Applied Digital stock jumps as revenue triples on surging AI data center demand

Applied Digital stock rose by 7% in premarket trading on Wednesday after the data center operator reported second-quarter revenue that comfortably beat Wall Street expectations, underscoring strong demand for large-scale infrastructure tied to artificial intelligence workloads.

The company said revenue more than tripled year on year in the quarter, while losses narrowed significantly, as it continued to secure long-term lease agreements with major hyperscale customers.

Revenue surge driven by AI infrastructure demand

Applied Digital reported fiscal second-quarter revenue of $126.6 million, far above analysts’ expectations of about $88 million, according to data compiled by LSEG.

The result compares with revenue of $36.16 million in the same period a year earlier, reflecting rapid growth as customers seek capacity for AI training and deployment.

The company posted a net loss of $19.1 million, or 7 cents a share, a sharp improvement from a loss of $139.4 million, or 66 cents a share, in the prior-year quarter.

On an adjusted basis, Applied Digital reported break-even earnings, compared with analyst forecasts for a loss of 16 cents a share.

The earnings update lifted Applied Digital shares by more than 7.3% in premarket trading, with the stock trading at $31.74.

As of the previous close, the shares had surged more than 239% over the past year.

Hyperscaler leases strengthen long-term outlook

Growth has been underpinned by large, long-term leasing agreements with hyperscalers.

Applied Digital recently secured a $5 billion lease with a US-based hyperscaler covering 200 megawatts of capacity at its Polaris Forge 2 campus in North Dakota.

The company said it now has leases with two hyperscalers across its Polaris Forge 1 and 2 campuses in the state.

Combined, these existing agreements are expected to generate approximately $16 billion in lease revenue over their terms, excluding any potential renewal options.

Chief executive Wes Cummins highlighted the strategic advantages of the region, pointing to its cool climate and abundant energy supply.

He said these factors, alongside the company’s experience in delivering technically complex data center projects, position Applied Digital as a competitive provider for hyperscale customers.

Based on current and anticipated lease activity, Applied Digital said it expects to exceed its $1 billion net operating income target within the next five years.

The company added that this outlook is supported by projections for additional hyperscaler customers across new development sites.

Strategic shifts and business restructuring

Alongside its operational expansion, Applied Digital is reshaping its corporate structure as it pivots toward becoming a data center-focused real estate investment trust.

Last month, the company announced plans to spin off its cloud services business and merge it with Ekso Bionics to form a new AI-focused entity called ChronoScale.

Applied Digital said it will retain a 97% ownership stake in ChronoScale following the transaction.

The move is intended to separate the capital-intensive data center business from cloud operations, allowing each unit to pursue distinct growth strategies.

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