400 MW). Phase 1 of Building 2 (75 MW) became ready for service on June 30, 2026, bringing live capacity to 175 MW. Building 4 (150 MW) is funded by $1.59 billion of 7.0% notes issued after year-end.
• Polaris Forge 2 (investment-grade hyperscaler, 200 MW). Initial capacity is expected in calendar 2026 and full capacity in early 2027, funded by $2.15 billion of 6.75% notes.
• Delta Forge 1 and Polaris Forge 3 (a second investment-grade hyperscaler, 300 MW each). Operations are expected to start in calendar 2027, with about $7.5 billion of base-term lease revenue each.
• Delta Forge 2 (same hyperscaler, 210 MW). Signed after year-end, about $5.2 billion of base-term revenue, with operations expected in the first half of calendar 2028.

In total, management cites about $36 billion of contracted revenue over the 15-year base terms. The 10-K says heavy capital spending will continue through FY2027 and that liquidity is sufficient for at least the next 12 months. The company had $4.15 billion of cash and restricted cash at year-end, plus a revolving credit facility upsized to $430 million.

Our read: contracted demand is no longer the open question. Execution and financing are. Each new building should add rent at margins similar to Polaris Forge 1's, but the income statement will show capitalised interest switching to expense, continued fit-out revenue that inflates the top line, and Macquarie's preferred return taking a share of profits ahead of common shareholders. Three things to watch in the Q1 FY2027 10-Q (quarter to August 31, 2026, due around mid-October): base rent as Building 2 comes online, net interest expense as capitalisation falls, and any news on renewing the single crypto-mining contract.