Applied Digital’s Strategic Pivot Amidst Explosive Revenue Gains

Applied Digital has reported a staggering surge in revenue for its second fiscal quarter of 2026, driven by its high-performance computing operations. As the company aggressively expands its artificial intelligence infrastructure footprint, management has unveiled a strategic reorganization plan involving the spin-off of its cloud business unit, raising questions about its path to sustainable profitability.

• Revenue: $126.6 million (a 250% year-over-year increase)
• Net Loss: $31.2 million ($0.11 per share)
• Adjusted EBITDA: $20.2 million
• Major Contract: 15-year lease for Polaris Forge 2, with an approximate total value of $5 billion

Strategic Reorganization on the Horizon

In a move designed to accelerate growth, the company intends to separate its cloud division. This unit is slated to merge with EKSO Bionics Holdings and operate as a specialized AI workload platform under the new name “ChronoScale.” Applied Digital is expected to retain a 97% ownership stake in the newly formed entity. The objective of this corporate action is to allow the cloud and core data center hosting businesses to scale independently. This transaction is anticipated to close in the first half of 2026.

Infrastructure Expansion Gains Momentum

The company’s growth is underpinned by significant physical expansion. January saw the groundbreaking for “Delta Forge 1,” a new AI infrastructure campus located in a southern U.S. state. The facility is designed for a total capacity of 430 megawatts (MW), with operations scheduled to commence in mid-2027.

Progress continues at its Polaris locations as well. The Polaris Forge 1 site, with 100 MW of capacity, is now fully operational. Furthermore, for the under-construction Polaris Forge 2 campus, Applied Digital has secured a landmark 15-year lease agreement with a credit-worthy hyperscaler client. This contract covers 200 MW of capacity and is projected to generate roughly $5 billion in revenue over its full term.

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Financial Performance: Strong Top Line, Bottom Line Challenges

The leap in quarterly revenue to $126.6 million is primarily attributed to the HPC (High-Performance Computing) Hosting segment, which contributed $85.0 million. This figure includes $73.0 million from tenant build-out services and $12.0 million in lease revenue from the Polaris Forge 1 location. The legacy data center hosting business also saw growth, increasing its revenue by 15% year-over-year to $41.6 million.

Despite this robust operational growth, the company posted a net loss of $31.2 million for the quarter. However, on an adjusted basis, earnings before interest, taxes, depreciation, and amortization (EBITDA) were positive, coming in at $20.2 million.

The company is expected to release its next quarterly financial results on April 13, 2026.