Applied Digital Q1 FY2026 Revenue Soars 84% with CoreWeave Data Center Expansion
Applied Digital's Q1 FY2026 revenue climbed about 84% year-over-year as it scales two North Dakota data centers through a CoreWeave partnership and 15-year leases to lock in long-term capacity. Management expects further revenue gains as additional GPUs come online later in 2026, boosting visibility into future cash flows.
1. Expanding Data Center Footprint
Applied Digital operates two owned and leased data center campuses in North Dakota, where it is actively increasing computing capacity through phased construction. Both facilities are built to accommodate high-density GPU clusters, with power capacity expansions scheduled to add over 200 megawatts by late 2026. The company’s relationship with CoreWeave as a strategic tenant underscores its positioning in the high-performance computing market, providing a guaranteed revenue stream as these clients ramp up AI workloads.
2. Long-Term Lease Structure Provides Visibility
To secure predictable cash flows, Applied Digital has executed multiple 15-year lease agreements covering the majority of its current and planned capacity. These leases include annual escalators averaging 3%, offering investors a transparent view into contracted revenue growth through the next decade. This long-duration lease model reduces rollover risk and aligns Applied Digital’s incentives with multinational AI and cloud service providers seeking stability for multi-year deployment plans.
3. Robust Revenue Growth in Q1 Fiscal 2026
In the quarter ending August 31, revenue surged approximately 84% year-over-year, driven by the commissioning of two new data halls and increased utilization from anchor tenants. Power usage effectiveness (PUE) improved to 1.25, reflecting operational efficiencies achieved through upgraded cooling systems. Management indicated that run-rate revenue for the facilities under development could exceed $150 million annually once fully operational, setting the stage for continued double-digit growth into fiscal 2027.
4. Valuation and Investor Considerations
Despite strong top-line momentum, Applied Digital’s enterprise value represents a premium relative to peers when evaluated on trailing price-to-sales multiples. With the company not yet cash-flow positive, investors must weigh the risk that future capacity-build milestones could slip or that tenant onboarding may take longer than projected. However, the 15-year contracted lease durations and strategic partnerships support a thesis that long-term cash flows will justify the current valuation if execution remains on track.