10-K: Applied Digital Corp. Details Share Structure and Capitalization

Applied Digital Corporation's Form 10-K filing provides a comprehensive overview of its authorized and outstanding capital stock, including common and preferred stock series, alongside detailed financial performance and strategic outlook.

Summary

• Applied Digital Corporation (APLD) has authorized 610,000,000 shares of capital stock, comprising 600,000,000 common shares and 10,000,000 preferred shares.
• As of July 24, 2026, there were 291,455,971 common shares and 411,705 preferred shares outstanding.
• The company's HPC Hosting Business generated $385.3 million in revenue for FY2026, while the Data Center Hosting Business generated $154.4 million.
• Total revenue for FY2026 reached $611.3 million, a significant increase from $228.6 million in FY2025.
• The company reported a net loss of $184.3 million for FY2026, an improvement from a net loss of $231.1 million in FY2025.
• Significant debt financing was secured throughout the fiscal year, including $2.35 billion in Senior Secured Notes due 2030 and $2.15 billion in Senior Secured Notes due 2031.
• The company's strategy focuses on expanding its High-Performance Computing (HPC) data center capacity, particularly for AI workloads.
• The company has a substantial pipeline of future development, with over 3 GW of utility power under active development and an extended pipeline of over 5 GW.

Sentiment

Score: 4

Explanation: StockSavvy.ai views the sentiment as cautiously negative due to the significant net loss and increased operating expenses, despite strong revenue growth and a positive industry outlook for HPC/AI data centers.

Positives

• Significant revenue growth, with total revenue increasing by 167% to $611.3 million in FY2026.
• The HPC Hosting Business commenced operations, generating $385.3 million in revenue and showing a positive segment profit of $39.1 million.
• Secured substantial debt financing, including $2.35 billion in 9.250% Senior Secured Notes due 2030 and $2.15 billion in 6.750% Senior Secured Notes due 2031, providing significant capital for expansion.
• The company has a strong contracted lease portfolio of 1,410 MW, representing approximately $36.2 billion in total contracted revenue over 15-year base terms.
• The company's strategy is aligned with the rapidly growing demand for AI and HPC infrastructure.
• Improved net loss from continuing operations to $183.3 million in FY2026 from $231.1 million in FY2025.
• The company has a robust pipeline of future development, indicating significant growth potential.
• The company has a large cash balance of $1.6 billion as of May 31, 2026, providing liquidity for ongoing operations and future investments.

Negatives

• The company reported a net loss of $184.3 million for the fiscal year ended May 31, 2026.
• Selling, general, and administrative expenses increased significantly by 208% to $332.1 million in FY2026, largely due to stock-based compensation.
• The company has substantial debt obligations, totaling $5.3 billion in principal payments due over the next several years.
• The company's business is subject to significant customer concentration, with a few customers accounting for a large portion of revenue.
• The company's operations are heavily concentrated in North Dakota, exposing it to state-specific regulatory and market risks.
• The company has a history of material weaknesses in internal controls, although these have been remediated.
• The company's stock price has been volatile and may continue to be so.
• The company does not expect to declare or pay dividends in the foreseeable future.

Risks

• Inability to access sufficient additional capital needed to grow the business.
• Delays in data center campus construction or cost overruns could adversely affect financial condition and results of operations.
• Significant customer concentration increases vulnerability to customer financial difficulties or contract failures.
• The company is subject to a highly evolving regulatory landscape for data centers and AI, which could adversely affect operations.
• Reliance on third-party suppliers for power and equipment creates vulnerability to service failures and price increases.
• Cybersecurity risks could disrupt operations, compromise data, and lead to significant costs.
• The company's substantial debt level could limit its ability to respond to business opportunities and increase vulnerability to adverse economic conditions.
• The company's business model is subject to various uncertainties related to the rapid evolution of AI technology and data center requirements.

Future Outlook

The company's growth strategy is centered on developing and operating HPC data centers, particularly for AI workloads. It has a significant pipeline of future development and is focused on securing scalable power sites and integrating power assets. The company expects continued growth in its HPC Hosting Business.

Management Comments

• Our HPC Hosting Business commenced operations during the current fiscal year with the first HPC data center at our Polaris Forge 1 campus resulting in the recognition of approximately $270.6 million related to tenant fit-out services.
• The increase was primarily due to the overall growth in the business, categorized as follows: approximately $198.3 million increase in stock-based compensation primarily due to an increase in shares awarded related to the increase in headcount as well as performance stock awards granted during the fiscal year ended May 31, 2026 compared to the fiscal year ended May 31, 2025.

Industry Context

StockSavvy.ai notes that Applied Digital's focus on AI-driven HPC data centers aligns with significant industry trends, including the projected tripling of global data center capacity by 2030 and a potential U.S. data center power shortfall exceeding 45 GW by 2030, driven by AI's increasing power demands.

Comparison to Industry Standards

• The company competes with established data center operators like Digital Realty Trust, Inc. and Equinix, Inc.
• Competitors expanding from blockchain hosting into HPC infrastructure include IREN Limited, Cipher Digital Inc., and TeraWulf Inc.
• The company's strategy of securing power-advantaged sites and developing purpose-built, high-density, liquid-cooled facilities is a key differentiator in a market where power and interconnection are principal constraints.

Management Changes

Legal Proceedings

• A putative securities class action lawsuit (McConnell v. Applied Digital Corporation, et al.) is ongoing, alleging false or misleading statements regarding the company's business, operations, and compliance policies.
• A derivative action (Weich v. Cummins, et al.) was filed alleging breach of fiduciary duties, corporate waste, and unjust enrichment; however, the court granted the defendants' motion to dismiss all claims.

Related Party Transactions

• Consulting fees were paid to a company owned by a family member of the former Chief Administrative Officer.
• Software license fees were incurred with a company whose chairman is also a member of the Board of Directors.
• Consulting fees were paid to a former member of the Board of Directors for sales consulting work.
• The company has a loan receivable from Base Electron, a related party, totaling $58.6 million as of May 31, 2026.
• The company holds an investment in Base Electron, valued at $2.0 million as of May 31, 2026.

Stakeholder Impact

• Shareholders may experience dilution due to future issuances of common stock and preferred stock convertible into common stock.
• The company's substantial debt may limit its ability to pay dividends to shareholders.
• Employees are incentivized through stock-based compensation awards, aligning their interests with long-term company success.
• Customers are secured under long-term, non-cancellable leases, providing revenue visibility.
• Creditors are subject to the company's significant debt obligations and covenants.

Next Steps

• Continue construction of data center facilities at Polaris Forge 1, Polaris Forge 2, Delta Forge 1, Polaris Forge 3, and Delta Forge 2.
• Focus on securing additional customer leases for contracted capacity.
• Monitor and manage supply chain logistics and potential impacts of tariffs.
• Continue to attract and retain top-tier employees to support business expansion.
• Evaluate and potentially integrate power assets to support growth.
• Continue to monitor regulatory developments in the data center and AI industries.

Key Dates

Recommendation

Applied Digital Corporation is in a high-growth sector with significant contracted revenue and a strong development pipeline. However, the substantial net loss, increased operating expenses, and significant debt load warrant a 'hold' recommendation. Investors should monitor the company's ability to convert its contracted revenue into profitability and manage its debt effectively.

Keywords

HPC data centers, AI infrastructure, data center development, hyperscaler leases, North Dakota data centers, CoreWeave, capital stock, preferred stock