8-K: Applied Digital Secures $7 Billion AI Data Center Leases with CoreWeave, Plans $200 Million Capital Raise

Applied Digital Corporation has announced two significant 15-year datacenter lease agreements with CoreWeave, totaling an anticipated $7 billion in revenue, alongside plans for a potential $200 million at-the-market stock offering.

Summary

• Applied Digital Corporation's subsidiaries, APLD ELN-02 LLC and APLD ELN-03 LLC, entered into two datacenter leases with CoreWeave, Inc. on May 28, 2025.
• These leases are for up to an aggregate of 250 MW of High-Performance Computing (HPC) infrastructure at Applied Digital's 400 MW Ellendale, North Dakota datacenter campus.
• The first lease covers Building 2 (100 MW) and the second covers Building 3 (150 MW), both currently under construction.
• Each Datacenter Lease has an initial term of approximately fifteen (15) years, with three (3) five (5)-year options to extend.
• The total contract value for the initial 15-year term is expected to be approximately $3 billion for Building 2 and $4 billion for Building 3, summing to about $7 billion.
• Applied Digital has guaranteed the obligations of its subsidiaries under these leases.
• In connection with the leases, Applied Digital issued CoreWeave an Initial Warrant to acquire up to 13,062,521 shares of common stock at an exercise price of $7.19 per share.
• Additional warrants will be issued to CoreWeave if it increases its total contracted capacity across Applied Digital's data centers.
• The total number of shares issuable under the warrants is capped at 44,991,589, subject to Nasdaq Listing Rules.
• Applied Digital plans to file a resale registration statement for the Initial Warrant Shares and any Additional Warrant Shares.
• The company is targeting a potential at-the-market (ATM) offering of up to $200 million of common stock to fund growth capital expenditures, general corporate purposes, and working capital.
• A resale registration statement for shares issuable upon conversion of Series G Preferred Stock and certain warrants issued to AI Bridge Funding, LLC (up to 3,000,000 shares) is also intended to be filed.

Sentiment

Score: 8

Explanation: The sentiment is highly positive due to the securing of substantial, long-term, high-value contracts with a key player in the AI/HPC space, which significantly de-risks future revenue. While there are inherent construction and financing risks, the magnitude of the deals and strategic positioning outweigh these, indicating strong growth potential and market validation.

Positives

• Secured substantial long-term datacenter leases with CoreWeave, an AI Hyperscaler, totaling approximately $7 billion in anticipated revenue over 15 years.
• The agreements cover a significant portion of the Ellendale campus's capacity (250 MW out of 400 MW), demonstrating strong demand for Applied Digital's infrastructure.
• CoreWeave has an option for an additional 150 MW at Ellendale, indicating potential for further expansion and revenue.
• The Ellendale campus is designed for high-density compute and scalability up to 1 gigawatt, positioning Applied Digital for future AI and HPC growth.
• The issuance of warrants to CoreWeave aligns interests and provides a strategic incentive for continued partnership.
• The planned ATM offering of up to $200 million aims to fund growth capital expenditures and general corporate purposes, supporting expansion.

Negatives

• CoreWeave has the right to terminate affected Datacenter Leases if Applied Digital fails to meet certain installation and delivery requirements by specified dates, without termination fees.
• CoreWeave can also terminate the leases for convenience by providing notice and paying a termination fee equal to 100% of the total scheduled Base Rent for the remaining term.
• The company's ability to fund ongoing data center construction and operations is dependent on raising additional capital and obtaining financing, which is subject to market and other conditions.
• The company's business is dependent on principal customers, including CoreWeave, which introduces concentration risk.
• The document highlights risks associated with construction completion, timely service delivery, and potential power/supply disruptions.

Risks

• Ability to complete construction of the Ellendale HPC data centers as planned.
• Changes to AI and HPC infrastructure needs and their impact on future plans.
• Risks associated with the leasing business, including those related to counterparties like CoreWeave.
• Costs related to HPC operations and strategy.
• Ability to timely deliver any services required in connection with completion of installation under the lease agreements.
• Ability to raise additional capital to fund ongoing and future data center construction and operations.
• Ability to obtain financing of the lease agreements on acceptable financing terms, or at all.
• Dependence on principal customers, including the ability to execute and perform obligations under leases with key customers.
• Ability to timely and successfully build new hosting facilities with appropriate contractual margins and efficiencies.
• Power or other supply disruptions and equipment failures.
• Inability to comply with regulations, developments, and changes in regulations.
• Cash flow and access to capital.
• Availability of financing to continue to grow the business.
• Decline in demand for products and services.
• Maintenance of third-party relationships.
• Conditions in the debt and equity capital markets.

Future Outlook

Applied Digital anticipates generating approximately $7 billion in total revenue from the initial 15-year terms of the CoreWeave leases. The company expects the first 100 MW data center (Building 2) to be ready for service in Q4 2025, and the 150 MW Building 3 to be ready in H1 2026. CoreWeave holds an option for a third 150 MW building, anticipated for 2027. Applied Digital is also targeting a potential $200 million at-the-market offering to fund growth capital expenditures and general corporate purposes, with the decision subject to market conditions.

Management Comments

• "We believe these leases solidify Applied Digital's position as an emerging provider of infrastructure critical to the next generation of artificial intelligence and high-performance computing."
• "As demand for AI accelerates exponentially, we believe that we are uniquely positioned to deliver substantial returns while supporting the evolving and dynamic needs of these rapidly evolving sectors."
• "We view CoreWeave as an ideal partner as we accelerate our growth and innovation."
• "We believe Ellendale is more than a development project – its a launchpad for the future of AI infrastructure."
• "We intend for this platform to put us in a strong position to support early demand while continuing to grow alongside our customers."
• "Through these newly signed long-term leases with CoreWeave, we are taking a step forward in our strategic expansion into advanced compute infrastructure."

Industry Context

This announcement positions Applied Digital as a significant player in the rapidly expanding high-performance computing (HPC) and artificial intelligence (AI) data center market. The substantial long-term contracts with CoreWeave, a prominent AI Hyperscaler, underscore the increasing demand for specialized infrastructure capable of supporting intensive AI/ML workloads. The Ellendale campus's design for high-density compute and its potential to scale up to 1 gigawatt align with the industry trend towards larger, more powerful, and energy-efficient data centers to meet the exponential growth in AI compute requirements.

Comparison to Industry Standards

• The Ellendale campus's planned capacity of 400 MW, with potential expansion to 1+ gigawatts, positions it among the largest data center developments in North America, comparable to hyperscale facilities developed by major cloud providers like Amazon Web Services, Microsoft Azure, and Google Cloud, which often feature multi-hundred megawatt campuses.
• The 15-year lease terms with CoreWeave are indicative of long-term commitments typical in the hyperscale and AI data center sector, providing stable, recurring revenue streams similar to those seen in contracts between large cloud providers and their infrastructure partners.
• The focus on 'purpose-built for next-generation workloads' and 'high-density compute' aligns with the evolving industry standard for AI/HPC infrastructure, which requires significantly higher power densities per rack compared to traditional enterprise data centers, often exceeding 30-50 kW per rack.
• The inclusion of liquid cooling systems, as implied by the lease definitions, is a critical and increasingly standard feature for supporting high-density AI hardware, differentiating it from older, air-cooled facilities.
• The $7 billion anticipated revenue over 15 years for 250 MW of capacity suggests a competitive pricing model and significant revenue per megawatt, reflecting the premium nature of AI/HPC hosting services compared to general colocation.

Stakeholder Impact

• **Shareholders**: Potential for significant long-term revenue growth and increased share liquidity through warrant registration and potential ATM offering. However, the ATM offering could lead to dilution.
• **Customers (CoreWeave)**: Guaranteed access to substantial HPC infrastructure capacity for their AI operations, with options for future expansion, supporting their growth.
• **Employees**: Potential for increased employment opportunities related to the construction and operation of the new data centers.
• **Creditors**: The long-term, high-value contracts provide a strong revenue base, potentially improving the company's creditworthiness for future financing.
• **Suppliers**: Increased demand for construction materials, equipment, and services related to data center development and operation.

Next Steps

• Commence providing services at Building 2 datacenter during the second half of calendar 2025.
• Commence providing services at Building 3 datacenter during the first half of calendar 2026.
• File a resale registration statement with the SEC to register the resale of the Initial Warrant Shares and Additional Warrant Shares.
• Potentially commence an at-the-market offering of up to $200 million of common stock during the week of June 2, 2025.
• File a resale registration statement for shares issuable upon conversion of Series G Preferred Stock and warrants issued to AI Bridge Funding, LLC by June 9, 2025.
• Continue planning for the third 150 MW building at Ellendale, with an anticipated ready for service date in 2027.

Key Dates

Recommendation

Keywords

Applied Digital, CoreWeave, Datacenter Lease, AI Infrastructure, High-Performance Computing, HPC, Ellendale Campus, North Dakota, Megawatts, MW, Warrants, Capital Raise, ATM Offering, SEC Filing, Digital Infrastructure, Cloud Services, GPU-as-a-Service