Executive Summary
In Q2 2025, Applied Digital Corporation reported a substantial increase in revenue of 51% year-over-year, reaching $63.9 million. This growth was primarily driven by robust demand in its Cloud Services segment and increased capacity utilization in Data Center Hosting. However, despite this revenue growth, the company reported a net loss of $138.7 million, largely impacted by significant conversion-related losses and fair value adjustments on convertible debt. Management has emphasized its strategic positioning for future growth, particularly through its recent partnership with Macquarie Asset Management, which is anticipated to advance its high-performance computing (HPC) capacities. Looking forward, executives are optimistic about scaling operations amidst challenges in securing hyperscaler contracts, indicating a focus on operational efficiency and enhancing cash flow.
Key Performance Indicators
QoQ: 3 332.30% | YoY:-11.36%
QoQ: -296.30% | YoY:-127.73%
QoQ: -3 166.45% | YoY:-1 217.56%
QoQ: -2 191.67% | YoY:-587.50%
Key Insights
**Revenue Growth:** $63.9 million (up 51% YoY)
**Net Income:** -$138.7 million (EPS: -$0.66)
**Gross Profit Margin:** 18.02%
**Operating Income:** -$18.6 million (Operating Margin: -29.46%)
**EBITDA:** -$104.8 million
**Total Assets:** $1.54 billion
**Cash Position:** $314.6 million with low liquidity ratios (Current Ratio: 0.774).
**Debt Levels:** Total Debt of $799.4 million, with a focus on repaying obligations following new financing agreements. The increase in revenue appears promising, but...
Financial Highlights
Revenue Growth: $63.9 million (up 51% YoY)
Net Income: -$138.7 million (EPS: -$0.66)
Gross Profit Margin: 18.02%
Operating Income: -$18.6 million (Operating Margin: -29.46%)
EBITDA: -$104.8 million
Total Assets: $1.54 billion
Cash Position: $314.6 million with low liquidity ratios (Current Ratio: 0.774).
Debt Levels: Total Debt of $799.4 million, with a focus on repaying obligations following new financing agreements. The increase in revenue appears promising, but challenges on the profitability front remain severe, highlighted by persistent negative operating income.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
63.87M |
51.34% |
5.21% |
| Gross Profit |
11.51M |
-11.36% |
3 332.30% |
| Operating Income |
-18.62M |
-127.73% |
-296.30% |
| Net Income |
-138.73M |
-1 217.56% |
-3 166.45% |
| EPS |
-0.66 |
-587.50% |
-2 191.67% |
Key Financial Ratios
operatingProfitMargin
-29.1%
operatingCashFlowPerShare
$-0.25
freeCashFlowPerShare
$0.01
dividendPayoutRatio
-0.45%
Management Commentary
Strategic Positioning:
- "...we are well positioned to capitalize on these trends..." - Wes Cummins, emphasizing the company’s proactive approach to the evolving HPC market.
- "This strategic partnership is a step towards... establishing Applied Digital as a leading HPC provider..." - Saidal Mohmand, concerning the significance of the Macquarie partnership for future growth.
Operational Capacity:
- "We currently have 286 megawatts of data center capacity... with demand remaining robust..." - Wes Cummins, indicating strong demand in cryptocurrency and HPC sectors crucial for Applied Digital's strategy.
"We remain confident in our growth trajectory..." - Wes Cummins
— Wes Cummins
"The rapid expansion of hyperscale data centers... is presenting significant challenges..." - Wes Cummins
— Wes Cummins
Forward Guidance
Management anticipates continued growth driven by their HPC initiatives. They expect revenue to increase further as construction of the Ellendale campus progresses, and they aim to secure additional hyperscaler contracts. The strategic partnership with Macquarie, providing $5 billion in equity financing, will enhance liquidity and reduce the cost of capital. Investors should closely monitor the completion timelines for new facilities and subsequent customer contracts, particularly in light of anticipated demand in AI and HPC applications. Furthermore, management is optimistic about potential cost reductions in depreciation and amortization in the upcoming quarters, influencing future profitability.