stockrowWhat it does
Applied Digital designs, develops, owns and operates U.S. data centers for high-performance computing, including artificial intelligence and machine learning. Its customers include large cloud and technology companies that need facilities for computing equipment. Applied Digital calls its purpose-built facilities AI factories.
The company provides the physical infrastructure—such as powered space, cooling and connectivity—under long-term leases and hosting arrangements. Its standardized design supports both air-cooled and liquid-cooled equipment. High-density computing can require liquid cooling and electrical systems capable of handling substantial power loads.
Applied Digital also operates a legacy hosting business that supplies energized space for a crypto mining customer’s equipment. It expects that business to become a smaller share of operations as its high-performance computing business expands.
The company separated its cloud business into ChronoScale, which remains consolidated in Applied Digital’s financial statements. ChronoScale rents space at third-party facilities and provides customers with access to its cloud computing equipment. Applied Digital reported an approximately 96% ownership stake in ChronoScale in fiscal Q1 2027.
Applied Digital is headquartered in Dallas, Texas. Wesley Cummins is its chairman and chief executive officer.
How it makes money
Applied Digital’s two core reporting segments are high-performance computing hosting and data center hosting. The former designs, builds and operates facilities for customers’ AI and other accelerated-computing equipment. The latter supplies powered space for crypto mining equipment. ChronoScale’s cloud operations are also included in consolidated results, although cloud services are no longer a reportable segment.
The high-performance computing business earns rental revenue from its facilities and revenue for services, including work to fit out space for tenants. It also receives payments for tenant recoveries. Its leases provide long-term recurring revenue once capacity is in service. As of May 31, 2026, the contracted portfolio represented approximately $36.2 billion of revenue over the initial 15-year base lease terms. The leases were take-or-pay and non-cancellable; termination for convenience would require payment of the remaining contractual value. Delivery estimates remain subject to construction, permitting, interconnection and other risks.
The legacy hosting business lets its crypto mining customer rent space based on power requirements. ChronoScale supplies access to cloud computing equipment and also records hardware sales.
For fiscal 2026, high-performance computing hosting revenue was $385.3 million and data center hosting revenue was $154.4 million; consolidated fiscal Q1 2027 revenue was $341.9 million.
In fiscal Q1 2027, the high-performance computing segment generated $262.6 million of revenue, including $65.8 million of base rent and $183.5 million of tenant fit-out services. Data center hosting generated $37.8 million, while ChronoScale generated $41.5 million, including approximately $23 million of GPU hardware sales. Fit-out services and hardware sales are distinct from the base rent earned under the data center leases.
Customers and how it sells
Applied Digital leases high-performance computing capacity directly to CoreWeave and investment-grade hyperscalers. Its high-performance computing business had three customers, each party to approximately fifteen-year leases. Its legacy data center hosting business serves one crypto mining customer. ChronoScale also serves cloud customers such as AI and machine learning developers.
Customer concentration is significant. In fiscal 2026, one high-performance computing customer accounted for 59.0% of revenue from continuing operations, and the data center hosting customer also accounted for a substantial share. At Polaris Forge 1, CoreWeave leases 400 MW of contracted capacity. The company has also leased capacity at other campuses to investment-grade hyperscalers.
The company’s data center campuses span northern and southern U.S. regions. Polaris Forge 1 is in Ellendale, North Dakota, and Polaris Forge 2 is near Harwood, North Dakota. Its legacy crypto hosting sites are in Jamestown and Ellendale. Applied Digital is developing campuses in Louisiana and Alabama; ChronoScale’s cloud business operates in Colorado, Minnesota and Utah.
Outside the United States, Applied Digital signed an agreement for up to 1 gigawatt of potential power capacity in Finland. The company said the site’s initial power is expected in 2028, while additional power would require further approvals and payments.
Suppliers and costs
Building and operating data centers requires electrical infrastructure, power and cooling equipment, construction materials, labor and energy. Some equipment has long lead times and can be affected by price changes, tariffs and supply-chain constraints. Applied Digital uses long-term supplier contracts, early purchasing and standardized designs to secure components for its campuses.
Its named suppliers include ABB for electrical equipment, BASX for mechanical and cooling systems, and Caterpillar for backup generation. The company relies on a limited number of vendors for certain products and services, and some contracts provide a single source of materials. Replacement suppliers could cause delays and higher costs.
Applied Digital said it had purchased the full output of certain factories for what it believed was a 4-year time frame to secure key components. It also said supply chains were tight, with some components more constrained than others.
In fiscal Q1 2027, services and other cost of revenues included $176.1 million in tenant fit-out services and $19.8 million in energy costs. Data center rental and other cost of revenues included depreciation and personnel costs. Construction of the company’s campuses also requires substantial capital.
- Revenue$611.3M
- Cost of revenue−$453.6M
- Selling, general and administrative−$332.1M
- Other operating costs−$62.0M
- Operating income−$236.5M
Competitive position
Applied Digital competes to develop and operate data centers for high-performance computing and AI. Competition includes established data center owners Digital Realty Trust and Equinix, hyperscalers that build their own capacity, and independent developers. IREN, Cipher Digital, TeraWulf, Hut 8 and other companies that have expanded from blockchain hosting into high-performance computing also compete in this market. The legacy hosting business competes with other blockchain hosting providers.
Competition centers on securing sites with reliable power and interconnection, delivering facilities for high-density computing, attracting customers and obtaining capital. Applied Digital controls sites and uses a standardized campus design qualified by major hyperscalers. Its leases and its master service and telecom agreements with hyperscalers are also part of its customer relationships.
Our reading: Control of powered sites and interconnection can be a meaningful barrier to entry because competitors also need those resources, although securing power remains a constraint across the industry. Our reading: Long-term leases and established customer agreements support customer retention, but the company has relatively few high-performance computing customers. Our reading: Standardized design and supplier arrangements may help delivery, though competing developers also seek equipment, capital and customers.
| Competitor | Where they compete | Threat (our reading) |
|---|---|---|
| Digital Realty Trust, Inc. | Data center development and operation for HPC and AI | Medium |
| Equinix, Inc. | Data center development and operation for HPC and AI | Medium |
| IREN Limited | Power-advantaged HPC infrastructure development | Medium |
| Cipher Digital Inc. | Power-advantaged HPC infrastructure development | Medium |
| TeraWulf Inc. | Power-advantaged HPC infrastructure development | Medium |
| Riot Platforms, Inc. | Power-advantaged HPC infrastructure development | Medium |
| Core Scientific, Inc. | Power-advantaged HPC infrastructure development | Medium |
Growth opportunities
Applied Digital’s growth strategy centers on bringing contracted high-performance computing campuses into service, expanding existing sites and selectively adding locations. As of May 31, 2026, it had executed leases for approximately 1,410 MW of critical IT load across five campuses. Approximately 100 MW was operating and revenue-generating at that date.
The company subsequently reported that the first two buildings at Polaris Forge 1 had reached full ready-for-service status, with 250 megawatts of critical IT load. It expects to place over 600 megawatts into service over the next 12 months. It also expects approximately 250 megawatts of expansion leases to be executed by calendar year-end, at higher pricing than prior leases.
Beyond the contracted portfolio, Applied Digital is developing an active pipeline of over 3 GW of utility power at new sites and existing campuses. Through Base Electron, it has entered a long-term power purchase agreement covering an approximately 1,200-megawatt natural gas facility near Polaris Forge 3, with deliveries expected to begin in 2030. The Finland agreement provides for up to 1 gigawatt of potential power capacity.
The company believes it could grow its operating portfolio to 3.5 to 4 gigawatts by the end of calendar year 2030, conditional on demand and its ability to execute. ChronoScale has also announced plans with Microsoft for a 50-megawatt AI compute deployment using NVIDIA systems.
- $8.5MFY2022
- $55.4MFY2023
- $165.6MFY2024
- $228.6MFY2025
- $611.3MFY2026
Structural risks
- Financing: Data center construction is capital-intensive, and Applied Digital expects to need substantial additional capital to expand. Financing availability, interest rates and credit spreads can affect projects. The company reported approximately $6.4 billion of debt at the end of fiscal Q1 2027.
- Customer concentration: The high-performance computing and legacy hosting businesses each had one customer responsible for a substantial share of fiscal 2026 revenue from continuing operations. The company currently has a small number of high-performance computing customers and one crypto mining customer.
- Construction and delivery: Projects can face permitting delays, budget overruns, equipment shortages, contractor problems and insufficient power. Expected lease delivery dates are estimates and are subject to construction, permitting and interconnection risks.
- Supply chain: Certain products and services come from a limited number of vendors, including some single-source arrangements. Supplier failures could delay development and increase costs; tariffs and logistics constraints can also affect equipment delivery.
- Regulation and communities: Data center power use and AI applications face an evolving regulatory landscape. The company has also observed local moratoriums, tighter zoning, longer permitting timelines and community resistance in some markets.
Bottom line
Our reading
Our reading: Applied Digital is primarily a builder and landlord of powered AI data centers, with a legacy crypto hosting business and a consolidated cloud subsidiary. Long-term leases give it contracted revenue, but much of the portfolio still has to be built and placed in service. Its growth depends on securing power, equipment and financing while delivering for a small group of large customers.