Applied Digital Corporation reported fiscal third‑quarter 2026 results that surpassed analyst expectations, with revenue rising to $126.6 million—up 139% from $52.9 million in the same period a year earlier—and adjusted earnings per share of $0.09, a $0.24 improvement over the consensus estimate of –$0.14 to –$0.17. The company’s adjusted net income of $33.2 million and adjusted EBITDA of $44.1 million also beat expectations, reflecting a dramatic jump from $6.3 million in Q3 FY2025. The earnings beat was driven largely by the high‑performance computing (HPC) hosting business, which generated $71.0 million in revenue, up 34% from $52.9 million a year ago, and contributed $44.1 million in base rent, $18.9 million in tenant fit‑out services, and $8.1 million in ancillary revenue.
The data‑center hosting segment added $37.5 million in revenue, a 7% increase from the prior year, while the company’s cloud services business was spun off, resulting in a non‑cash write‑down that impacted net income. The mix shift toward higher‑margin HPC hosting and the elimination of the lower‑margin cloud services unit helped improve profitability, though the earnings beat was still largely supported by low‑margin fit‑out and power pass‑through services that operate at roughly 5% margins.
Polaris Forge 1, the company’s first 100 MW AI data‑center facility, became fully operational during the quarter, delivering $44.1 million in base rent and additional revenue from fit‑out and ancillary services. "We now operate one of the only 100 MW direct‑to‑chip liquid‑cooled data centers online today, and more importantly, it is fully operational," said Wes Cummins, Chairman and Chief Executive Officer. The milestone demonstrates Applied Digital’s ability to convert complex AI factory designs from blueprint to production with precision and speed, as Cummins added, "This Ready for Service milestone is a clear demonstration of the team's ability to convert highly complex AI Factory designs from blueprint to production with precision and speed."
Delta Forge 1, a second 100 MW campus, has broken ground and is expected to begin operations in mid‑2027. The company has secured significant financing, including a $2.15 billion private offering of senior secured notes for the Polaris Forge 2 campus and a $100 million DevCo facility with Macquarie Equipment Capital, underscoring its capacity to fund large‑scale projects. The shift from crypto‑mining cash flow to recurring lease income is a key milestone in Applied Digital’s long‑term growth strategy.
Market reaction to the results highlighted both enthusiasm for the revenue and earnings beat and caution over the quality of the margin drivers. Investors noted that while the company’s revenue growth is impressive, the earnings beat was largely driven by low‑margin fit‑out services and power pass‑throughs. "We are seeing a clear acceleration in demand for high‑performance AI data center capacity, with hyperscalers as aggressive as we have ever seen them. Just three months ago, we referenced approximately $400 billion in annual capital expenditures from the largest U.S. hyperscalers. That figure has now been reported to have increased to nearly $700 billion," said Cummins during the earnings call. The commentary underscores the strong tailwinds from hyperscaler demand while also signaling that margin expansion will depend on scaling the higher‑margin HPC hosting business and securing new long‑term leases.
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