Applied Digital earnings: why APLD revenue jumped 407%

Why Applied Digital's Q4 revenue jumped 407%#

Applied Digital's fiscal Q4 release reported US$258.748m of total revenue. Its HPC Hosting segment produced US$203.000m, comprising US$44.100m of base rent, US$152.400m of tenant fit-out services and US$6.500m of tenant recoveries.

Tenant fit-out covers work needed to prepare the building for a customer. Applied Digital recorded US$145.600m of related costs against the US$152.400m of fit-out revenue. The US$6.800m difference represents an approximate 4.5% gross spread before corporate costs and should not be confused with the margin earned on recurring rent.

The quarter's US$152.400m of fit-out revenue represented 58.9% of total revenue. Base rent represented 17.0%. This explains how revenue could more than double from Q3 while the recurring base-rent line remained unchanged at US$44.100m.

The final row outside the named hosting segments is derived by subtracting US$203.000m of HPC Hosting and US$37.300m of Data Center Hosting from total revenue. Applied Digital's non-GAAP reconciliation reports US$18.396m of ChronoScale revenue, which explains nearly all of that difference.

The headline beat the preview, but recurring rent did not accelerate#

Before the release, the first nine months of fiscal 2026 had produced US$352.562m of reported revenue. A mechanical reference showed that Q4 needed US$80.017m for full-year revenue to equal three times the prior year's adjusted baseline. Actual Q4 revenue exceeded that reference by US$178.731m.

The final accounts also clarify why the old comparison was imperfect. Applied Digital now consolidates ChronoScale in its GAAP accounts while removing it from adjusted results. Reported fiscal 2026 revenue was US$611.311m, up 167.5% from reported fiscal 2025 revenue of US$228.569m. On the company's adjusted basis, which excludes ChronoScale, revenue rose 274.3% from US$144.193m to US$539.707m.

The sequential comparison is more revealing. Total revenue rose 104.3% from Q3, but base rent was flat and adjusted EBITDA declined 3.9%. The quarter therefore confirmed that construction activity can create a large revenue surge before the recurring-rent engine grows.

Adjusted profit improved while the GAAP loss widened#

Applied Digital reported a US$110.560m Q4 net loss from continuing operations attributable to common shareholders. That compares with a US$53.076m loss a year earlier. The company also reported US$12.914m of adjusted net income and US$42.400m of adjusted EBITDA.

The gap is largely explained by items that the adjusted calculation removes. Selling, general and administrative expense reached US$165.282m, including a US$116.800m increase in stock-based compensation tied mainly to accelerated vesting, new grants around the cloud separation and higher headcount. The non-GAAP reconciliation shows US$127.845m of stock-based compensation for the quarter.

Fair-value movements also helped the reported result. Applied Digital recorded a US$53.276m gain on derivatives and a US$4.768m gain on investments. Those gains do not represent rent collected from customers.

This does not make either measure disposable. The GAAP loss captures the cost attributed to common shareholders under the accounting rules. Adjusted EBITDA helps isolate the operating result management uses for its core data-centre businesses. Reading both prevents a large non-cash charge or fair-value gain from being mistaken for the recurring economics of a live campus.

Cash flow turned positive while construction spending accelerated#

For fiscal 2026, operating activities produced US$89.685m of cash, compared with a US$115.402m outflow in fiscal 2025. Over the same year, purchases of property, equipment and other assets reached US$2.866bn, up from US$681.603m.

Subtracting those purchases from operating cash produces a US$2.776bn gap. This is a simple construction-funding reference, not company-defined free cash flow. Applied Digital is building project-financed campuses, and restricted cash, tenant payments and financing timing can move differently from ordinary operating cash.

At 31 May, cash, cash equivalents and restricted cash totalled US$4.153bn. US$2.381bn of that amount was restricted, so it was not all freely available for any corporate purpose. Current and long-term debt totalled US$4.976bn. The company paid US$263.402m of cash interest during the year.

Applied Digital funded the buildout with several forms of capital. Fiscal 2026 cash proceeds included US$4.955bn from long-term debt, US$814.998m from preferred units and US$196.366m from common stock. Period-end common shares rose 28.0% from 224.910 million to 287.884 million. Preferred distributions and ownership dilution therefore belong beside the revenue and capacity story, not in a separate footnote to it.

ChronoScale is separate, but still inside APLD's accounts#

Applied Digital completed the separation of its cloud business into ChronoScale on 5 May. ChronoScale now trades separately as Nasdaq: CHRN, but Applied Digital still owned approximately 96% at the fiscal year-end.

That ownership means ChronoScale remains consolidated in Applied Digital's GAAP accounts. Management then removes ChronoScale from adjusted revenue, adjusted net income and adjusted EBITDA to show what it considers the core HPC and Data Center Hosting businesses.

The comparison rule is simple: compare reported revenue with reported revenue, or adjusted revenue with adjusted revenue. Mixing fiscal 2025 adjusted revenue of US$144.193m with fiscal 2026 reported revenue of US$611.311m would overstate like-for-like growth.

For Q4, ChronoScale contributed US$18.396m of revenue and a US$12.118m operating loss in the reconciliation. For the full year, it contributed US$71.604m of revenue and a US$37.043m operating loss. The separation simplified the strategic story, but the retained ownership means the financial statements are not yet those of a completely detached business.

Live, contracted and marketed capacity are different#

Applied Digital had 100 MW live at Polaris Forge 1 when the fiscal year ended. It delivered another 75 MW on 30 June, taking current live capacity at that campus to 175 MW. Data Center Dynamics independently reported the delivery.

The company has 1,410 MW of contracted critical IT load across five campuses. Those leases represent approximately US$36.000bn of base-term contracted revenue, but most of that capacity is still being built. Initial operations at Delta Forge 1 and Polaris Forge 3 are expected in 2027, while Delta Forge 2 is expected in the first half of 2028.

Applied Digital is also marketing another 1.7 GW. Marketed capacity is a sales pipeline, not a signed lease. Keeping these three numbers separate prevents future capacity from being counted as present operation.

What the result resolved and what remains unknown#

The release resolved the Q4 revenue mix. It showed that fit-out work, rather than a new step-up in base rent, drove most of the sequential increase. It also disclosed the full-year construction spend, cash, restricted cash, debt, share count and the accounting treatment of ChronoScale.

Management added a forward operating target on the earnings call. It expects the company to reach a US$1.000bn annual net-operating-income run rate around July 2027 and described more than US$2.000bn of annual net operating income as already contracted across the 1,410 MW portfolio. Those figures are management's expectations based on capacity that is largely still under construction. They are not current net operating income or formal fiscal 2027 revenue and adjusted EBITDA guidance. Recurring rent still has to begin as each building enters service.

The call also narrowed the funding question. Management expects approximately US$600.000m of capital expenditure in the next quarter, said financing is secured for all 400 MW at Polaris Forge 1 and 200 MW at Polaris Forge 2, and said most of the restricted cash at year-end came from the Polaris Forge 2 bond and became unrestricted after the related escrow condition was satisfied in June. What remains unavailable is one campus-by-campus schedule showing remaining construction spend, the timing of that spend and how much cash, debt and equity each project still requires before opening. Management said projects remain within a US$11.000m to US$13.000m cost range per megawatt, with early buildings and more difficult sites tending towards the high end.

The sales pipeline is more specific than the release alone suggested. Applied Digital is in advanced negotiations for another 100 MW at Polaris Forge 2 with the existing tenant and 150 MW at a Delta Forge campus. Management expects materially higher pricing and possibly longer terms. If both leases are signed, it estimates more than US$6.000bn of additional contracted revenue using existing rates and durations. The leases were not signed at the time of the call, so their final rates, terms and start dates remain unknown. Management expects the capacity being marketed beyond those expansions to involve new customers.

Customer quality and customer concentration need to be read together. Management said 76% of contracted lease revenue is with investment-grade customers and argued that stronger tenants support cheaper financing. Three newer campus leases representing about US$20.000bn of base-term revenue are with the same high-investment-grade hyperscaler. Management also stressed that long leases depend on meeting service-level agreements, the operating standards written into a customer contract. The remaining tests are whether Applied Digital can deliver and operate each site to those standards, and whether new leases diversify or deepen its dependence on one customer.

On ChronoScale, management said the cloud company extended one customer contract at higher pricing and is pursuing large reserved-capacity contracts. It did not disclose a signed contract value, reserved capacity, revenue contribution or funding requirement. Those opportunities are not yet measurable from the figures management provided.

The metrics to monitor next#

Start with base rent and net operating income. Q4 base rent stayed at US$44.100m while company-defined net operating income was US$39.900m. Compare later quarters with management's US$1.000bn annual run-rate target for around July 2027 and its estimate of more than US$2.000bn of annual net operating income once the contracted portfolio is operating. The evidence is the rent and net operating income actually reported as buildings enter service, not the target by itself.

Then track live megawatts against contracted megawatts and scheduled opening dates. The gap between 175 MW live after quarter-end and 1,410 MW contracted is the company's opportunity and its execution burden. Management identified power availability and supply-chain capacity as the two main constraints, while the first 1.2 GW of Base Electron generation is not expected until 2029 and 2030.

Follow the two proposed expansion leases separately. The next evidence is whether the 100 MW Polaris Forge 2 expansion and the 150 MW Delta Forge expansion are signed, followed by their actual rates, durations, construction schedules and financing.

Follow construction purchases, debt, restricted cash and cash interest together. Start with management's approximately US$600.000m next-quarter capital-expenditure reference and compare actual campus spending with the US$11.000m to US$13.000m per-megawatt build range. A larger cash balance is less informative when it is paired with project debt or restricted to a particular build.

Watch the common-share denominator and preferred capital. Revenue growth does not automatically become per-share growth when period-end shares have increased 28.0% and project cash also has claims ahead of common equity.

Finally, keep ChronoScale separate in the comparison. Its revenue and losses remain inside GAAP accounts while the company excludes them from adjusted measures. A higher-priced contract and reserved-capacity discussions become measurable only when ChronoScale discloses the signed value, capacity, funding and revenue contribution.