Analysts Forecast Q2 Loss of $0.22 on 29% Revenue Growth; Cloud Spin-Off Planned
Applied Digital will report Q2 results on Jan. 7 with analysts forecasting a $0.22 per share loss versus $0.06 year-ago on $82.22 million revenue, a 29% annual rise. It plans to spin off Sai Computing into ChronoScale via merger with EKSO Bionics, likely prompting analysts to revise estimates post-close.
1. Rapid Business Model Transformation
Applied Digital has pivoted from serving primarily blockchain and cryptocurrency miners to focusing on cloud, high-performance computing and AI data centers. Since 2022, the company has invested heavily in building out two North Dakota campuses with a combined capacity of 286 megawatts (MW). In 2023 it launched Sai Computing to provide its own AI services using the latest GPUs, but this venture proved unprofitable and conflicted with its long-term goal of becoming a real estate investment trust (REIT). To resolve this, Applied Digital agreed to spin off Sai’s cloud business into ChronoScale, in which it will retain a 97% stake while allowing the data center leasing unit to operate as a stable, dividend-oriented REIT.
2. Substantial Near-Term Growth Catalysts
From fiscal 2022 to fiscal 2025, Applied Digital grew revenue (excluding its cloud business) from 8.5 million dollars to 144.2 million dollars, driven by the opening of its second data center and new customer contracts. Net losses widened from 23.5 million dollars to 233.7 million dollars over the same period due to expansion and GPU purchases. The company has secured approximately 16 billion dollars in lease commitments over the next 15 years, primarily with a major AI server operator that will initially occupy 250 MW and could expand to 400 MW. It recently completed a 100 MW building at its Polaris Forge 1 campus and plans a 150 MW expansion this year, with a third 150 MW facility in the planning stages.
3. Investor Outlook and Valuation Considerations
Analysts project Applied Digital’s fiscal 2026 revenue, including its cloud business, to reach 297.3 million dollars, a 38% year-over-year increase, while net losses narrow to 91.1 million dollars. With an enterprise value of roughly 7.0 billion dollars, the company trades at about 24 times projected sales. If its 16 billion dollars in lease deals translate evenly over 15 years, Applied Digital could exceed 1 billion dollars in annual revenue once its full capacity comes online in two to three years. However, profitability remains distant, and the upcoming ChronoScale spin-off is expected to prompt analysts to adjust estimates. Investors may see only moderate stock appreciation over the next year as the company transitions toward a REIT structure and works to improve margins.