Applied Digital Signs 1,200 MW Gas Power Deal and Targets 15%+ Rent Uplifts on 250 MW of Expansions as It Pivots From Land Grab to Delivery
Fiscal first quarter 2027 earnings call, October 7, 2026
Applied Digital used its fiscal first quarter call to signal a change in emphasis. Over the past year, management said, success was measured by how fast it grew its campus portfolio and contracted value, which now stands at about $36 billion across 5 campuses in 3 states. The next phase is judged on conversion. CEO Wes Cummins said the company expects to place more than 600 megawatts into service over the next 12 months, against 250 megawatts over the past 12. The more consequential disclosures were on pricing, power and capacity ambitions, and they point to a company that believes it holds scarce assets and intends to be paid for them.
Expansion Leases at Materially Higher Rents
Management expects about 250 megawatts of expansion leases to be signed by calendar year-end at "materially higher pricing" than prior leases. Pressed by George Sutton of Craig-Hallum on what premium means, Cummins offered the most specific guidance to date: "you can think of definitely north of 15% plus increases on the lease rate, but also could include longer duration on the leases." He declined to pin the figure down further. The company is marketing about 1.3 gigawatts of U.S. capacity. Cummins described demand as "at max," with 2027 delivery "fairly contracted at this point" and buyers now moving into 2028 and 2029.
Cummins framed the premium as a function of scarcity. Local moratoriums, tighter zoning and longer permitting times are, in his view, raising the value of campuses that already have land, power, interconnection, permits and community support. His argument is that a tenant with tens of thousands of GPUs in a liquid-cooled campus faces a simple choice at the end of a 15-year term: "renew with us or try finding comparable power and approval somewhere else." That supports a bull case on renewals and terminal value, though it remains an assertion until the first lease expiry, which is more than a decade away. The company is also being more selective about tenants. Cummins confirmed that the term means credit quality, because Applied Digital "has a limited amount of capacity to build."
Power Strategy: Base Electron and the Gas Pipeline
Applied Digital signed a long-term power purchase agreement with Base Electron, an independent producer in which it holds roughly 10%. The agreement covers an approximately 1,200-megawatt natural gas facility in Center, North Dakota, adjacent to the Polaris Forge 3 campus, with deliveries expected to begin in 2030. The facility is designed to be front-of-the-meter and grid-connected, and the agreement can follow the company's tenants. Cummins said the company is working with a new WBI pipeline, owned by MDU, to secure gas at Center and Harwood and possibly Jamestown, and that Center sits near the pipeline's start, giving "almost unlimited capacity for expansion." Base Electron has already procured equipment for roughly 2.4 to 2.5 gigawatts of generation, and Cummins expects that figure to grow significantly.
The practical effect is that Applied Digital is trying to set its own expansion schedule instead of waiting on utility interconnection queues. The tie to a single related-party developer is a concentration worth noting, and the 2030 start date means the benefit is back-end loaded.
The 3.5 to 4 Gigawatt Target Is a Construction Question
Management reiterated that it could grow its operating portfolio to 3.5 to 4 gigawatts by the end of calendar 2030. Responding to John Todaro of Needham, Cummins said power is not the binding constraint, since the company believes it has the power in its pipeline. The limiting factor is build capacity. Reaching the high end would require delivering about 1 gigawatt per year in 2029 and 2030, after reaching roughly 2 gigawatts by the end of 2028. That is a steep ramp for a company that delivered 250 megawatts in the past year. The supply chain helps: Cummins said Applied Digital locked in key components almost 2 years ago and, in some cases, bought full factory output for about 4 years. It is now pushing to upsize those commitments for 2027 through 2029.
Delivery in North Dakota
Execution at Polaris Forge 1 is a credibility point. The first lease with CoreWeave was signed in May 2025. The first building was operational by the end of 2025, and the second, which broke ground in summer 2025, came online about a year later. Both buildings are now fully ready for service, with 10 data halls and 250 megawatts of critical IT load, a 150% increase in delivered capacity. The third building is on schedule. With the expected initial operation of Harwood, the company anticipates 300 megawatts of critical IT online in North Dakota by the end of calendar 2026.
Cummins also noted a roughly 1 gigawatt self-build by one of the Tier 1 hyperscalers in the state, which he cited as evidence the market is validating North Dakota. It is also a sign that hyperscalers may increasingly build for themselves rather than lease.
Financing Costs Fall; the Next Test Is Larger
CFO Saidal Mohmand said the first campus is now fully financed. In June, the company closed a $1.59 billion offering of 7% senior secured notes due 2031 at par, funding the third Polaris Forge 1 building and repaying a $300 million bridge. The earlier Polaris Forge 1 notes carried a 9.25% coupon. Management attributed the 225 basis point improvement to credit enhancements for CoreWeave and growing investor confidence. The full 400 megawatts at Polaris Forge 1 and the 200 megawatts contracted at Polaris Forge 2 are funded. The company also upsized its revolver to $430 million, with a $120 million accordion.
The next financings are Polaris Forge 3, Delta Forge 1 and Delta Forge 2, all leased to the same Tier 1 investment-grade hyperscaler under 15-year take-or-pay leases. Mohmand said this opens options beyond high-yield bonds, including project finance and newer investment-grade structures. The structure remains preferred equity from Macquarie Asset Management followed by project debt, so shareholders keep a majority stake in each site. Mohmand said the company does not underwrite leases where a 100 basis point rate move would materially hurt economics, and it targets refinancing within 1 to 2 years after construction, once the 25 to 100 basis point construction risk premium falls away. The Macquarie arrangement covers North America only, Cummins clarified.
Finland: A Cheap Option on Europe
Applied Digital signed for up to 1 gigawatt of potential power in Finland. Cummins characterized it as a measured step: the company bought the site and holds an option on additional power, with an off-ramp before further payments are due. The first 100 megawatts of power is available in 2028, ramping through 2031 to the full gigawatt. Management reviewed 30 to 40 sites over about 12 months, and existing and prospective customers have asked more about European capacity over the past 4 months. The site is about 30 kilometers from a hyperscaler self-build. Cummins expects build costs to be roughly the same in dollar terms as in the U.S., with longer delivery timelines. No tenant has been announced, and Cummins did not say whether the site was acquired with a specific customer in mind.
ChronoScale Heads Toward Smaller, Grid-Tied Sites
ChronoScale, 96% owned, announced a 50-megawatt deployment with Microsoft using NVIDIA GB300 NVL72 systems. Management said the unit is on track for $1 billion of ARR in 2027. Cummins drew a clear line between the two businesses. ChronoScale will source capacity outside the large Applied Digital campuses, which are reserved for Tier 1 hyperscaler leases, targeting 50 to 100 megawatt grid-tied sites "that have been passed over because they don't scale." He sees it reaching multiple hundreds of megawatts in 2027 and 2028. That is a different risk profile from the core business, with shorter contracts, GPU exposure and hardware sales, and it will add complexity to consolidated GAAP results.
Quarterly Results and Quality of Earnings
Revenue was $341.9 million, up 322% from $80.9 million. HPC hosting contributed $262.6 million, made up of $65.8 million of base rent, $183.5 million of tenant fit-out services and $13.3 million of tenant recoveries. The fit-out line is largely a pass-through, with $176.1 million of related cost, so base rent is the better gauge of earnings power. Net operating income for HPC hosting was $58.8 million, an 89% margin. Bitcoin hosting revenue was $37.8 million, with operating profit of $13.3 million, more than double the prior quarter's $6 million on favorable power pricing. ChronoScale revenue was $41.5 million, including about $23 million of GPU hardware sales.
Adjusted EBITDA was $64.4 million, compared with $500,000 a year earlier. GAAP results were weak: the net loss attributable to common stockholders was $221 million, or $0.76 per share. SG&A was $114.7 million, including $65.4 million of stock-based compensation, of which $41.3 million was tied to one-time performance stock units. The company also booked a $67.5 million noncash loss on its Babcock & Wilcox warrants and stock. Adjusted net loss was $4.1 million, or $0.01 per share. Much of the GAAP loss is noncash, but the compensation burden is large relative to current earnings.
The company ended the quarter with about $2.9 billion of cash and $0.7 billion of restricted cash against roughly $6.4 billion of debt, more than 80% of which is due in fiscal 2031 or later. Stockholders' equity was about $1.6 billion.
Design Philosophy and Tenant Flexibility
Cummins devoted time to differentiating the company's "fourth generation" design from competitors he said are "doing close to unnatural acts" to bring capacity online quickly. He argued Applied Digital builds for 30-plus years rather than the 5- to 6-year GPU cycle, with extra space in the data halls and flexible electrical and cooling systems that can handle higher or lower power densities. He conceded the company "could build a slightly cheaper product," but must meet SLAs for at least 15 years. Tenant fit-out is also changing: it is larger in dollar terms and more flexible, and Cummins said the company can no longer tell exactly what will go into its halls. That suggests customers are hedging on workload mix across GPUs, TPUs, CPUs, storage and networking, which supports the case for adaptable shells but makes forecasting tenant needs harder.
Management also pointed to community benefits, including an estimated $45 million in savings for MDU customers, more than $100 million of substation and grid upgrades paid for at Harwood, and Ellendale local tax revenue rising from about $400,000 to nearly $4 million a year. These matter as political scrutiny of data centers builds, and they are central to the company's argument that its campuses are hard to replicate.