Applied Digital Surges as AI Data Center Demand Fuels 250% Revenue Growth
Company beats Q2 revenue estimates by over 50% and secures a $5 billion hyperscaler lease, signaling a successful pivot to high-performance computing.
Shares of Applied Digital (NASDAQ: APLD) surged nearly 14% on Wednesday after the company reported fiscal second-quarter financial results that significantly outpaced analyst expectations, driven by booming demand for its artificial intelligence and high-performance computing (HPC) data center services.
The Dallas-based infrastructure company announced quarterly revenue of $126.6 million, a staggering 250% increase from the same period last year. The figure blew past the consensus analyst estimate of $82.22 million, underscoring the company's rapid and successful transition into a key provider for the AI industry.
The results provided a clear validation of Applied Digital's strategic pivot towards building and operating next-generation data centers tailored for AI and HPC workloads. The newly established HPC Hosting business was the primary growth engine, contributing $85 million to the quarterly revenue. The company reported a net loss of $0.11 per share, a substantial improvement from a loss of $0.61 per share in the prior year, though it slightly missed the consensus estimate of a $0.10 loss per share. However, investors focused on the dramatic revenue beat and strong forward-looking indicators.
"The second quarter was a milestone period for Applied Digital, marked by exceptional execution and significant strategic advancements," said Wes Cummins, Chairman and CEO of Applied Digital, in the company's earnings announcement.
A cornerstone of the quarter's success was the announcement of a landmark 15-year lease with an unnamed U.S.-based investment-grade hyperscaler. The deal covers 200 megawatts of AI and HPC capacity at Applied Digital's forthcoming Polaris Forge 2 campus and is projected to generate approximately $5 billion in revenue over the life of the lease, providing a massive long-term, stable revenue stream.
To support this aggressive expansion, Applied Digital has successfully fortified its balance sheet. The company completed a $2.35 billion private offering of senior secured notes and secured an additional $562.5 million investment from Macquarie Asset Management specifically to fund the construction of its AI Factories. These moves provide the necessary capital to build out its ambitious project pipeline and meet the voracious demand for computing power.
Further cementing its technological edge, Applied Digital made a strategic $15 million investment in Corintis, a developer of advanced direct-to-chip liquid-cooling technology. This investment aims to enhance the efficiency and density of its AI-optimized data centers, a critical factor for housing power-hungry AI processors.
In a move to unlock further shareholder value, the company also unveiled plans to spin out its Applied Digital Cloud business, which will merge with EKSO Bionics Holdings to form ChronoScale. The new entity will operate as a dedicated platform for GPU-optimized AI infrastructure, with Applied Digital expected to retain over 80% ownership.
Looking ahead, Cummins expressed strong confidence in the company's trajectory. He reiterated the goal of surpassing a $1 billion Net Operating Income (NOI) target within the next five years, fueled by strong demand across its data center campuses. According to the company's official Q2 results, Cummins noted that the company is already in advanced discussions for three additional sites totaling 900 megawatts of capacity.
Following the report, Applied Digital's stock traded at $33.69, pushing its market capitalization over $8.4 billion. The average analyst 12-month price target for APLD stood at $43.00 prior to the latest results, suggesting Wall Street sees further upside potential as the company continues to execute on its AI infrastructure strategy.