Applied Digital Corporation
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Item 1. Business
Overview
Our Business
We are a U.S.-based designer, developer, owner, and operator of large-scale, purpose-built data centers engineered to support high-performance computing (“HPC”) workloads, including artificial intelligence (“AI”), machine learning, and other accelerated-compute applications. We design, build, and operate high-performance, sustainably engineered data centers—which we refer to as AI factories—and deliver that capacity to investment-grade hyperscalers and other leading compute customers under long-term lease and hosting arrangements. Our standardized, repeatable design model spans site selection, design, construction, and operations, and has been qualified by major hyperscalers, enabling rapid, flexible deployment in both air-cooled and liquid-cooled configurations.
Over the past several fiscal years, we have evolved from a company focused on blockchain hosting into a purpose-built HPC data center platform organized around our proprietary AI factory model. Today, our growth, capital allocation, and operating focus are centered on developing and operating HPC data centers, while our legacy blockchain hosting operations represent a smaller, single-customer component of our business that we expect to continue to decline in relative significance over time.
We conduct our business through two reportable segments: our HPC data center hosting business (the “HPC Hosting Business”) and our blockchain data center hosting business (the “Data Center Hosting Business”). As discussed further under Note 1 - Business and Basis of Presentation and Note 19 - Business Segments, our cloud services business is no longer an operating or reportable segment following the May 2026 transaction.
Our Competitive Strengths
We believe the following strengths position us to capture growing demand for HPC and AI infrastructure:
Control of power-advantaged sites
We originate and control large, contiguous sites with access to substantial, cost-competitive power and the interconnection rights necessary to energize high-density compute at scale. We believe that securing power and interconnection ahead of demand is the principal constraint on new HPC capacity and a core differentiator for us from many of our competitors.
Purpose-built, high-density design
Our campuses are engineered for liquid-cooled, high-density graphics processing unit (GPU) deployments, with redundant electrical and mechanical systems designed to meet the uptime and performance requirements of mission-critical AI workloads.
Long-term contracted revenue with high-quality counterparties
Our HPC capacity is contracted under long-term leases, including with investment-grade hyperscalers, providing long-dated revenue visibility.
Standardized, repeatable AI factory platform
We develop our campuses using a standardized, franchise-style design that is engineered to deliver state-of-the-art data centers of approximately 150 MW in approximately 14 to 18 months, with low water usage. A scalable operating model which standardizes operations and leverages the same core roles across campuses and our master service and master telecom service agreements with leading hyperscalers—agreements that are difficult to obtain—position us to move quickly as hyperscaler AI infrastructure investment accelerates.
HPC Hosting Business
Our HPC Hosting Business designs, constructs, owns, and operates next-generation data centers purpose-built to host high-density GPU and other accelerated-compute infrastructure for AI, machine learning, and other HPC applications.
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Polaris Forge 1
Our flagship HPC campus, located in Ellendale, North Dakota, is being developed in phases. Our first HPC data center at the campus, with approximately 100 MW of critical IT load, became operational in October 2025. A second data center, expected to provide an additional 150 MW, is partially operational, and a third data center, also expected to provide approximately 150 MW, is under construction with an anticipated ready-for-service date in calendar year 2027.
On May 28, 2025, our subsidiaries APLD ELN-02 LLC and APLD ELN-03 LLC each entered into a data center lease (the "ELN-02 Lease" and the "ELN-03 Lease”) with CoreWeave, Inc. (“CoreWeave”) to deliver an aggregate of 250 MW of capacity to host CoreWeave’s HPC operations at Polaris Forge 1. On August 28, 2025, our subsidiary APLD ELN-02 C LLC entered into a third lease (the “Building 4 Lease”) with CoreWeave for an additional 150 MW, bringing the total contracted capacity at Polaris Forge 1 under our CoreWeave leases to 400 MW. We have guaranteed the obligations of the applicable subsidiaries under each of these leases. On March 30, 2026, as a result of an internal restructuring at CoreWeave, the ELN-02 Lease was amended and the ELN-03 Lease was assigned, in each case, to a wholly owned subsidiary of CoreWeave, CoreWeave Compute Acquisition Co. VIII, LLC, as further described in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Business Overview."
Polaris Forge 2
On August 18, 2025, we broke ground on our Polaris Forge 2 data center campus near Harwood, North Dakota, with an initial 200 MW data center. We currently anticipate reaching initial capacity in the second half of calendar year 2026 and full capacity in early calendar year 2027. On October 22, 2025, we entered into an approximately 15-year lease with a U.S.-based investment-grade hyperscaler for 200 MW of critical IT load at the campus.
Delta Forge 1
On January 22, 2026, we broke ground on Delta Forge 1, a 300 MW critical IT load campus located in a strategic southern U.S. market. On April 23, 2026, we entered into two approximately 15-year leases with a second U.S.-based investment-grade hyperscaler for an aggregate 300 MW of critical IT load at the campus.
Polaris Forge 3
Polaris Forge 3 is a 300 MW critical IT load data center campus located in our northern United States region, currently under construction across two buildings. The aggregate 300 MW of critical IT load is contracted under two approximately 15-year leases (with three five-year renewal options) with a high investment-grade hyperscaler, representing approximately $7.5 billion of contracted revenue over the base term, with expected delivery beginning in the second half of calendar year 2027 through the second half of calendar year 2028.
Delta Forge 2
Delta Forge 2 is a 210 MW critical IT load campus located in our southern region, comprising a single building under construction. The full 210 MW of critical IT load is contracted under an approximately 15-year lease (with three five-year renewal options) with a high investment-grade hyperscaler, representing approximately $5.2 billion of contracted revenue over the base term, with expected delivery in the first half of calendar year 2028.
Contracted Lease Portfolio
As of May 31, 2026, we had executed long-term leases representing approximately 1,410 MW of contracted critical IT load across five campuses, representing approximately $36.2 billion of total contracted revenue over the initial 15-year base lease terms. Each lease is a direct, long-term agreement with CoreWeave or an investment-grade hyperscaler, is structured
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on a take-or-pay basis, and is non-cancellable, such that a termination for convenience would require payment of the full remaining contractual value. The following table summarizes our contracted HPC lease portfolio as of May 31, 2026:
| Campus | Anchor Tenant | Contracted Critical IT Load | Lease Term | Total Contracted Revenue (1) | Expected Delivery (2) | ||||||||||||||
| Polaris Forge 1 | CoreWeave | 400 MW | 15 years | ~$11.0B | 2H25–1H27 | ||||||||||||||
| Polaris Forge 2 | Investment-grade hyperscaler | 200 MW | 15 years | ~$5.0B | 2H26–1H27 | ||||||||||||||
| Polaris Forge 3 | High investment-grade hyperscaler | 300 MW | 15 years | ~$7.5B | 2H27–2H28 | ||||||||||||||
| Delta Forge 1 | High investment-grade hyperscaler | 300 MW | 15 years | ~$7.5B | 1H27–1H28 | ||||||||||||||
| Delta Forge 2 | High investment-grade hyperscaler | 210 MW | 15 years | ~$5.2B | 1H28 | ||||||||||||||
| Total / Portfolio | 1,410 MW | ~$36.2B | 2H25–2H28 | ||||||||||||||||
(1)Total contracted revenue reflects the initial 15-year base term of each lease and excludes renewal options. Each lease includes multiple five-year renewal options (three five-year options, except Polaris Forge 2, which includes two five-year options), which are not reflected in the amounts shown.
(2)Expected delivery reflects management’s current estimates of the periods during which contracted capacity is expected to be placed in service and is subject to construction, permitting, interconnection, and other risks. Expected delivery is presented as calendar year periods.
Site and Power Pipeline
In addition to our contracted lease portfolio, we are developing and originating additional capacity that we expect to support future HPC leasing. We categorize this pipeline as follows:
Secured and under construction
As of May 31, 2026, we had approximately 1.5 GW of critical IT load that is contracted and operating or under construction across our five named campuses—Polaris Forge 1, Polaris Forge 2, and Polaris Forge 3 in our northern region and Delta Forge 1 and Delta Forge 2 in our southern region—of which approximately 100 MW was operating and revenue-generating. Each megawatt in this category is backed by land under our control and/or an executed utility power agreement.
Active pipeline
We are advancing an active development pipeline of over 3 GW of utility (gross) power, consisting of near-term greenfield sites in multiple states together with expansion capacity at our existing campuses, certain of which are scalable to 1 GW or more.
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. You can identify these forward-looking statements through our use of words such as “will,” “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. Statements that contain these words and other statements that are forward-looking in nature should be read carefully because they discuss future expectations, contain projections of future results of operations or of financial positions, or state other “forward-looking” information.
These statements are based on our management’s beliefs and assumptions, which are based on currently available information. Our actual results, and the assumptions on which we relied, could prove materially different from our expectations. You are cautioned not to place undue reliance on forward-looking statements. Except as otherwise may be required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or actual operating results. There are a number of important factors that could cause our actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:
•our ability to complete construction of our data center campuses;
•our dependence on principal customers, including our ability to execute leases with key customers;
•availability of financing to continue to grow our business;
•labor and other workforce shortages and challenges;
•power or other supply disruptions and equipment failures;
•the addition or loss of significant customers or material changes to our relationships with these customers;
•delays or denials of entitlements or permits, including zoning, siting, utility and other permits, or other delays resulting from requirements of public agencies and utility companies;
•our sensitivity to general economic conditions including changes in disposable income levels and consumer spending trends;
•our ability to timely and successfully build new data center facilities with the appropriate contractual margins and efficiencies; and
•uncertainties of regulation policy.
You should carefully review the risks described in Item 1A of the Company’s Annual Report on Form 10-K for the year ended May 31, 2026, which was filed with the SEC on July 29, 2026, as well as any other cautionary language in this Quarterly Report on Form 10-Q, as the occurrence of any of these events could have an adverse effect, which may be material, on our business, results of operations, financial condition or cash flows.
A comparison of our results of operations and cash flows for the three months ended August 31, 2025 can be found under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q for the quarter ended August 31, 2025, filed with the SEC on October 9, 2025.
During the fiscal year 2026, we completed the contribution of our Cloud Services Business to ChronoScale (as defined below), formerly Ekso (as defined below). As a result of this transaction, certain prior-period amounts presented in this Quarterly Report have been recast to conform to the current period presentation. The recast primarily reflects changes associated with the transaction, including revisions to the presentation of certain historical financial statement line items and related disclosures. As a result, certain fiscal quarter 2025 amounts presented in this Quarterly Report differ from the amounts previously reported in our Quarterly Report on Form 10-Q for the quarter ended August 31, 2025.
Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time, and it is not possible for our management to predict all risk factors and uncertainties, nor are we able to assess the impact of all of these risk factors on our business or the extent to which any risk factor, or combination of risk factors, may cause actual results to differ materially from those contained in any forward-looking statements. These risks are not exhaustive.
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Executive Overview
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q.
Business Overview
We are a U.S. designer, developer, and operator of high-performance, sustainably engineered data centers and colocation services for artificial intelligence (“AI”), networking, and blockchain workloads. We provide digital infrastructure solutions to the rapidly growing industries of high-performance computing (“HPC”) and AI. We operate in two distinct business segments, data center hosting (the "Data Center Hosting Business") and HPC data center hosting (the “HPC Hosting Business”), both of which are included in our unaudited consolidated financial statements, as further discussed below. Management considers the Data Center Hosting Business and the HPC Hosting Business to be our core operations for long-run strategic and performance evaluation purposes.
We consolidate entities that meet the definition of a variable interest entity (“VIE”) for which the Company is considered the primary beneficiary or entities that meet the definition of a voting interest entity (“VOE”). The Company consolidates a VIE where it has been determined that the Company is the primary beneficiary of the entity's operation in accordance with ASC Topic 810, Consolidations. The primary beneficiary is the party that has both the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. In evaluating whether the Company is the primary beneficiary, the Company evaluates its power to direct the most significant activities of the VIE by considering the purpose and design of the entity and the risks the entity was designed to create and pass through to its variable interest holders. The Company also evaluates its economic interests in the VIE.
On May 5, 2026, we completed the separation of our cloud services business. As of August 31, 2026 we owned approximately 96% of the outstanding common stock of ChronoScale Holdings Corporation (“ChronoScale”). We consolidate ChronoScale under the voting interest model because we hold a controlling financial interest. The ownership interests in ChronoScale not attributable to us are presented as noncontrolling interests in the unaudited condensed consolidated financial statements.
Trends and Other Factors Affecting Our Business
Regulatory Environment
The regulatory landscape surrounding AI and blockchain hosting services is evolving rapidly, and we anticipate increased scrutiny and potential regulation in the near and long term. Any such developments may significantly impact our business and operations in ways that are difficult to predict.
Governments and regulatory bodies are considering measures to ensure the responsible development and deployment of AI systems, including transparency, accountability, and fairness guidelines. For example, in the U.S Senate, committees of jurisdiction have passed several AI bills that establish industry standards and impose significant obligations in relation to the use of AI systems. On the state level, several U.S. states have considered AI legislation, which aims to reduce risk associated with the use of AI; while certain states have passed comprehensive AI legislation. A number of states have recently issued moratoriums on future AI data centers while other states are considering the same. In Europe, the EU AI Act has been adopted, portions of which have started to take effect, with other portions continuing to take effect over the next several years.
The amount of energy used for AI and crypto mining has also received significant attention. The U.S. Energy Information Administration has recently launched surveys relating to electricity consumption from both data centers and cryptocurrency mining in the U.S. Certain U.S. states have also conducted similar studies. This indicates that more focus is being placed on the energy usage of these activities. It is unclear how the information collected will be used for future regulations, but it is expected that energy efficiency and sustainability will be critical factors regulating our industries. While there is currently insufficient support for any particular proposal, we expect that regulatory efforts in this area will continue to evolve and potentially impact our business.
As a company operating at the intersection of data center and HPC hosting services, we are committed to maintaining a proactive and adaptive approach to regulatory compliance. We closely monitor legislative and regulatory developments and engage in dialogue with relevant stakeholders to ensure our business practices align with the evolving legal and regulatory framework. Despite the uncertainties posed by the changing regulatory landscape, we remain committed to delivering
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innovative and responsible solutions in the data center and HPC hosting markets while prioritizing compliance and risk management. However, if we fail to comply with applicable laws and regulations, we may be subject to significant liabilities, including fines and penalties, and our business, financial condition, or results of operations could be adversely affected.
Critical Accounting Estimates
Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our unaudited condensed consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Our critical accounting estimates are identified and described in our annual consolidated financial statements and the related notes included in our Annual Report on Form 10-K and our subsequent Quarterly Reports on Form 10-Q.
Business Update
HPC Hosting Business
Our HPC Hosting Business designs, constructs, and operates next-generation data centers, which are designed to provide massive computing power and support HPC applications within a cost-effective model.
In the prior fiscal year, we commenced operations at our first HPC data center at our Polaris Forge 1 campus in Ellendale, North Dakota, with 100 MW of capacity. During the quarter, we began commencing operations at our second HPC data center at our Polaris Forge 1 campus, which reached its full 150MW of capacity as of the date of filing of this Form 10-Q.
Our third HPC building at our Polaris Forge 1 campus, which is expected to provide an additional 150MW of capacity, is currently under construction. We anticipate reaching full ready for service in calendar year 2027.
Our two buildings at our Polaris Forge 2 campus, with an aggregate 300MW of capacity, are currently under construction. We anticipate reaching initial ready for service in the second half of calendar year 2026 and full capacity in early calendar year 2027.
Our two buildings at our Polaris Forge 3 campus, with an aggregate 300MW capacity, are currently under construction. We anticipate reaching initial ready for service in the second half of calendar year 2027 and full capacity in the second half of calendar year 2028.
Our two buildings at our Delta Forge 1 campus, with an aggregate 300MW capacity, are currently under construction. We anticipate reaching initial ready for service in the first half of calendar year 2027 and full capacity in early calendar 2028.
On June 5, 2026, we entered into an approximately 15-year lease (with three five-year renewal options) with a high investment-grade hyperscaler at our Delta Forge 2 campus located in our southern region, comprising a single 210 MW building under construction. The lease is for the full 210 MW of critical IT load, representing approximately $5.2 billion of contracted revenue over the base term, with expected delivery in the first half of calendar year 2028.
We recognized $262.6 million in revenue from this business segment during the three months ended August 31, 2026, with $183.5 million related to services and other revenue and $79.1 million related to data center rental and other revenue.
Data Center Hosting Business
Our Data Center Hosting Business provides energized infrastructure services to crypto mining customers. Our custom-designed data centers allow customers to rent space based on their power requirements. As of August 31, 2026, our 106 MW facility in Jamestown, North Dakota and our 180 MW facility in Ellendale, North Dakota continue to operate at full capacity.
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We recognized $37.8 million in revenue from this business segment during the three months ended August 31, 2026.
ChronoScale
In the prior fiscal year, we completed the separation of our cloud business in a series of transactions. As of August 31, 2026, we own approximately 96% of the issued and outstanding equity of ChronoScale Holdings Corporation ("ChronoScale Holdings"). ChronoScale Holdings owns and operates our historic cloud business through its wholly owned subsidiary, ChronoScale Corporation, and is consolidated into our financial statements.
The cloud business currently operates in three states: Colorado, Minnesota and Utah. This business provides cloud services to customers, such as AI and machine learning developers by renting space at third party co-location centers and providing the customers with access to its cloud computing equipment. Additionally, effective in the first quarter of fiscal year 2027, ChronoScale Holding’s cloud business provides AI infrastructure, or GPU-related, hardware, and ancillary support and maintenance services, through resale arrangements.
On July 1, 2026, we completed a holding company formation transaction (the “Holding Company Transaction”) that created the new parent holding company as the public company, with its operating companies as wholly-owned subsidiaries, including Applied Digital Cloud Corporation, which changed its name to ChronoScale Corporation. We effected the holding company structure to better reflect our individual operating businesses, which allows for and can accommodate future growth from internal operations and generally provides for greater administrative and operational flexibility. ChronoScale Holdings has the exact same classes and number of shares outstanding after the Holding Company Transaction as its predecessor had outstanding immediately before the Holding Company Transaction, and as such, the shareholders of ChronoScale Corporation prior to the Holding Company Transaction were not diluted as a result thereof. Following the Holding Company Transaction, ChronoScale Holdings became the successor issuer to ChronoScale and continues to trade on Nasdaq under the ticker symbol “CHRN” with the same CUSIP.
On August 6, 2026, ChronoScale entered into a two-year strategic partnership with Microsoft to support the planned development of approximately 50 MW of AI compute capacity. On August 24, 2026, ChronoScale entered into a one-year extension of such strategic partnership, resulting in a total of a three-year service term. Upon projected completion, the deployment is expected to expand available compute capacity and further strengthen ChronoScale’s digital infrastructure supporting AI and cloud computing applications.
Debt and Equity Offerings and Changes to Equity
Cloud SAFE Payoff
During the fiscal year ended May 31, 2025, we entered into two Simple Agreements for Future Equity (“SAFEs”) with an investor for equity in Cloud, which was, at that time, our wholly-owned subsidiary, for aggregate proceeds of $12.0 million. On June 2, 2026, following an agreement reached with the investor, we paid off all amounts outstanding under the SAFEs, totaling $13.3 million.
$1.59 Billion Senior Secured Notes due 2031
On June 16, 2026, APLD ComputeCo 3 LLC refinanced the Bridge Facility with the closing of a $1.59 billion offering (the “2031 7.000% Notes Offering”) of 7.000% senior secured notes due 2031 (the “2031 7.000% Notes”) at an issue price of 100.000% of par. The 2031 7.000% Notes are senior secured obligations of APLD ComputeCo 3 LLC and bear interest at a rate of 7.000% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2026. The principal amount of the 2031 7.000% Notes will amortize on a semi-annual basis on June 15 and December 15 of each year, pursuant to the terms and amounts set forth in the 2031 7.000% Notes Indenture. The 2031 7.000% Notes will mature on June 15, 2031, unless earlier redeemed or repurchased in accordance with their terms. The 2031 7.000% Notes are fully and unconditionally guaranteed by the subsidiary guarantors, all of which are wholly owned subsidiaries of APLD ComputeCo 3 LLC. The Company provided a customary completion guarantee for the 2031 7.000% Notes Offering.
Series G Preferred Stock
On June 26, 2026, we entered into the sixth amendment to the PEPA to increase the aggregate commitment amount under the PEPA for the issuance of shares of Series G Preferred Stock from $1,590,000,000 to $2,000,000,000.
As Series G Preferred Stock may be reissued, during the three months ended August 31, 2026, we issued and sold 283,250 shares of Series G Preferred Stock for gross proceeds of $275.0 million. During the three months ended August 31, 2026,
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154,500 shares of Series G Preferred Stock were converted into 4.5 million shares of our common stock. As of August 31, 2026, 128,750 shares of Series G Preferred Stock were issued and outstanding.
Satisfaction of Escrow Release Condition for 6.750% Senior Secured Notes due 2031
On June 18, 2026, APLD ComputeCo 2 satisfied the escrow release condition under the escrow agreement for the 2031 6.750% Notes and executed and delivered to the escrow agent an escrow release certificate directing the escrow agent to release the funds in the escrow account to APLD ComputeCo 2 and apply such funds in accordance with the escrow agreement and the indenture for the 2031 6.750% Notes.
Upsize of 2026 Revolving Credit Facility
On June 26, 2026, in connection with the 2026 Revolving Credit Facility, the Company, APLD Intermediate HoldCo, and certain subsidiaries of APLD Intermediate HoldCo entered into an Incremental Assumption Agreement No. 1 (the “Incremental Assumption Agreement”), with First National Bank of Omaha (in its capacities as administrative agent and collateral agent under the 2026 Revolving Credit Facility) and the lenders and issuing banks party thereto, providing for an Incremental Revolving Facility Commitment (as defined in the Incremental Assumption Agreement) in an aggregate principal amount of up to $80.0 million (the “Incremental Revolving Financing”). After giving effect to the Incremental Assumption Agreement, the aggregate revolving commitments under the 2026 Revolving Credit Facility increased to $430.0 million, with an additional $120 million accordion option remaining. The Incremental Revolving Financing constitutes a part of the 2026 Revolving Credit Facility and is subject to the terms and conditions of the Revolving Credit Agreement and the other loan documents entered into in connection therewith.
Loan and Security Agreement
On June 30, 2026, we entered into a Loan and Security Agreement (the "Texas Capital Loan Agreement") with Texas Capital Bank ("Texas Capital") and a related Promissory Note in favor of Texas Capital in the stated principal amount of $58.5 million (the "Texas Capital Note"). The Texas Capital Loan Agreement contains standard terms, conditions and covenants. Interest is payable on the Texas Capital Note at the sum of an adjusted term SOFR plus an applicable margin. The Texas Capital Note matures on June 30, 2031.
Series E and Series E-1 Redemptions
During the three months ended August 31, 2026, 276,673 shares of Series E Preferred Stock were redeemed as well as 78 shares of Series E-1 Preferred Stock.
Recent Developments
Series G
Subsequent to the quarter, 128,750 shares of Series G Preferred Stock were converted into an aggregate of 5.2 million shares of the Company’s common stock.
Sale of Legacy Ekso Business
On September 30, 2026, ChronoScale, through its wholly-owned subsidiary ChronoScale Intermediate LLC, completed the sale of its legacy Ekso business through two related transactions: Ekso and its wholly-owned German subsidiary sold substantially all of the assets of Ekso’s “EksoWorks” industrial exoskeleton business, including the EVO product line, to DynaWear Tech, Inc. under an asset purchase agreement, and immediately thereafter, ChronoScale Intermediate LLC sold all of the outstanding capital stock of Ekso, which held the remaining neuro-rehabilitation business, to WanderEkso Inc., a subsidiary of Wandercraft SAS, under a stock purchase agreement.
Base Electron Power Purchase Agreement
On October 4, 2026, the Company entered into a Power Purchase Agreement with Base Electron, for the purchase of capacity and energy from an approximately 1,200 MW natural gas-fired generation facility to be developed by Base Electron in North Dakota, which is intended to provide dedicated generation for our Polaris Forge 3 campus expansion.
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Results of Operations
Comparative Results for the Three Months Ended August 31, 2026 and August 31, 2025:
The following table sets forth key components of the results of operations (in thousands) during the three months ended August 31, 2026 and August 31, 2025.
| Three Months Ended | |||||||||||||||||||||
| August 31, 2026 | August 31, 2025 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||
| Services and other revenue | $ | 262,755 | $ | 80,934 | |||||||||||||||||
| Data center rental and other revenue | 79,120 | — | |||||||||||||||||||
| Total revenue | 341,875 | 80,934 | |||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||
| Services and other cost of revenue | 245,709 | 58,831 | |||||||||||||||||||
| Data center rental and other cost of revenue | 43,862 | 140 | |||||||||||||||||||
Selling, general and administrative (1) | 114,683 | 29,482 | |||||||||||||||||||
| Loss on abandonment of assets | — | 2,243 | |||||||||||||||||||
| Total costs and expenses | 404,254 | 90,696 | |||||||||||||||||||
| Operating loss | (62,379) | (9,762) | |||||||||||||||||||
| Interest expense | 77,383 | 8,013 | |||||||||||||||||||
Interest income (2) | (35,821) | (857) | |||||||||||||||||||
| Loss on change in fair value of derivatives | 49,511 | — | |||||||||||||||||||
| Loss on change in fair value of investment | 11,352 | — | |||||||||||||||||||
| Other expense, net | 1,311 | — | |||||||||||||||||||
| Net loss before income tax expense | (166,115) | (16,918) | |||||||||||||||||||
| Income tax expense | 1,886 | 8 | |||||||||||||||||||
| Net loss from continuing operations | (168,001) | (16,926) | |||||||||||||||||||
| Net loss from discontinued operations | (16,054) | — | |||||||||||||||||||
| Net loss | (184,055) | (16,926) | |||||||||||||||||||
| Net loss attributable to noncontrolling interest and redeemable noncontrolling interest | (51,484) | — | |||||||||||||||||||
| Preferred dividends | (1,543) | (1,576) | |||||||||||||||||||
| Net loss attributable to common stockholders | $ | (237,082) | $ | (18,502) | |||||||||||||||||
| Net loss attributable to common stockholders | |||||||||||||||||||||
| Continuing operations | $ | (221,028) | $ | (18,502) | |||||||||||||||||
| Discontinued operations | (16,054) | — | |||||||||||||||||||
| Net loss | $ | (237,082) | $ | (18,502) | |||||||||||||||||
| Basic and diluted net loss per share attributable to common stockholders | |||||||||||||||||||||
| Continuing operations | $ | (0.76) | $ | (0.07) | |||||||||||||||||
| Discontinued operations | (0.06) | — | |||||||||||||||||||
| Basic and diluted net loss per share | $ | (0.82) | $ | (0.07) | |||||||||||||||||
| Basic and diluted weighted average number of shares outstanding | 291,557,618 | 255,892,902 | |||||||||||||||||||
Adjusted Amounts (3) | |||||||||||||||||||||
Adjusted revenue | $ | 300,393 | $ | 64,216 | |||||||||||||||||
| Adjusted operating income (loss) | $ | 37,816 | $ | (3,616) | |||||||||||||||||
Adjusted operating margin | 13 | % | (6) | % | |||||||||||||||||
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| Adjusted net loss from continuing operations attributable to common stockholders | $ | (4,053) | $ | (7,570) | ||||||||||||||||
| Adjusted net loss from continuing operations attributable to common stockholders per diluted share | $ | (0.01) | $ | (0.03) | ||||||||||||||||
Other Financial Data (3) | ||||||||||||||||||||
| EBITDA | $ | (72,625) | $ | (18,140) | ||||||||||||||||
as a percentage of adjusted revenue | (24) | % | (28) | % | ||||||||||||||||
| Adjusted EBITDA | $ | 64,412 | $ | 537 | ||||||||||||||||
as a percentage of adjusted revenue | 21 | % | 1 | % | ||||||||||||||||
| Net operating income | $ | 58,829 | $ | — | ||||||||||||||||
| Net operating income margin | 89 | % | — | % | ||||||||||||||||
(1)Includes related party selling, general and administrative expense of $49.7 thousand and $74.3 thousand for the three months ended August 31, 2026 and August 31, 2025, respectively. See Note 7 - Related Party Transactions for further discussion of related party transactions.
(2)Includes related party income of $0.7 million for the three months ended August 31, 2026. See Note 7 - Related Party Transactions for further discussion of related party transactions.
(3)Adjusted Amounts and Other Financial Data are non-GAAP performance measures. These non-GAAP measures exclude the results of the Cloud Services Business. A reconciliation of reported amounts to adjusted amounts can be found in the "Non-GAAP Measures and Reconciliation" section of Management’s Discussion and Analysis.
Commentary on Results of Operations Comparative Results for the Three Months Ended August 31, 2026 compared to the Three Months Ended August 31, 2025
Revenue
Services and other revenue increased $181.8 million, or 225%, from $80.9 million for the three months ended August 31, 2025 to $262.8 million for the three months ended August 31, 2026. The increase was primarily due to an increase in tenant fit-out services of approximately $157.2 million. This revenue also consisted of approximately $23.0 million in GPU hardware sales related to ChronoScale. The remaining increase in services and other revenue was due to performance improvements in Data Center Hosting Business and ChronoScale during the three months ended August 31, 2026 compared to the three months ended August 31, 2025.
Data center rental and other revenue was $79.1 million for the three months ended August 31, 2026 compared to no revenue for the three months ended August 31, 2025, as our HPC Hosting Business commenced operations in the second half of the fiscal year 2026, resulting in approximately $65.8 million related to base rent, net of $0.9 million in amortization of customer lease incentives, and $13.3 million related to tenant recoveries.
Cost of revenues
Services and other cost of revenues increased $186.9 million, or 318%, from $58.8 million for the three months ended August 31, 2025 to $245.7 million for the three months ended August 31, 2026. The increase in services and other cost of revenues was due to the following changes:
•approximately $151.1 million increase in expenses associated with tenant fit-out services for our HPC Hosting Business;
•approximately $22.4 million in cost of revenue associated with GPU hardware sales related to ChronoScale, which commenced during the current fiscal quarter;
•approximately $14.2 million increase in depreciation and amortization expense due to the Cloud Services Business no longer being classified as held for sale;
•approximately $3.6 million increase in lease and lease related expenses primarily related to ChronoScale’s operating leases; and
•approximately $0.3 million increase in personnel expenses and other costs due to the increases in headcount as well as other related costs directly supporting revenue.
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These increases were partially offset by a decrease of approximately $4.7 million in energy costs associated with our Data Center Hosting Business and other costs directly supporting revenue.
Data center rental and other cost of revenue increased by $43.7 million, from $0.1 million for the three months ended August 31, 2025 to $43.9 million for the three months ended August 31, 2026 as the Company’s HPC hosting operations were not fully commenced during the first fiscal quarter 2026. The increase in data center rental and other cost of revenue was categorized as follows:
•approximately $22.4 million increase in depreciation and amortization associated with our HPC Hosting Business;
•approximately $13.3 million increase in expenses which are reimbursable as tenant recoveries;
•approximately $5.6 million increase in rental property operating expenses, which are not eligible for recovery from our tenant;
•approximately $1.3 million increase in property insurance expenses associated with our HPC Hosting Business; and
•approximately $0.8 million increase in property tax expenses associated with our HPC Hosting Business.
Selling, general and administrative expense
Selling, general and administrative expense increased $85.2 million, or 289%, from $29.5 million for the three months ended August 31, 2025 to $114.7 million for the three months ended August 31, 2026. The increase in selling, general and administrative expense was categorized as follows:
•approximately $51.7 million increase in stock based compensation primarily due to an increase in shares awarded related to the increase in headcount and increase in performance stock awards granted in the period after the three months ended August 31, 2025;
•approximately $12.1 million increase in professional service expense primarily related to legal services provided on discrete transactions and projects, as well as general support of the business;
•approximately $9.9 million increase in personnel expenses related to the increase in headcount;
•approximately $9.5 million increase in other selling, general, and administrative expense such as travel, computer and software expenses; and
•approximately $2.0 million increase in lease and lease related expense primarily related to ChronoScale’s operating leases.
Loss on abandonment of assets
Loss on abandonment of assets was $2.2 million for the three months ended August 31, 2025, driven by the write down of assets to their fair value upon disposal. There was no such loss recorded in the current year comparative period.
Interest expense
Interest expense increased $69.4 million, or 866%, from $8.0 million for the three months ended August 31, 2025, to $77.4 million for the three months ended August 31, 2026. As we entered into more debt arrangements, there was an increase of approximately $66.4 million in interest expense, approximately $2.8 million in loan issuance discount, and approximately $2.4 million in loan issuance cost. These increases were partially offset by a decrease of $2.2 million in finance lease interest associated with the renegotiation of the majority of our finance leases during fiscal year ended May 31, 2026.
Interest income
Interest income increased $35.0 million, or 4,080%, from $0.9 million for the three months ended August 31, 2025 to $35.8 million for the three months ended August 31, 2026 due to an increase in funds held in interest-bearing accounts.
Loss on change in fair value of derivatives
Loss on the change in fair value of derivatives was $49.5 million for the three months ended August 31, 2026, due a decrease of $56.1 million in the fair value of our Babcock & Wilcox Enterprises, Inc. (“B&W”) common stock warrant and an increase of $6.6 million in the fair value of the derivative assets related to the preferred units and corresponding common units held by APLD HPC TopCo 2’s redeemable noncontrolling interest. There was no such loss recorded in the prior year comparative period.
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Loss on change in fair value of investment
Loss on change in fair value of investment was $11.4 million for the three months ended August 31, 2026, due to a decrease in fair value of our investment in B&W common stock. There was no such loss recorded in the prior year comparative period.
Other expense, net
Other expense, net was $1.3 million for the three months ended August 31, 2026 and consisted of a loss of approximately $1.3 million due to the settlement of the SAFEs as a result of an agreement reached with the investor offset by a gain on the fair value of warrants issued to third parties. There was no such activity recorded in the prior year comparative period.
Income tax expense
Income tax expense was $1.9 million for the three months ended August 31, 2026, compared to nominal expense for the three months ended August 31, 2025. This change was driven by an increase in current federal and state income tax expense during the current fiscal quarter.
Net loss from discontinued operations
Net loss from discontinued operations was $16.1 million for the three months ended August 31, 2026 and represents the income statement activity related to the Ekso business at ChronoScale classified as held for sale and discontinued operations. There was no such activity in the prior year comparative period.
Comparative Segment Data for the Three Months Ended August 31, 2026 and August 31, 2025:
The following table sets forth the operating (loss) profit for each of our segments for the three months ended August 31, 2026 and August 31, 2025 (in thousands):
| Three Months Ended | |||||||||||||||||||||
| August 31, 2026 | August 31, 2025 | ||||||||||||||||||||
| Segment profit | |||||||||||||||||||||
Data Center Hosting Business | $ | 13,327 | $ | 6,035 | |||||||||||||||||
HPC Hosting Business | 33,431 | (2,022) | |||||||||||||||||||
| Total segment profit | $ | 46,758 | $ | 4,013 | |||||||||||||||||
Commentary on Segment Data Comparative Results for the Three Months Ended August 31, 2026 compared to the Three Months Ended August 31, 2025
Data Center Hosting Business
Operating Profit
Data Center Hosting Business operating profit increased $7.3 million, or 121%, from $6.0 million for the three months ended August 31, 2025 to $13.3 million for the three months ended August 31, 2026 primarily due to a decrease of $6.4 million in cost of revenues due to more advantageous power pricing when compared to the to the three months ended August 31, 2025.
HPC Hosting Business
Operating Profit
HPC Hosting Business operating profit increased $35.5 million, or 1,753%, from a loss of $2.0 million for the three months ended August 31, 2025 to a profit of $33.4 million for the three months ended August 31, 2026. The change is primarily due to revenue generated from the first two buildings at our Polaris Forge 1 campus, as well as tenant fit-out services performed, net of expenses during the three months ended August 31, 2026 compared to the three months ended August 31, 2025.
Non-GAAP Measures
To supplement our unaudited condensed consolidated financial statements presented under GAAP, we are presenting certain non-GAAP financial measures. We are providing these non-GAAP financial measures to disclose additional
48
information to facilitate the comparison of past and present operations by providing perspective on results absent one-time or significant non-cash items. We utilize these measures in the business planning process to understand expected operating performance and to evaluate results against those expectations. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results, provide management and investors with an additional understanding of our core business operating results regarding factors and trends affecting our business and provide a reasonable basis for comparing our ongoing results of operations. Management considers the Data Center Hosting Business and the HPC Hosting Business to be our core operations for long-run strategic and performance evaluation purposes. Accordingly, these non-GAAP financial measures exclude the results of our consolidated subsidiary, ChronoScale. ChronoScale is included in our unaudited condensed consolidated financial statements and results of continuing operations. Due to its strategic role relative to the Company’s core business, management believes the ChronoScale results may obscure underlying trends in the performance of core operations when included in certain non-GAAP measures.
These non-GAAP financial measures are provided as supplemental measures to our performance measures calculated in accordance with GAAP and therefore, are not intended to be considered in isolation or as a substitute for comparable GAAP measures. Excluding the results of ChronoScale in our non-GAAP financial measures removes revenues and expenses that are part of the Company’s consolidated results and continuing operations and should not be viewed as measures or reflections of liquidity or profitability in accordance with GAAP. Further, these non-GAAP financial measures have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. Because of the non-standardized definitions of non-GAAP financial measures, we caution investors that the non-GAAP financial measures as used by us in this Quarterly Report on Form 10-Q have limits in their usefulness to investors and may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. Further, investors should be aware that when evaluating these non-GAAP financial measures, these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, from time to time in the future there may be items that we may exclude for purposes of our non-GAAP financial measures and we may in the future cease to exclude items that we have historically excluded for purposes of our non-GAAP financial measures. Likewise, we may determine to modify the nature of the adjustments to arrive at our non-GAAP financial measures. Investors should review the non-GAAP reconciliations provided below and not rely on any single financial measure to evaluate our business.
Adjusted Revenue
“Adjusted revenue” is a non-GAAP financial measure that represents total revenue excluding ChronoScale revenue.
Adjusted Operating Income (Loss), Adjusted Net Loss from Continuing Operations, and Adjusted Net Loss from Continuing Operations per Diluted Share
“Adjusted operating income (loss)” and “Adjusted net loss from continuing operations” are non-GAAP financial measures that represent operating income and net income (loss) from operations excluding ChronoScale, respectively. Adjusted operating income (loss) is Operating loss excluding operating (loss) income from ChronoScale, stock-based compensation, non-recurring repair expenses, diligence, acquisition, disposition and integration expenses, litigation expenses, non-cash amortization of customer lease incentives, loss on abandonment of assets, restructuring expenses and other non-recurring expenses that management believes are not representative of our expected ongoing costs. Adjusted net loss from continuing operations is Adjusted operating income (loss) further adjusted for interest expense directly attributable to ChronoScale, loss on change in fair value of derivatives, and loss on change in fair value of investment. We define “Adjusted net loss from continuing operations per diluted share” as Adjusted net loss from continuing operations divided by weighted average diluted share count.
EBITDA and Adjusted EBITDA
“EBITDA” is defined as earnings before interest expense, interest income, income tax expense, and depreciation and amortization and excluding results of ChronoScale. “Adjusted EBITDA” is defined as EBITDA adjusted for stock-based compensation, non-cash amortization of customer lease incentives, non-recurring repair expenses, diligence, acquisition, disposition and integration expenses, litigation expenses, loss on abandonment of assets, loss on change in fair value of derivatives, loss on change in fair value of investments, restructuring expenses, and other non-recurring expenses that management believes are not representative of our expected ongoing costs.
Net Operating Income
"Net Operating Income" is a non-GAAP financial measure that represents base rental revenue from the HPC Hosting Business. Net Operating Income is HPC Hosting Business base rental revenue, excluding the non-cash amortization of one-
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time customer lease incentives provided at contract inception, less rental property operating expenses, property taxes, and property insurance expenses. "Net Operating Income Margin" is defined as Net Operating Income divided by HPC Hosting Business base rental revenue.
Reconciliation of GAAP to Non-GAAP Measures
(In thousands, except percentage data)
| Three Months Ended | |||||||||||||||||||||
| August 31, 2026 | August 31, 2025 | ||||||||||||||||||||
Adjusted revenue | |||||||||||||||||||||
Total Revenue (GAAP) | $ | 341,875 | $ | 80,934 | |||||||||||||||||
| Less: ChronoScale revenue | (41,482) | (16,718) | |||||||||||||||||||
| Adjusted revenue (Non-GAAP) | $ | 300,393 | $ | 64,216 | |||||||||||||||||
| Adjusted operating income (loss) | |||||||||||||||||||||
| Operating loss (GAAP) | $ | (62,379) | $ | (9,762) | |||||||||||||||||
| Operating loss from ChronoScale | 25,354 | (12,531) | |||||||||||||||||||
Stock-based compensation (1) | 59,391 | 14,446 | |||||||||||||||||||
Non-recurring repair expenses (2) | 72 | 173 | |||||||||||||||||||
Diligence, acquisition, disposition and integration expenses (3) | 11,911 | 1,196 | |||||||||||||||||||
Litigation expenses (4) | 1,177 | 190 | |||||||||||||||||||
| Non-cash amortization of customer lease incentives | 854 | — | |||||||||||||||||||
| Loss on abandonment of assets | — | 1,751 | |||||||||||||||||||
Restructuring expenses (5) | 129 | 431 | |||||||||||||||||||
Other non-recurring expenses (6) | 1,307 | 490 | |||||||||||||||||||
| Adjusted operating income (loss) (Non-GAAP) | $ | 37,816 | $ | (3,616) | |||||||||||||||||
Adjusted operating margin | 13 | % | (6) | % | |||||||||||||||||
| Adjusted net loss from continuing operations | |||||||||||||||||||||
| Net loss from continuing operations (GAAP) | $ | (168,001) | $ | (16,926) | |||||||||||||||||
| Operating loss from ChronoScale | 25,354 | (12,531) | |||||||||||||||||||
| Net interest expense directly attributable to ChronoScale | 1,557 | 3,210 | |||||||||||||||||||
Stock-based compensation (1) | 59,391 | 14,446 | |||||||||||||||||||
Non-recurring repair expenses (2) | 72 | 173 | |||||||||||||||||||
Diligence, acquisition, disposition and integration expenses (3) | 11,911 | 1,196 | |||||||||||||||||||
Litigation expenses (4) | 1,177 | 190 | |||||||||||||||||||
| Non-cash amortization of customer lease incentives | 854 | — | |||||||||||||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-10-16 | Cummins Wes | CEO; Chairman | Buy | +55,803 | $18.04 | $1,006,686 |
| 2026-10-16 | Zhang Jason Gechen | President | Buy | +300,000 | $18.86 | $5,658,000 |
| 2026-10-13 | Nottenburg Richard N | Director | Sell | -31,250 | $21.84 | -$682,500 |
| 2026-08-04 | Nottenburg Richard N | Director | Sell | -75,000 | $31.15 | -$2,336,250 |
Source: SEC Form 4 filings.
Next expected filings
- ~2027-01-08 10-Q expected by 2027-01-09 (in 72 days)
- ~2027-04-08 10-Q expected by 2027-04-09 (in 162 days)
- ~2027-07-15 10-K expected by 2027-07-27 (in 260 days)
- ~2027-10-07 10-Q expected by 2027-10-08 (in 344 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-10-07 8-K Earnings Release; Financial Statements and Exhibits
- 2026-10-07 10-Q Quarterly Report
- 2026-09-25 DEF 14A Proxy Statement
- 2026-09-25 POSASR POSASR
- 2026-07-29 10-K Annual Report
- 2026-07-27 8-K Earnings Release; Financial Statements and Exhibits
- 2026-06-26 8-K Material Agreement Entered; Material Financial Obligation; Unregistered Equity Sale; Financial Statements and Exhibits
- 2026-06-17 8-K/A Material Agreement Entered
- 2026-06-16 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits
- 2026-06-09 8-K Regulation FD Disclosure; Other Events; Financial Statements and Exhibits
- 2026-06-09 8-K Other Events; Financial Statements and Exhibits
- 2026-05-05 8-K Material Agreement Entered; Completion of Acquisition/Disposition; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-04-16 8-K Officer/Director Change
- 2026-04-08 10-Q Quarterly Report
- 2026-04-08 8-K Earnings Release; Financial Statements and Exhibits