Applied Digital's Q2 Earnings Miss Estimates, Revenues Rise Y/Y

Applied Digital APLD reported a loss of 11 cents per share in the second quarter of fiscal 2026, an improvement from a loss of 61 cents reported in the year-ago quarter. The figure missed the Zacks Consensus Estimate by 22.22%.

Revenues jumped 250% year over year to $126.6 million, driven by the ramp-up of HPC tenant fit-out services at Polaris Forge 1 and continued growth in the Data Center Hosting Business. The figure beat the Zacks consensus estimates by 66.67%.

Applied Digital Corporation Price, Consensus and EPS Surprise

Applied Digital Corporation price-consensus-eps-surprise-chart | Applied Digital Corporation Quote

APLD’s Segment Performance

The Data Center Hosting Business generated $41.6 million in revenues, up 15% year over year, with both Jamestown (106 MW) and Ellendale (180 MW) operating at full capacity as of Nov. 30.

The segment generated approximately $16 million in operating profit during the quarter, operating on an asset base of $130.8 million, demonstrating strong operational efficiency.

The HPC Hosting Business contributed $85 million in revenues during the quarter. This included approximately $73 million from tenant fit-out services for CoreWeave at Polaris Forge 1 and $12 million in partial-quarter lease revenues as the first building became fully energized. The lease revenue reflects cash received during the quarter of approximately $8 million.

APLD’s Operating Details

Cost of revenues jumped 344% year over year to $100.6 million, primarily reflecting $69.5 million associated with tenant fit-out services for the HPC Hosting Business and increased energy costs for the Data Center Hosting Business. 

Selling, general and administrative expenses surged 119% year over year to $57 million, driven by $23.8 million in stock-based compensation due to accelerated vesting of certain employee stock awards, $4.7 million in professional services primarily related to legal work on discrete transactions and $2.5 million in personnel expenses to support business growth.

Interest expense increased 292% year over year to $11.5 million, primarily due to increased borrowing activity during the quarter. The company recognized a $13.1 million gain on change in fair value of derivative related to its Babcock & Wilcox common stock warrant and a $2.8 million gain on change in fair value of investment related to its Babcock & Wilcox common stock holdings. These non-cash gains were not present in the year-ago quarter.

APLD’s Balance Sheet and Cash Flows

As of Nov. 30, Applied Digital held cash, cash equivalents and restricted cash of approximately $2.3 billion compared with $114.1 million as of Aug. 31. Total debt stood at approximately $2.6 billion compared with $687.3 million at the end of the first quarter of fiscal 2026. The substantial increase in both cash and debt reflects the company's successful completion of a $2.35 billion senior secured notes offering during the quarter, issued at 97% of par with a 9.25% coupon due 2030. Proceeds were allocated to the construction of the first and second buildings at Polaris Forge 1, repayment of the SMBC loan and establishment of required debt service reserves.

Operating cash flow was negative $97.9 million for the six months ended Nov. 30, 2025, reflecting construction scaling and early-stage HPC activity.

APLD Offers Positive Outlook

Applied Digital provided updates reflecting strong growth expectations for its data center portfolio. The company now has 600 MW under contract with two hyperscalers across Polaris Forge 1 and Polaris Forge 2, representing approximately $16 billion in prospective lease revenues over approximately 15 years.

Lease revenues are expected to ramp significantly over the coming quarters as the second 150 MW building at Polaris Forge 1 comes online in mid-2026, and the third 150 MW building follows in 2027. Initial capacity at Polaris Forge 2 is anticipated in 2026, with full build-out expected in 2027.

The company is in advanced discussions with another investment-grade hyperscaler covering approximately 900 MW across three sites in the Dakota and select southern U.S. markets. APLD expects to begin construction on at least one new campus by the end of Jan. 2026, supported by a $100 million development loan facility secured after quarter-end.

Applied Digital anticipates exceeding its long-term goal of $1 billion in NOI within five years. The company plans to spin out its Cloud Services Business and merge it with EKSO Bionics to form ChronoScale, with closing expected in the first half of 2026, and Applied Digital retaining over 80% ownership.

APLD’s Zacks Rank & Stocks to Consider

Currently, Applied Digital carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Finance sector are Credicorp BAP, Bankinter BKNIY and HSBC HSBC.

Credicorp, Bankinter and HSBC all sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Credicorp have appreciated 30.7% in the past six months. The Zacks Consensus Estimate for BAP’s 2025 EPS is pegged at $25.36, up by 3 cents over the past 30 days.

Shares of Bankinter have appreciated 19.3% in the past six months. The Zacks Consensus Estimate for BKNIY’s 2025 EPS is pegged at $1.33, unchanged over the past 30 days.

Shares of HSBC have appreciated 29.3% in the past six months. The Zacks Consensus Estimate for HSBC’s 2025 EPS is pegged at $7.44, unchanged over the past 30 days.

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This article originally published on Zacks Investment Research (zacks.com).

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