Applied Digital (APLD) FY2026 10-K: $36.2B Contracted Lease Book vs a $236M Operating Loss
The Hook
Applied Digital $APLD closed fiscal 2026 with 1,410 megawatts of data center capacity under signed, non-cancellable, take-or-pay leases, representing approximately $36.2 billion of contracted revenue over the initial 15-year base terms. About 100 megawatts of that was actually operating and generating revenue at May 31, 2026. Seven percent.
The rest of the filing follows from that one ratio. Revenue for the year was $611.3 million, up 167%. The contracted book is fifty-nine times the revenue the company just reported. Property and equipment reached $4.31 billion gross, of which $2.78 billion has never been placed in service, and against which the company has recorded a cumulative $77.6 million of depreciation in its entire history. Applied Digital's income statement is not a description of Applied Digital. It is a progress report on a construction site with a tenant list attached.
Company Snapshot
Applied Digital designs, builds and operates liquid-cooled data centers in North Dakota and the southern United States, leasing critical IT load to AI and high-performance computing operators. This analysis covers the Form 10-K for the fiscal year ended May 31, 2026, filed July 29, 2026 (accession 0001144879-26-000048).
At year-end the company ran two reportable segments. The Data Center Hosting Business provides energized space to a single crypto mining customer out of facilities in Jamestown (106 MW) and Ellendale (180 MW), North Dakota, with a remaining contractual term of about eighteen months. The HPC Hosting Business is the AI business: five named campuses, of which the first 100 MW building at Polaris Forge 1 in Ellendale came online in October 2025. A third bucket, "Other," holds the legacy cloud business, which was separated on May 5, 2026 into ChronoScale Corporation, a Nasdaq-listed entity (CHRN) that Applied Digital still owns roughly 97% of and still consolidates.
That separation matters for every year-over-year comparison in this filing. Fiscal 2025 and 2024 figures were recast, and prior-year revenue as presented here will not tie to the numbers Applied Digital reported a year ago.
The Financial Story
The operating loss is a reporting artifact, not a cash event. Applied Digital reported a $236.5 million operating loss. Gross profit less selling, general and administrative expense only accounts for $117.6 million of it. The remaining $118.8 million sits in three lines that most summaries skip. Here is the complete stack, straight from the filing.
| Line item, fiscal 2026 | FY2025 | FY2026 |
|---|---|---|
| Revenue | $228.6M | $611.3M |
| Cost of revenue | $216.8M | $396.9M |
| Gross profit | $11.8M | $214.5M |
| Selling, general and administrative | $107.9M | $332.1M |
| Depreciation of lessor assets, and other cost of revenue | $0.0M | $56.8M |
| Loss on classification of assets as held for sale | ($24.6M) | $59.7M |
| Loss on abandonment of assets | $0.7M | $2.4M |
| Total costs and expenses | $300.7M | $847.8M |
| Operating loss | ($72.2M) | ($236.5M) |
The $56.8 million line is new this year and was zero in fiscal 2025 and 2024. It appeared because Applied Digital is now a landlord: $114.7 million of the year's revenue is tagged as operating lease income rather than as revenue from contracts with customers, and the depreciation and other direct costs on the assets underlying those leases now sit on their own line below cost of revenue rather than inside it.
Now strip out the charges that never touched cash. Of the $332.1 million of SG&A, $216.4 million was stock-based compensation, against $18.1 million the year before. Stock compensation charged to SG&A alone was larger than the entire year's gross profit of $214.5 million. Total share-based compensation expense was $220.1 million, up from $22.7 million, driven by 7,485,000 performance stock units awarded during the year at a weighted-average grant-date fair value of $29.42 per share.
| Operating loss bridge, fiscal 2026 | Amount |
|---|---|
| Reported operating loss | ($236.5M) |
| Add back: stock-based compensation | $220.1M |
| Add back: depreciation and amortization | $67.4M |
| Add back: loss on held-for-sale classification | $59.7M |
| Add back: loss on asset abandonment | $2.4M |
| Operating result before non-cash charges | $113.1M |
The $67.4 million is DepreciationDepletionAndAmortization as reported in the cash flow statement, which is the company's own total. It is not additive to the $56.8 million line in the table above, which is a cost-of-revenue caption rather than a pure depreciation figure. This bridge is deliberately conservative: it excludes the $27.4 million of finance lease right-of-use amortization the filing reports separately.
The cash flow statement corroborates it. Net cash provided by operating activities was positive $89.7 million in fiscal 2026, against negative $115.4 million in fiscal 2025. That is a $205.1 million swing in the same year the reported operating loss more than tripled.
Strip the stock compensation out of SG&A and the cost discipline is the opposite of what the headline suggests. Cash SG&A went from $89.8 million to $115.7 million, up 28.9%, while revenue grew 167%. That is operating leverage, not a cost blowout.
Both operating segments made money. This is the part the consolidated statement buries entirely.
| Segment, fiscal 2026 | Revenue | Segment profit |
|---|---|---|
| Data Center Hosting | $154.4M | $48.3M |
| HPC Hosting | $385.3M | $39.1M |
| Reportable segments | $539.7M | $87.5M |
| Other (cloud, now ChronoScale) | $71.6M | not reported |
| Consolidated revenue | $611.3M |
The HPC Hosting Business produced zero revenue and a $12.1 million loss in fiscal 2025. In fiscal 2026 it produced $385.3 million of revenue and $39.1 million of segment profit, from a single 100 MW building that went live in October. The two reportable segments together grew from $144.2 million to $539.7 million, up 274%, a faster rate than the 167% headline, because the headline is dragged down by the legacy cloud business, which shrank from $84.4 million to $71.6 million.
The asset base has barely started depreciating, and not for the reason the tape assumes. Total depreciation and amortization fell from $134.7 million to $67.4 million. That decline is not evidence that the new campuses are running depreciation-free. Depreciation on owned property actually rose from $12.5 million to $48.5 million. What collapsed was finance lease right-of-use amortization, from $85.7 million to $27.4 million, as the leased GPU fleet went out with the cloud business. Total lease cost as a lessee fell from $144.4 million to $42.5 million.
The real evidence is on the balance sheet, and it is stronger.
| Property and equipment | May 31, 2025 | May 31, 2026 |
|---|---|---|
| Construction in progress | $1,090.6M | $2,776.2M |
| Assets placed in service | $188.3M | $1,537.6M |
| Gross property and equipment | $1,278.8M | $4,313.9M |
| Accumulated depreciation | ($26.6M) | ($77.6M) |
| Property and equipment, net | $1,252.3M | $4,236.3M |
Sixty-four percent of the asset base has never been switched on. Accumulated depreciation across the company's entire life is 1.8% of gross property and equipment. The filing discloses useful lives of 15 years for electrical infrastructure, 20 years for mechanical infrastructure, 15 to 25 years for building improvements and 39 years for buildings. Applying a 15-to-20-year blended straight-line life to the $4.25 billion depreciable base (gross property and equipment less $59.7 million of land) implies roughly $210 million to $285 million a year of steady-state depreciation once today's assets are all in service, against $48.5 million booked in fiscal 2026. That range is a RoboSystems estimate under the stated assumptions, not a company figure, and it covers only the assets already built.
The funding is the other half of the story. Capital expenditure was $2.87 billion in cash, plus $556.4 million incurred but not yet paid. Financing brought in $6.88 billion: $4.96 billion of senior secured notes (a $2.35 billion 9.250% issue due 2030 and a $2.15 billion 6.750% issue due 2031), $815.0 million of Series G preferred, $1.83 billion from Macquarie Asset Management for 13.5% of the HPC holding company, and $196.4 million from an at-the-market equity program. Total assets went from $1.87 billion to $9.93 billion in twelve months. At year-end the company held $1.59 billion of cash and $2.38 billion of restricted cash sitting in construction escrow.
Valuation
Applied Digital closed at $27.97 on July 30, 2026, a market capitalization of about $8.05 billion on 287.9 million shares (source: stockanalysis.com; 52-week range $9.79 to $50.73; consensus target $73.32 across 11 analysts). Add roughly $5.03 billion of notes and lease liabilities, subtract $1.59 billion of unrestricted cash, and enterprise value is about $11.5 billion, before the $1.96 billion of redeemable noncontrolling interest that sits ahead of the common.
Conventional multiples are meaningless here, because 93% of the contracted capacity is not delivered. The useful test is what the delivered book has to be worth. The $36.2 billion of contracted revenue over 15-year base terms implies about $2.41 billion of annual revenue at full delivery. The scenarios below apply a stabilized EBITDA margin and an exit multiple to that figure, then discount three years back at 12%.
| Scenario | Stabilized EBITDA margin | EBITDA on $2.41B | Multiple | Implied EV today |
|---|---|---|---|---|
| Bear | 30% | $0.72B | 10x | ~$5.1B |
| Base | 45% | $1.08B | 14x | ~$10.8B |
| Bull | 55% | $1.33B | 18x | ~$17.0B |
| Today | ~$11.5B |
Implied value under stated assumptions. Not a price target and not investment advice. Margin, multiple, discount rate and delivery timing are RoboSystems assumptions; only the $36.2 billion of contracted revenue and the 1,410 MW come from the filing.
Two reference points sharpen it. At $11.5 billion of enterprise value the market is paying about $8.2 million per contracted megawatt, and about $115 million per megawatt that is actually operating today. And the margin assumption is doing enormous work: within the HPC segment's own fiscal 2026 numbers, the rental line ran a 50.5% gross margin while the services line ran 4.6%, because power is largely passed through. The mix between those two determines which column of that table the company lands in.
The honest summary is that today's price already sits at the base case, which requires delivering roughly 1,310 megawatts that do not exist yet, on schedule, at a margin the company has not yet demonstrated at scale.
Risks
Concentration, and a counterparty that just restructured. Three customers were 59%, 25% and 12% of fiscal 2026 revenue, 96% between them. The 59% customer is CoreWeave, and it was not a customer at all a year ago. On March 30, 2026, as part of an internal CoreWeave restructuring, the ELN-02 lease was amended to suspend the term on two of its four data halls and the ELN-03 lease was assigned outright to CoreWeave Compute Acquisition Co. VIII, a CoreWeave subsidiary, releasing CoreWeave itself from ELN-03. CoreWeave provided springing guaranties and agreed to post a $50 million letter of credit. The economics were preserved; the direct obligor on a large piece of the anchor lease is now a special-purpose vehicle rather than the parent.
Delivery and capital. Roughly 1,310 of the 1,410 contracted megawatts are undelivered, with expected in-service dates running through the second half of calendar 2028, subject to construction, permitting and interconnection. The filing's own risk factors describe restrictive covenants across the notes and the revolving facility, financial covenants the company must maintain, and cross-default and cross-acceleration exposure if it breaches them.
Structure and dilution. Shares outstanding rose 28%, from 224.9 million to 287.9 million; 913,800 Series G preferred shares converted into approximately 51.0 million common shares during the year, and the Series G floor price was ratcheted from $4.25 to $34.00 across five amendments while the commitment grew from $150 million to $1.59 billion. Preferred dividends of $6.3 million plus a $59.7 million temporary-equity dividend adjustment turned a $184.3 million net loss into a $250.3 million loss available to common, or $0.91 per share. Separately, Macquarie holds 13.5% of the HPC holding company and has the right to invest up to another $4.9 billion at that level, which funds the build but sells the best assets down at the subsidiary line rather than the parent.
One number that does not reconcile on a single line. Interest cost incurred was $69.1 million, of which $39.6 million was capitalized into construction and $29.5 million was expensed. The supplemental cash flow disclosure separately reports $263.4 million of cash paid for interest. The filing does not bridge the two in one place, and with $4.96 billion of notes issued mid-year the cash interest burden is the line to watch next year.
The Bottom Line
Applied Digital's fiscal 2026 numbers do not describe an operating company yet. They describe a construction program that happens to be consolidated. The operating loss is mostly stock compensation, both operating segments were profitable, operating cash flow turned positive, and the AI business went from zero to $385 million of revenue on one building. What to watch is not earnings. It is megawatts energized against the 1,410 contracted, the mix between the 50% margin rental line and the 5% margin services line, and whether the depreciation charge starts stepping toward $200 million-plus as construction in progress moves into service. When it does, the reported loss will widen for reasons that have nothing to do with the business getting worse.
This analysis was built on the RoboSystems SEC Shared Repository: structured XBRL for every public company that files. Point your own tools at it at robosystems.ai/pricing. New customers get 50% off your first month with code ROBO50.