Applied Digital Corp. 10-Q

Item 1. Financial Statements APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share and par value data) November 30, 2025 May 31, 2025 ASSETS Current assets: Cash and cash equivalents $ 1,913,436 $ 41,552 Restricted cash 205,121 72,368 Accounts receivable 13,345 3,043 Prepaid expenses and other current assets 272,012 9,430 Current assets held for sale 313,403 304,200 Total current assets 2,717,317 430,593 Property and equipment, net 2,001,450 1,239,941 Operating lease right of use assets, net 656 960 Finance lease right of use assets, net 1,532 17,820 Other assets 508,389 180,776 TOTAL ASSETS $ 5,229,344 $ 1,870,090 LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 92,911 $ 247,528 Accrued liabilities 207,454 29,549 Current portion of operating lease liability 632 692 Current portion of finance lease liability 1,366 13,633 Current portion of debt 12,555 10,331 Customer deposits 16,752 16,125 Deferred revenue 29,444 — Due to customer 2,658 4,807 Current liabilities held-for-sale 161,318 216,047 Other current liabilities 38,311 19,432 Total current liabilities 563,401 558,144 Long-term portion of operating lease liability 105 381 Long-term portion of finance lease liability 8 15 Long-term debt 2,594,011 677,825 Total liabilities 3,157,525 1,236,365 Commitments and contingencies (Note 15) Temporary equity Series E preferred stock, $ 0.001 par value, 2,000,000 shares authorized, 301,673 shares issued and 281,673 shares outstanding at November 30, 2025, and 301,673 shares issued and outstanding at May 31, 2025 6,432 6,932 Series E-1 preferred stock, $ 0.001 par value, 62,500 shares authorized, 62,500 shares issued and 62,260 shares outstanding at November 30, 2025, and 62,500 shares issued and 62,485 shares outstanding at May 31, 2025 56,796 57,011 Series G preferred stock, $ 0.001 par value, 1,030,000 shares authorized, 43,250 shares issued and outstanding at November 30, 2025, and 78,000 shares issued and outstanding at May 31, 2025 41,990 72,094 Redeemable noncontrolling interest 516,972 — Stockholders' equity: Common stock, $ 0.001 par value, 600,000,000 shares authorized, 286,248,510 shares issued and 279,083,210 shares outstanding at November 30, 2025, and 234,200,868 shares issued and 224,909,669 shares outstanding at May 31, 2025 287 230 Treasury stock, 7,165,300 shares at November 30, 2025 and 9,291,199 shares at May 31, 2025, at cost ( 52,737 ) ( 31,400 ) Additional paid in capital 2,014,459 1,009,913 Accumulated deficit ( 512,380 ) ( 481,055 ) Total stockholders’ equity attributable to Applied Digital Corporation 1,449,629 497,688 TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY $ 5,229,344 $ 1,870,090 See accompanying notes to the unaudited condensed consolidated financial statements 1 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except share and per share data) Three Months Ended Six Months Ended November 30, 2025 November 30, 2024 November 30, 2025 November 30, 2024 Revenue: Revenue $ 126,589 $ 36,163 $ 190,805 $ 69,086 Related party revenue — — — 1,926 Total revenue 126,589 36,163 190,805 71,012 Costs and expenses: Cost of revenues 100,553 22,661 156,158 45,404 Selling, general and administrative (1) 56,993 25,974 86,145 36,966 Loss (gain) on classification of held for sale (2) — 192 — ( 24,616 ) Loss on abandonment of assets — 141 1,751 769 Total costs and expenses 157,546 48,968 244,054 58,523 Operating (loss) income ( 30,957 ) ( 12,805 ) ( 53,249 ) 12,489 Interest expense, net 11,484 2,929 15,431 5,888 Gain on change in fair value of derivative ( 13,126 ) — ( 13,126 ) — Gain on change in fair value of investment ( 2,767 ) — ( 2,767 ) — Loss on conversion of debt — 25,410 — 33,612 Loss on change in fair value of debt — 87,218 — 85,439 Net loss from continuing operations before income tax expense ( 26,548 ) ( 128,362 ) ( 52,787 ) ( 112,450 ) Income tax expense 15 1 23 1 Net loss from continuing operations ( 26,563 ) ( 128,363 ) ( 52,810 ) ( 112,451 ) Net (loss) income from discontinued operations 12,113 ( 10,363 ) 21,434 ( 30,522 ) Net loss ( 14,450 ) ( 138,726 ) ( 31,376 ) ( 142,973 ) Net loss attributable to noncontrolling interest ( 3,061 ) — ( 3,061 ) — Preferred dividends ( 1,571 ) ( 629 ) ( 3,146 ) ( 673 ) Net loss attributable to common stockholders $ ( 19,082 ) $ ( 139,355 ) $ ( 37,583 ) $ ( 143,646 ) Net (loss) income attributable to common stockholders Continuing operations $ ( 31,195 ) $ ( 128,992 ) $ ( 59,017 ) $ ( 113,124 ) Discontinued operations 12,113 ( 10,363 ) 21,434 ( 30,522 ) Net loss $ ( 19,082 ) $ ( 139,355 ) $ ( 37,583 ) $ ( 143,646 ) Basic and diluted net loss per share attributable to common stockholders Continuing operations $ ( 0.11 ) $ ( 0.61 ) $ ( 0.22 ) $ ( 0.63 ) Discontinued operations 0.04 ( 0.05 ) 0.08 ( 0.17 ) Basic and diluted net loss per share $ ( 0.07 ) $ ( 0.66 ) $ ( 0.14 ) $ ( 0.80 ) Basic and diluted weighted average number of shares outstanding 277,423,733 209,560,339 266,599,490 179,119,398 (1) Includes related party selling, general and administrative expense of $ 0.1 million for each of the three months ended November 30, 2025 and November 30, 2024, and for each of the six months ended November 30, 2025 and November 30, 2024, respectively. See Note 6 - Related Party Transactions for further discussion of related party transactions. (2) Includes $ 25 million received in connection with the sale of our Garden City facility once conditional approval requirements were met and escrowed funds were released during the six months ended November 30, 2024. See accompanying notes to the unaudited condensed consolidated financial statements 2 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders’ Equity (Unaudited) For the Three Months ended November 30, 2025 (In thousands, except share data) Temporary Equity Permanent Equity Preferred Stock (1) Redeemable Noncontrolling Interest Common Stock Treasury Stock Additional Paid in Capital Accumulated Deficit Stockholders’ Equity Shares Amount Shares Amount Shares Amount Balance, August 31, 2025 363,933 $ 63,728 $ — 278,584,101 $ 274 ( 9,291,199 ) $ ( 31,400 ) $ 1,573,367 $ ( 497,981 ) $ 1,044,260 Issuance of common stock from stock compensation plans — — — 739,197 1 — — ( 1 ) — — Tax payments for restricted stock upon vesting — — — — — — — ( 10,970 ) — ( 10,970 ) Issuance of Preferred Stock, net of costs 424,050 407,807 — — — — — — — — Conversion of Preferred Stock ( 380,800 ) ( 365,817 ) — 15,416,411 15 — — 365,802 — 365,817 Redemption of Preferred Stock ( 20,000 ) ( 500 ) — — — — — — — — Preferred Stock dividends — — — — — — — ( 1,571 ) — ( 1,571 ) Shares issued in offering, net of costs — — — — — — — ( 4 ) — ( 4 ) Issuance of warrants, at fair value, net of costs — — — — — — — 34,217 — 34,217 Exercise of warrants — — — 800,000 1 — — 6,263 — 6,264 Treasury Stock repurchase — — — — — ( 7,165,300 ) ( 52,737 ) 52,737 — — Treasury Stock retirement — — — ( 9,291,199 ) ( 4 ) 9,291,199 31,400 ( 31,396 ) — — Contributions from noncontrolling interest, net of costs — — 513,911 — — — — — — — Noncontrolling interest preferred stock dividends — — 3,112 — — — — ( 3,112 ) — ( 3,112 ) Stock-based compensation — — — — — — — 29,127 — 29,127 Net loss — — ( 51 ) — — — — — ( 14,399 ) ( 14,399 ) Balance, November 30, 2025 387,183 $ 105,218 $ 516,972 286,248,510 $ 287 ( 7,165,300 ) $ ( 52,737 ) $ 2,014,459 $ ( 512,380 ) $ 1,449,629 (1) See Note 13 - Temporary Equity for further discussion of preferred stock activity. See accompanying notes to the unaudited condensed consolidated financial statements 3 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders’ Equity (Unaudited) For the Three Months ended November 30, 2024 (In thousands, except share data) Temporary Equity Permanent Equity Preferred Stock (1) Common Stock Treasury Stock Additional Paid in Capital Accumulated Deficit Stockholders’ Equity Shares Amount Shares Amount Shares Amount Balance, August 31, 2024 354,864 $ 55,282 162,471,048 $ 162 ( 5,032,802 ) $ ( 62 ) $ 496,027 $ ( 254,281 ) $ 241,846 Shares issued in offering, net of costs — — 49,382,720 49 — — 149,768 — 149,817 Issuance of common stock from stock compensation plans — — 497,271 1 — — ( 1 ) — — Conversions of debt — — 7,657,226 8 — — 48,736 — 48,744 Issuance of other common stock — — 528,541 1 — — ( 1 ) — — Issuance of warrants, at fair value — — — — — — 7,636 — 7,636 Conversion of warrants — — 3,853,605 4 — — ( 4 ) — — Issuance of Preferred Stock, net of costs 6,359 5,850 — — — — ( 4,841 ) — ( 4,841 ) Conversion of Preferred Stock ( 10,191 ) ( 5,350 ) 1,455,857 1 — — 10,190 — 10,191 Preferred Stock Dividends — — — — — — ( 672 ) 44 ( 628 ) Stock-based compensation — — — — — — 3,461 — 3,461 Share repurchase — — — ( 4 ) ( 4,258,397 ) ( 31,338 ) — — ( 31,342 ) Purchase of capped call options — — — — — — ( 51,750 ) — ( 51,750 ) Purchase of prepaid forward contract — — — — — — ( 52,736 ) — ( 52,736 ) Reclass of debt conversion option — — — — — — 252,900 — 252,900 Net loss — — — — — — — ( 138,726 ) ( 138,726 ) Balance, November 30, 2024 351,032 $ 55,782 225,846,268 $ 222 ( 9,291,199 ) $ ( 31,400 ) $ 858,713 $ ( 392,963 ) $ 434,572 (1) See Note 13 - Temporary Equity for further discussion of preferred stock activity. See accompanying notes to the unaudited condensed consolidated financial statements 4 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders’ Equity (Unaudited) For the Six Months ended November 30, 2025 (In thousands, except share data) Temporary Equity Permanent Equity Preferred Stock (1) Redeemable Noncontrolling Interest Common Stock Treasury Stock Additional Paid in Capital Accumulated Deficit Stockholders’ Equity Shares Amount Shares Amount Shares Amount Balance, May 31, 2025 442,158 $ 136,037 $ — 234,200,868 $ 230 ( 9,291,199 ) $ ( 31,400 ) $ 1,009,913 $ ( 481,055 ) $ 497,688 Issuance of common stock from stock compensation plans — — — 1,636,219 2 — — ( 2 ) — — Tax payments for restricted stock upon vesting — — — — — — — ( 15,467 ) — ( 15,467 ) Issuance of Preferred Stock, net of costs 604,050 578,203 — — — — — — — — Conversion of Preferred Stock ( 638,800 ) ( 608,297 ) — 43,582,061 43 — — 608,254 — 608,297 Redemption of Preferred Stock ( 20,225 ) ( 725 ) — — — — — — — — Preferred Stock dividends — — — — — — — ( 3,147 ) — ( 3,147 ) Shares issued in offering, net of costs — — — 15,320,373 15 — — 190,402 — 190,417 Issuance of warrants, at fair value, net of costs — — — — — — — 155,421 — 155,421 Exercise of warrants — — — 800,188 1 — — 6,264 — 6,265 Treasury Stock repurchase — — — — — ( 7,165,300 ) ( 52,737 ) 52,737 — — Treasury Stock retirement — — — ( 9,291,199 ) ( 4 ) 9,291,199 31,400 ( 31,396 ) — — Contributions from noncontrolling interest, net of costs — — 513,911 — — — — — — — Noncontrolling interest preferred stock dividends — — 3,112 — — — — ( 3,112 ) — ( 3,112 ) Stock-based compensation — — — — — — — 44,592 — 44,592 Net loss — — ( 51 ) — — — — — ( 31,325 ) ( 31,325 ) Balance, November 30, 2025 387,183 $ 105,218 $ 516,972 286,248,510 $ 287 ( 7,165,300 ) $ ( 52,737 ) $ 2,014,459 $ ( 512,380 ) $ 1,449,629 (1) See Note 13 - Temporary Equity for further discussion of preferred stock activity. See accompanying notes to the unaudited condensed consolidated financial statements 5 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders’ Equity (Unaudited) For the Six Months ended November 30, 2024 (In thousands, except share data) Temporary Equity Permanent Equity Preferred Stock (1) Common Stock Treasury Stock Additional Paid in Capital Accumulated Deficit Stockholders’ Equity Shares Amount Shares Amount Shares Amount Balance, May 31, 2024 — $ — 144,083,944 $ 144 ( 5,032,802 ) $ ( 62 ) $ 374,738 $ ( 249,990 ) $ 124,830 Shares issued in offering, net of costs — — 55,506,938 55 — — 180,783 — 180,838 Issuance of common stock from stock plans — — 1,267,179 2 — — ( 2 ) — — Conversions of debt — — 19,050,204 19 — — 104,926 — 104,945 Issuance of shares — — 628,541 1 — — 518 — 519 Issuance of warrants, at fair value — — — — — — 44,115 — 44,115 Conversion of warrants — — 3,853,605 4 — — ( 4 ) — — Issuance of Preferred Stock, net of costs 361,223 61,132 — — — — ( 4,835 ) — ( 4,835 ) Preferred Stock Dividends — — — — — — ( 672 ) — ( 672 ) Conversion of preferred stock ( 10,191 ) ( 5,350 ) 1,455,857 1 — — 10,190 — 10,191 Stock-based compensation — — — — — — 542 — 542 Share repurchase — — — ( 4 ) ( 4,258,397 ) ( 31,338 ) — — ( 31,342 ) Purchase of capped call options — — — — — — ( 51,750 ) — ( 51,750 ) Purchase of prepaid forward contract — — — — — — ( 52,736 ) — ( 52,736 ) Reclass of conversion option — — — — — — 252,900 — 252,900 Net loss — — — — — — — ( 142,973 ) ( 142,973 ) Balance, November 30, 2024 351,032 $ 55,782 225,846,268 $ 222 ( 9,291,199 ) $ ( 31,400 ) $ 858,713 $ ( 392,963 ) $ 434,572 (1) See Note 13 - Temporary Equity for further discussion of preferred stock activity. See accompanying notes to the unaudited condensed consolidated financial statements 6 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Six Months Ended November 30, 2025 November 30, 2024 CASH FLOW FROM OPERATING ACTIVITIES Net loss $ ( 31,376 ) $ ( 142,973 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 12,739 60,761 Stock-based compensation 44,592 542 Lease expense 10,826 15,380 Gain on change in fair value of derivative ( 13,126 ) — Gain on change in fair value of investment ( 2,767 ) — Amortization of debt issuance costs 11,700 2,424 Gain on classification of held for sale — ( 24,616 ) Loss on conversion of debt — 33,612 Loss on change in fair value of debt — 85,439 Loss on abandonment of assets 2,243 769 Changes in operating assets and liabilities: Accounts receivable ( 15,545 ) ( 8,466 ) Prepaid expenses and other current assets ( 6,247 ) ( 7,153 ) Customer deposits 627 2,306 Related party customer deposits — ( 1,549 ) Deferred revenue 26,002 ( 31,487 ) Related party deferred revenue — ( 1,692 ) Accounts payable ( 159,003 ) ( 82,849 ) Accrued liabilities 21,026 ( 2,515 ) Due to customer ( 2,149 ) ( 5,647 ) Lease assets and liabilities 5,207 ( 19,382 ) Other assets ( 2,617 ) ( 1,058 ) CASH FLOW USED IN OPERATING ACTIVITIES ( 97,868 ) ( 128,154 ) CASH FLOW FROM INVESTING ACTIVITIES Purchases of property and equipment and other assets ( 801,490 ) ( 225,847 ) Proceeds from satisfaction of contingency on sale of assets — 25,000 Finance lease prepayments — ( 5,270 ) Investment in companies ( 17,000 ) ( 1,422 ) CASH FLOW USED IN INVESTING ACTIVITIES ( 818,490 ) ( 207,539 ) CASH FLOW FROM FINANCING ACTIVITIES Repayment of finance leases ( 70,050 ) ( 62,170 ) Borrowings of long-term debt 2,419,863 275,000 Repayments of long-term debt ( 430,286 ) ( 133,314 ) Payment of deferred financing costs ( 78,699 ) ( 28,927 ) Tax payments for restricted stock upon vesting ( 15,467 ) — Noncontrolling interest contributions 562,500 — Noncontrolling interest issuance costs ( 61,819 ) — Proceeds from issuance of common stock 196,366 191,590 Common stock issuance costs ( 5,949 ) ( 10,233 ) Proceeds from issuance of preferred stock 589,999 67,085 Preferred stock issuance costs ( 11,796 ) ( 5,947 ) Redemption of preferred stock ( 725 ) — Dividends issued on preferred stock ( 3,146 ) ( 672 ) Warrant issuance costs ( 8,250 ) — Exercise of warrants 6,265 — Proceeds from issuance of SAFE agreement included in long-term debt — 12,000 Repurchase of shares — ( 31,342 ) Proceeds from convertible notes — 450,000 Purchase of capped call options — ( 51,750 ) Purchase of prepaid forward contract — ( 52,736 ) CASH FLOW PROVIDED BY FINANCING ACTIVITIES 3,088,806 618,584 7 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Six Months Ended November 30, 2025 November 30, 2024 NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 2,172,448 282,891 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD, INCLUDING CASH FROM DISCONTINUED OPERATIONS 123,318 31,688 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD, INCLUDING CASH FROM DISCONTINUED OPERATIONS 2,295,766 314,579 Less: CASH, CASH EQUIVALENTS, AND RESTRICTED CASH FROM DISCONTINUED OPERATIONS 2 14 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH FROM CONTINUING OPERATIONS $ 2,295,764 $ 314,565 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid $ 20,643 $ 33,144 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES Finance right-of-use assets obtained by lease obligation $ 24,292 $ 97,489 Property and equipment in accounts payable and accrued liabilities $ 176,158 $ 165,721 Conversion of debt to common stock $ — $ 104,945 Conversion of preferred stock to common stock $ 608,297 $ 10,191 Cashless exercise of warrants $ 1 $ 4 Issuance of warrants, at fair value $ 104,705 $ 44,115 Non-cash dividends paid in-kind $ 3,112 $ — See accompanying notes to the unaudited condensed consolidated financial statements 8 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 1. Business and Organization Applied Digital Corporation (the “Company”) is a designer, builder, and operator of high-performance, sustainably engineered data centers and colocation services for artificial intelligence, cloud, networking, and blockchain workloads. The Company has two reportable segments. Financial information for each segment is contained in “Note 16 - Business Segments.” All references to “Applied Digital Corporation,” “we,” “us,” “our” or the “Company” mean Applied Digital Corporation and its subsidiaries. 2. Basis of Presentation and Significant Accounting Policies Principles of Consolidation The accompanying interim unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"), including the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in the Company's annual consolidated financial statements on Form 10-K have been condensed or omitted. The unaudited condensed consolidated balance sheet as of May 31, 2025 has been derived from the audited consolidated financial statements as of that date, but does not include all disclosures required for audited annual financial statements. The unaudited condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries and entities that meet the definition of a variable interest entity (“VIE”) for which the Company is considered the primary beneficiary. See Note 9 - Variable Interest Entity for further discussion. In the Company’s opinion, all necessary adjustments have been made for the fair presentation of the results of the interim periods presented. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year. For further information, please refer to and read these interim unaudited condensed consolidated financial statements in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2025 filed with the SEC on July 30, 2025. Significant Accounting Policies and Use of Estimates Use of Estimates The preparation of the unaudited condensed consolidated financial statements is in conformity with accounting principles generally accepted in the United States of America (“GAAP”). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ significantly from those estimates. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers. Data Center Hosting Revenue The Company provides energized space to customers who locate their hardware within the Company’s co-hosting facility. Performance obligations are achieved simultaneously by providing the hosting environment for the customers’ operations. Customers pay a fixed rate to the Company in exchange for a managed hosting environment supported by customer-provided equipment. Revenue is recognized based on the contractual fixed rate, net of any credits for non-performance, over the term of the agreements. Any ancillary revenue for other services is generally recognized at a point in time when the services are complete. Customer contracts include advance payment terms. All advanced service payments are recorded as deferred revenue and are recognized as revenue once the related service is provided. HPC Hosting Revenue 9 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 The Company provides certain fit-out services in accordance with the terms of the agreement with the client and recognizes revenues over time as performance obligations are satisfied. The Company measures its progress to completion using an input measure of total costs incurred divided by total costs expected to be incurred, which it believes to be the best measure of progress towards completion of the performance obligation. In the course of providing its services, the Company routinely subcontracts for services and incurs other direct costs on behalf of its clients. These costs are passed through to client and, in accordance with GAAP, are included in the Company’s revenue and cost of revenue. During the quarter ended November 30, 2025, the Company began recognizing revenue associated with certain of its data center leases as accounted for under ASC 842. See Note 14 - Leases for further information. Segments The Company has identified two reportable segments: data center hosting (“Data Center Hosting Business”) and high-performance compute hosting (“HPC Hosting Business”). These segments represent management's view of the business for which separate financial information is available and evaluated regularly by the Chief Operating Decision Maker (CODM), which is the Company’s Chief Executive Officer. The Company's CODM evaluates performance and makes operating decisions primarily based on revenue and segment profit (loss), on a consolidated basis and for each of the Company's reportable segments. Operating results by segment include costs or expenses directly attributable to each segment, which include selling, general, and administrative expenses, gain on classification of held for sale and loss on abandonment of assets. The Company does not allocate loss on change in fair value of debt or income tax expense to these segments for internal reporting purposes, as the Company does not believe that allocating these expenses is beneficial in evaluating segment performance. The Data Center Hosting Business operates data centers to provide energized space to crypto mining customers. Customer-owned hardware is installed in the Company’s facilities and the Company provides operational and maintenance services for a fixed fee. The HPC Hosting Business designs, builds, and operates data centers which are designed to support high-compute applications using advanced technologies and sophisticated infrastructures to provide services to customers. See Note 2 - Basis of Presentation and Significant Accounting Policies to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended May 31, 2025, as filed with the SEC, for additional information regarding the Company’s significant accounting policies and use of estimates. Babcock & Wilcox Enterprises, Inc. (“B&W”) Investment The Company accounted for the warrants received from B&W under Accounting Standard Codification (“ASC”) 815 and concluded that the warrants met the definition of a derivative asset that needs to be fair valued at inception and each reporting period. Corintis Investment The Company accounted for the investment at cost under Accounting Standard Codification (“ASC”) 321, adjusted for impairment since the investment did not have a readily determinable fair value. Variable Interest Entity The Company consolidates a VIE where it has been determined that the Company is the primary beneficiary of the entity's operation in accordance with ASC Topic 810, Consolidations. The primary beneficiary is the party that has both the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. In evaluating whether the Company is the primary beneficiary, the Company evaluates its power to direct the most significant activities of the VIE by considering the purpose and design of the entity and the risks the entity was designed to create and pass through to its 10 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 variable interest holders. The Company also evaluates its economic interests in the VIE. All intercompany amounts and transactions have been eliminated. Redeemable Noncontrolling Interest The Company determined for the noncontrolling interest, the initial amount presented in temporary equity should be the initial carrying amount of the noncontrolling interest pursuant to ASC 805-20-30. Under ASC 805-20-30, noncontrolling interests are initially measured at fair value at the acquisition date. However, as the noncontrolling interest has embedded features that require bifurcation, the fair value at issuance must be allocated between the components. The Company initially measured the noncontrolling interest by first allocating the proceeds from the offering to the derivatives and, with the residual net proceeds allocated to the temporary equity classified noncontrolling interest and the warrants based on their respective relative fair values. The Company will not subsequently remeasure the temporary equity classified noncontrolling interest until it is probable that the noncontrolling interest will become redeemable. However, the noncontrolling interest balance will be adjusted for the attribution of net income or loss of the Subsidiary to the noncontrolling interest holder as prescribed by ASC 810. Recent Accounting Pronouncements In August 2023, the FASB issued ASU No. 2023-05, Business Combinations-Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, which is intended to provide guidance for the formation of a joint venture, including the initial measurement of assets and liabilities, the formation date, and basis of accounting. This new standard became effective for annual reporting periods beginning on or after January 1, 2025, with early adoption permitted. The Company adopted the ASU with the execution of the Unit Purchase Agreement (as defined and described below). In December 2023, the FASB issued ASU 2023-09, Income Taxes ("Topic 740"): Improvements to Income Tax Disclosures. This ASU is intended to enhance the transparency and decision usefulness of income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and can be applied either prospectively or retrospectively. The Company has adopted this ASU for the fiscal year beginning June 1, 2025 and will present updated disclosures in its Form 10-K for the fiscal year ended May 31, 2026. In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU is intended to enhance transparency of income statement disclosures primarily through additional disaggregation of relevant expense captions. In January 2025, the FASB issued ASU No. 2025-01, which revises the effective date of ASU No. 2024-03, to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The ASU allows prospective or retrospective application. The Company is currently evaluating the impact of this ASU on its financial statement presentation and disclosures and plans to adopt this pronouncement beginning with its fiscal year beginning June 1, 2027. In November 2024, the FASB issued ASU 2024-04, Debt – Debt with Conversion and Other Options (Subtopic 470-20). The amendments in this ASU clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The amendments in this ASU are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in ASU 2020-06. The amendments in this ASU permit an entity to apply the new guidance on either a prospective or a retrospective basis. The Company is currently evaluating the impact of this ASU on its financial statements and plans to adopt this pronouncement beginning with its fiscal year beginning June 1, 2026. In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This ASU is intended to simplify the capitalization guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption 11 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 permitted. The amendments in this update permit an entity to apply the new guidance using a prospective, retrospective or modified transition approach. The Company is currently evaluating the impact of this ASU on its financial statements and plans to adopt this pronouncement beginning with its fiscal year beginning June 1, 2028. In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) Narrow-Scope Improvements. which is intended to improve the navigability of the guidance in ASC 270, Interim Reporting, and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP. ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, and early adoption is permitted. The Company is currently evaluating the impact of this ASU on its financial statements and plans to adopt this pronouncement beginning with its fiscal year beginning June 1, 2028. Assets Held For Sale The Company generally considers assets to be held for sale when the following criteria are met: (i) management commits to a plan to sell the property, (ii) the property is available for sale immediately, (iii) management has initiated an active program to locate a buyer or buyers and other actions required to complete the plan to sell the disposal group, (iv) the sale of the property within one year is considered probable, (v) the property is actively being marketed for sale at a price that is reasonable in relation to its current fair value and (vi) significant changes to the plan to sell are not expected. Property classified as held for sale is no longer depreciated and is reported at the lower of its carrying value or its estimated fair value less estimated costs to sell in accordance with ASC 360, Property, Plant and Equipment - Impairment or Disposal of Long-Lived Assets . During the fiscal quarter ended May 31, 2025, the Company deemed its Cloud Services Business met the held for sale criteria and was classified as such on the unaudited condensed consolidated balance sheet. Discontinued Operations The Company deems it appropriate to classify a business as a discontinued operation if the related disposal group meets all the following criteria: (i) the disposal group is a component of the Company, (ii) the component meets the held-for-sale criteria, and (iii) the disposal of the component represents a strategic shift that has a major effect on the Company's operations and financial results. During the fiscal quarter ended May 31, 2025, the Company deemed its Cloud Services Business to be discontinued operations due to the disposal group meeting all three criteria. As such, the results of the Cloud Services Business are presented as discontinued operations in the unaudited condensed consolidated statements of operations and have been excluded from both continuing operations and segment results for all periods presented . Reclassifications The Company reclassified certain prior period amounts in its unaudited condensed consolidated balance sheets to conform to our current period presentation. Specifically, we have reclassified certain amounts in “Property and equipment, net” to “Other assets”. This reclassification has no impact on total assets or cash flows. Cash, Cash Equivalents, and Restricted Cash The Company’s restricted cash balances consist of debt service reserves and letters of credit. The debt service reserves are held in separate accounts and are to be used to fund interest and principal on the Senior Secured Notes (as defined below) during construction. See further discussion in Note 7 - Debt. Additionally, the Company has letters of credit totaling $ 23.5 million and $ 31.3 million, as of November 30, 2025 and May 31, 2025, respectively, presented on its unaudited condensed consolidated balance sheets within restricted cash. The Company is required to keep these balances, which are held in money market funds, in separate accounts for the duration of the letter of credit agreements, which have terms of up to two years . The letters of credit were issued in lieu of security deposits. The Company considers the money market funds to be Level 1 which the Company believes approximates fair value. 12 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Cash, cash equivalents, and restricted cash within the unaudited condensed consolidated balance sheets that are included in the unaudited condensed consolidated statements of cash flows as of November 30, 2025 and May 31, 2025 were as follows (in thousands): November 30, 2025 May 31, 2025 Cash and cash equivalents $ 1,913,436 $ 41,552 Restricted cash 205,121 72,368 Restricted cash included in other assets 177,207 7,000 Total cash, cash equivalents, and restricted cash $ 2,295,764 $ 120,920 3. Property and Equipment Property and equipment consisted of the following as of November 30, 2025 and May 31, 2025 (in thousands): Estimated Useful Life November 30, 2025 May 31, 2025 Networking equipment, electrical equipment, and software 3 years - 5 years $ 37,177 $ 32,938 Mechanical infrastructure 20 years 71,868 — Electrical infrastructure 15 years 103,485 — Electric generation and transformers 15 years - 25 years 177,706 9,914 Land and building Building 39 years 272,885 109,672 Building improvements 15 years - 25 years 625,129 — Land 31,922 20,047 Land improvements 15 years 43,026 1,423 Leasehold improvements 3 years - 7 years 444 444 Construction in progress 642,575 1,087,256 Other equipment and fixtures 5 years - 10 years 29,237 2,126 Total cost of property and equipment 2,035,454 1,263,820 Accumulated depreciation ( 34,004 ) ( 23,879 ) Property and equipment, net $ 2,001,450 $ 1,239,941 Depreciation expense totaled $ 7.4 million and $ 10.1 million for the three and six months ended November 30, 2025, respectively, and $ 2.6 million and $ 5.2 million for the three and six months ended November 30, 2024, respectively. 4. Revenue from Contracts with Customers Below is a summary of the Company’s revenue concentration by major customers for the three and six months ended November 30, 2025 and November 30, 2024, respectively. Three Months Ended Six Months Ended November 30, 2025 November 30, 2024 November 30, 2025 November 30, 2024 Customer A 67 % — % 58 % — % Customer B 33 % 90 % 42 % 87 % 13 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Deferred Revenue Changes in the Company's deferred revenue balances for the six months ended November 30, 2025 and November 30, 2024, respectively, are shown in the following table (in thousands): Six Months Ended November 30, 2025 November 30, 2024 Balance, beginning of period $ — $ 8,188 Advance billings 208,854 59,248 Revenue recognized ( 179,501 ) ( 70,763 ) Other adjustments 91 3,756 Balance, end of period $ 29,444 $ 429 Customer Deposits Changes in the Company's customer deposits balances for the six months ended November 30, 2025 and November 30, 2024, respectively, are shown in the following table (in thousands): Six Months Ended November 30, 2025 November 30, 2024 Balance, beginning of period $ 16,125 $ 15,367 Customer deposits received 627 5,698 Customer deposits refunded — ( 3,373 ) Customer deposits applied — ( 1,567 ) Balance, end of period $ 16,752 $ 16,125 5. Discontinued Operations During the fiscal quarter ended May 31, 2025, the Company determined that the Cloud Services Business met the criteria to be classified as “held for sale,” as the Board of Directors approved plans for the sale of the segment. The potential sale of the Cloud Services Business represents a strategic shift in the Company’s operations and financial results. As such, the Company reported the Cloud Services Business as discontinued operations for the three and six months ended November 30, 2025 in accordance with ASC 205-20, Discontinued Operations. The Company expects the sale of the Cloud Services Business to occur within 12 months from the date it met the held for sale criteria. The financial results of the Cloud Services Business are presented as net loss from discontinued operations on the unaudited condensed consolidated statements of operations. The following table presents the major components of the 14 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 financial results of the Cloud Services Business for the periods presented (in thousands): Three Months Ended Six Months Ended November 30, 2025 November 30, 2024 November 30, 2025 November 30, 2024 Revenue $ 18,402 $ 27,705 $ 35,120 $ 53,560 Cost of revenues 3,044 29,700 6,409 68,017 Selling, general and administrative 616 3,815 946 7,163 Loss on abandonment of assets — — 492 — Operating income (loss) from discontinued operations 14,742 ( 5,810 ) 27,273 ( 21,620 ) Interest expense 2,629 4,553 5,839 8,902 Net income (loss) from discontinued operations before income tax expense 12,113 ( 10,363 ) 21,434 ( 30,522 ) Income tax expense — — — — Net income (loss) from discontinued operations $ 12,113 $ ( 10,363 ) $ 21,434 $ ( 30,522 ) As of November 30, 2025, the assets and liabilities of the Cloud Services Business are classified as current in the unaudited condensed consolidated balance sheets, as it is probable that the sale will occur within one year. The following table represents the aggregated carrying amounts of classes of assets and liabilities that are classified as held for sale on the unaudited condensed consolidated balance sheets for the periods presented (in thousands): November 30, 2025 May 31, 2025 Assets: Cash and cash equivalents $ 2 $ 2,398 Accounts receivable 9,031 3,788 Prepaid expenses and other current assets 560 223 Property and equipment, net 16,741 10,922 Operating lease right of use asset, net 93,995 91,374 Finance lease right of use asset, net 193,067 195,495 Other assets 8 — Total current assets held for sale $ 313,404 $ 304,200 Liabilities: Accounts payable $ 3,182 $ 3,962 Accrued liabilities 1,534 572 Current portion of operating lease liability 17,090 16,093 Current portion of finance lease liability 74,794 133,406 Current deferred revenue 152 3,594 Long-term portion of operating lease liability 49,594 58,420 Long-term portion of finance lease liability 14,972 — Total current liabilities held for sale $ 161,318 $ 216,047 15 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 The following table presents significant non-cash items and capital expenditures of discontinued operations for the periods presented (in thousands): Six Months Ended November 30, 2025 November 30, 2024 Depreciation and amortization $ — $ 51,951 Stock-based compensation $ 167 $ ( 1,664 ) Purchases of property and equipment and other assets $ ( 6,311 ) $ 657 Finance lease prepayments $ — $ — Operating right-of-use assets obtained by lease obligation $ — $ — Finance right-of-use assets obtained by lease obligation $ 4,973 $ 68,329 Property and equipment in AP and accrued liabilities $ — $ 1,931 6. Related Party Transactions Related Party Revenue Related party revenue consisted of revenue from two customers, Customer D and Customer E. During the three months ended November 30, 2025 and 2024, there was no related party revenue. Similarly, during the six months ended November 30, 2025, there was no related party revenue. During the six months ended November 30, 2024, there was approximately $ 1.2 million of related party revenue from Customer D and approximately $ 0.7 million of related party revenue from Customer E. Customer D is a subsidiary of an entity which, during the first quarter of fiscal year 2025, was deemed to beneficially own over 5 % of the Company's outstanding common stock. As of July 25, 2024, the controlling individual of the entity filed a Schedule 13G to report the fact that as of the date thereof, the entity had ceased to be a beneficial owner of more than 5 % of such class of securities. Customer E is 60 % owned by an individual who, during the first quarter of fiscal year 2025, was deemed to beneficially own over 5 % of the Company's outstanding common stock. As of July 25, 2024, the individual filed a Schedule 13G to report the fact that as of the date thereof, the individual had ceased to be a beneficial owner of more than 5 % of such class of securities. Other Related Party Transactions Related party transactions included within selling, general and administrative expense on the unaudited condensed consolidated statement of operations include software license fees of $ 74,250 and $ 72,000 during the three months ended November 30, 2025 and 2024, respectively, and $ 148,500 and $ 142,875 during the six months ended November 30, 2025 and 2024, respectively, were incurred with a company whose chairman is also a member of the Company’s Board of Directors. 16 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 7. Debt The Company’s outstanding debt consisted of the following components (in thousands): Interest Rate Maturity Date November 30, 2025 May 31, 2025 Senior Secured Notes 9.25 % December 2030 $ 2,350,000 $ — Convertible Notes, senior unsecured (1) 2.75 % June 2030 450,000 450,000 SMBC Loan (2) (2) August 2026 — 375,000 Starion Ellendale Loan (3) 7.48 % February 2028 10,234 12,283 Cornerstone Bank Loan (4) 8.59 % March 2029 11,429 12,866 Starion Term Loan (5) 6.50 % July 2027 5,506 7,061 Other long-term debt (6) 31,891 12,275 Deferred financing costs, net of amortization ( 252,494 ) ( 181,329 ) Less: Current portion of debt ( 12,555 ) ( 10,331 ) Long-term debt, net $ 2,594,011 $ 677,825 (1) The net carrying amount of the Convertible Notes was $ 274.6 million and $ 273.3 million and the remaining unamortized deferred financing costs related to the issuance was $ 175.4 million and $ 176.7 million, each as of November 30, 2025 and May 31, 2025, respectively. (2) The SMBC Loan was guaranteed by APLD HPC TopCo LLC, a wholly-owned subsidiary of the Company, and was secured by a continuing security interest in all of the membership interests of the borrower, APLD HPC Holdings LLC, including a mortgage on certain properties as defined in the collateral agency, security and depositary agreement. During the quarter ended November 30, 2025, concurrent with the closing of the Senior Secured Notes offering (see below), the Company repaid in full the aggregate principal balance plus accrued interest. As of May 31, 2025, there were $ 4.4 million of unamortized deferred financing costs. The average SOFR plus the applicable margin for the fiscal year ended May 31, 2025 was 7.82 %. (3) The Starion Ellendale Loan is guaranteed by APLD ELN-01 LLC, a wholly-owned subsidiary of the Company, and is secured by a security interest in substantially all of the assets of the Ellendale Data Center Hosting facility (as defined in the Starion Ellendale Loan), and a security interest in the form of a collateral assignment of the Company’s rights and interests in all master hosting agreements related to APLD ELN-01 LLC. (4) The Cornerstone Bank Loan is guaranteed by APLD GPU-01, LLC, a wholly-owned subsidiary of the Company, and is secured by a security interest in multiple Terms of Service Agreements for HPC based systems related to AI Cloud Computing Services, which are to be serviced at the Jamestown hosting facility. (5) The Starion Term Loan is guaranteed by APLD Hosting, LLC, a wholly-owned subsidiary of the Company, and is secured by the Jamestown hosting facility, a security interest in substantially all of the assets of APLD Hosting LLC, and interests in all master hosting agreements related to the Jamestown hosting facility. The Starion Term Loan Agreement contains customary covenants, representations and warranties and events of default. The Company is subject to a debt service coverage ratio and is in compliance as of November 30, 2025. (6) Inclusive in this number is $ 12.0 million of proceeds from the issuance of two SAFE agreements which were accounted for as liabilities as well as two promissory notes the Company entered into during the three months ended November 30, 2025 for a total of approximately $ 19.5 million. 17 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Remaining Principal Payments Below is a summary of the remaining principal payments due over the life of the term loans as of November 30, 2025 (in thousands): FY26 $ 6,226 FY27 13,184 FY28 100,771 FY29 187,329 FY30 184,158 Thereafter (1) 2,367,393 Total $ 2,859,061 (1) Includes $ 12.0 million of proceeds from the issuance of two SAFE agreements which were accounted for as liabilities. Letters of Credit As of November 30, 2025, the Company had letters of credit totaling $ 23.5 million. The Company has restricted cash related to its letters of credit and is required to keep these balances in separate accounts for the duration of the letter of credit agreements. The Company presents all restricted cash amounts with letter of credit terms of 12 months or less within the Restricted Cash caption within current assets and any amounts with related letter of credit terms of over 12 months in Other Assets. Revolving Credit Facility On November 10, 2025, the Company entered into a loan and security agreement with First National Bank of Omaha, pursuant to which the lender agreed to make one or more revolving loans, and issue letters of credit, from time to time to the Company in an aggregate principal amount of $ 65 million. Amounts borrowed and repaid are available for future borrowing. Interest accrues on the outstanding balance at a rate of SOFR plus 2.75 % per annum. Additionally, there is an unused facility fee of 0.35 % per annum based on the daily average unused amount, payable quarterly in arrears at the end of each quarter. The loan is secured by all of the Company’s (but none of its subsidiaries’) assets. As of November 30, 2025, there have been no draws on the facility. Promissory Note On September 9, 2025, APLD FAR-01 LLC, a subsidiary of the Company, entered into a promissory note (the “Promissory Note”) with Macquarie Equipment Capital, Inc., a Delaware corporation (“MEC”). The Promissory Note provided for an initial principal sum of $ 50 million (the “Loan”), which was drawn on the Closing Date. The Loan bore interest at 8.0 % per annum. From the Closing Date and for the succeeding twelve months (the “PIK Period”), accrued interest was to be paid in kind, with such payment in kind being capitalized to principal monthly and at such other times as specified in the Promissory Note. After the PIK Period, accrued interest was to be paid in cash in certain circumstances. The Promissory Note was to mature on the earliest of (i) the date of acceleration of the Loan, (ii) February 1, 2026, if the 200 MW Lease Execution (as defined therein) has not occurred on or before October 31, 2025, or (iii) September 9, 2027. The Loan could be accelerated and the Company required to prepay the full outstanding principal balance of the Promissory Note, together with accrued interest to the date of prepayment on the principal amount prepaid and any other amounts then due and payable, upon the occurrence of any of the following conditions: (a) a Change of Control (as defined therein), (b) within ninety (The Company may voluntarily prepay all or part of the Promissory Note at any time with no less than three ( 3 ) business days’ notice with accrued interest to the date of prepayment on the principal amount prepaid, so long as, with respect to the portion of the Loan then being prepaid, in each case, such prepayment is accompanied by the payment of amounts sufficient to achieve a rate of return that equals or exceeds 1.10 to 1.00. The same 1.10 x return hurdle applied to repayment at maturity. Amounts repaid under the Promissory Note are not available to be re-borrowed. 18 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Proceeds of the Loan under the Promissory Note were used, in part, to (i) pay transaction costs, (ii) pay transaction expenses in connection with the Note Documents (as defined therein), (iii) fund the purchase of the financed properties located on the Company’s campus in Harwood, ND (“Polaris Forge 2”), including all associated closing costs, title fees, and legal expenses, (iv) finance improvements to the Polaris Forge 2 properties, (v) fund the purchase of the Transformers (as defined therein) and other equipment expected to be installed and used for the improvements of the Polaris Forge 2 properties, (v) to pay any other costs, fees, expenses, or amounts related to or in connection with the development and construction of Polaris Forge 2, and (vi) for general corporate working capital purposes. In connection with the Loan, (i) APLD FAR-01 LLC, APLD FAR Holdings LLC (“Intermediate Holdings”), a Delaware limited liability company, as parent of the APLD FAR-01 LLC, and APLD FAR-02 LLC (“FAR-02”), a Delaware limited liability company, as a subsidiary of Intermediate Holdings, entered into a guarantee and collateral agreement, as grantors thereunder, in favor of the Lender (the “Guarantee and Collateral Agreement”). On November 28, 2025, the Company repaid the Promissory Note in full, including all outstanding and unpaid principal, accrued interest, and rate of return. As a result, the accrued interest and rate of return on the Macquarie Promissory Note of $ 1.4 million was capitalized to CIP commensurate with the use of proceeds associated with construction. Senior Secured Notes On November 20, 2025, APLD ComputeCo LLC (“Issuer”), a subsidiary of the Company, completed a private offering of 9.25 % Senior Secured Notes due 2030 (the “Notes”). The Notes were sold pursuant to the terms of a purchase agreement, dated as of November 13, 2025 and as amended thereafter, entered into by and among the Issuer, the subsidiary guarantors party thereto (the “Subsidiary Guarantors”) and Morgan Stanley & Co. LLC as the representative (the “Representative”) of the several initial purchasers (the “Initial Purchasers”) in a Rule 144A/Regulation S offering. The aggregate principal amount of Notes sold in the offering was $ 2.35 billion. The Notes were issued at a price equal to 97 % of their aggregate principal amount. The Issuer intends to use the net proceeds from the offering to fund a portion of the construction and associated expenses of its 100 MW and 150 MW data centers, ELN-02 and ELN-03, respectively (the “Facilities”), at the Company’s 400MW Ellendale, North Dakota campus (“Polaris Forge 1”), repay the aggregate principal balance plus any accrued and unpaid interest under the SMBC Loan, fund debt service reserves, and pay transaction expenses. Also on November 20, 2025, the Issuer, APLD HPC Holdings 2 LLC (the direct parent of the Issuer) and the Subsidiary Guarantors entered into an indenture (the “Indenture”) with respect to the Notes with Wilmington Trust, National Association, as trustee (the “Trustee”) and collateral agent (the “Collateral Agent”). The Notes are senior secured obligations of the Issuer and bear interest at a rate of 9.25 % per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2026. The Notes will mature on December 15, 2030, unless earlier redeemed or repurchased in accordance with their terms. The principal amount of the Notes will amortize on a semi-annual basis on June 15 and December 15 of each year, beginning on December 15, 2027, in amounts set forth in the Indenture. Required amortization shall be subject to adjustment in case of partial redemption or repurchase or, in certain circumstances, the issuance of additional notes. On or after December 15, 2027, the Issuer may redeem the Notes at its option, in whole at any time or in part from time to time, at the redemption prices set forth in the Indenture. Prior to December 15, 2027, the Issuer may redeem the Notes at its option, in whole at any time or in part from time to time, at a redemption price equal to 100 % of the principal amount of the notes redeemed, plus a “make-whole” premium and accrued and unpaid interest, if any. In addition, prior to December 15, 2027, the Issuer may redeem up to 40 % of the aggregate principal amount of the notes in an amount not to exceed the amount of the proceeds of certain equity offerings, at the redemption price set forth in the Indenture, plus accrued and unpaid interest. The Indenture limits the ability of the Issuer and the Subsidiary Guarantors to, among other things: (i) incur or guarantee additional indebtedness; (ii) pay dividends or distributions on, or redeem or repurchase, capital stock and make other restricted payments; (iii) make certain investments; (iv) create or incur liens; (v) consummate certain asset sales; (vi) enter into sale and lease back transactions; (vii) hold assets or conduct operations unrelated to the operation of the Facilities and certain additional projects; (viii) engage in certain transactions with its affiliates; and (ix) merge, consolidate or transfer or 19 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 sell all or substantially all of its assets. These covenants are subject to a number of important qualifications and exceptions as set forth in the Indenture. Additionally, upon the occurrence of specified change of control events, the Issuer must offer to repurchase the notes at 101 % of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the purchase date. The Indenture also provides for customary events of default. The Company will provide a customary completion guarantee with respect to each Project (as defined in the Indenture) related to the Facilities, which will require the Company to provide the Issuer funds as necessary to ensure the achievement of the applicable Commencement Date (as defined in the Indenture) under the respective datacenter lease in the event that the proceeds of the Notes and the available funds (including previous equity contributions from the Company) are insufficient to do so. As of November 30, 2025, remaining unamortized deferred financing costs related to the issuance of the loan was $ 6.2 million. 8. Balance Sheet Components Certain balance sheet components are as follows (in thousands): November 30, 2025 May 31, 2025 Prepaid expenses and other current assets Short term equipment deposit $ 256,672 $ — Deferred issuance costs 182 5,443 Short term lease incentive 3,413 1,290 Prepaid expenses 5,721 1,225 Other current assets 6,024 1,472 Total Prepaid expenses and other current assets $ 272,012 $ 9,430 November 30, 2025 May 31, 2025 Other assets Long term lease incentive $ 203,346 $ 84,416 Restricted cash 177,207 7,000 Deposits on assets & construction 13,345 69,500 Deferred lease costs 12,558 8,811 Derivative assets (1) 55,697 — Investments in other companies (2) 38,966 6,073 Other 7,270 4,976 Total Other assets $ 508,389 $ 180,776 (1) Balance as of November 30, 2025 consists of the fair value of derivative assets related to the preferred units and corresponding common units held by APLD HPC TopCo 2’s noncontrolling interest. See Note 13 - Temporary Equity for further discussion. 20 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 (2) Balance as of November 30, 2025 includes two investments that occurred during the three months ended November 30, 2025: Babcock & Wilcox Enterprises, Inc. (“B&W”), a publicly traded company, and Corintis SA (“Corintis”), a private company. On November 4, 2025, the Company and B&W entered into an agreement under which the Company contributed $ 2.0 million to B&W in exchange of 500,000 shares of B&W’s common stock and a warrant to purchase 2.6 million shares of common stock with an exercise price of $ 4.11 . The warrant was determined to be a derivative asset and was required to be measured at fair value at issuance. It will be remeasured at fair value at each reporting date with changes in fair value reported on the unaudited condensed consolidated statement of operations. To allocate the contribution between the common stock and the warrant, the Company determined the fair value of each and utilized the relative fair value allocation method. During the three months ended November 30, 2025, the Company recorded $ 2.8 million gain on change in fair value of investment and $ 13.1 million gain on change in fair value of derivatives on the unaudited condensed consolidated statement of operations. On November 28, 2025, the Company invested in Corintis for approximately $ 15.0 million in exchange for Series A1 preferred shares. The investment in Corintis will be carried at cost as it is an equity security without a readily determinable fair value and evaluated annually for impairment indicators. November 30, 2025 May 31, 2025 Accrued liabilities Accrued construction payables $ 172,552 $ — Accrued expenses 21,779 22,782 Accrued interest 6,862 2,694 Other accrued liabilities 6,261 4,073 Total Accrued liabilities $ 207,454 $ 29,549 November 30, 2025 May 31, 2025 Other current liabilities Construction retainer $ 38,228 $ 19,338 Other 83 94 Total Other current liabilities $ 38,311 $ 19,432 9. Variable Interest Entity Based upon the criteria set forth in ASC 810, Consolidation , the Company consolidates variable interest entities (“VIEs”) in which it has a controlling financial interest and is therefore deemed the primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance; and (b) the obligation to absorb the VIE losses and the right to receive benefits that are significant to the VIE. As of November 30, 2025, the Company has determined that it was the primary beneficiary of one VIE, APLD HPC TopCo 2 LLC (“TopCo 2”), as it has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Additionally, under the A&R UPA (as defined below), the Company is required to fund its portion of the equity to TopCo 2 for the applicable project at the rate of $ 750,000 per MW of capacity (less any equity capital previously invested in the project by the Company or any of its subsidiaries). As previously disclosed, on January 13, 2025, APLD HPC Holdings LLC (formerly, APLD ELN-02 Holdings LLC), an indirect wholly owned subsidiary of the Company, entered into a Unit Purchase Agreement (the “UPA”) for its HPC Hosting Business with MIP VI HPC Holdings, LLC, an affiliate of Macquarie Asset Management (“MAM”). On February 11, 2025, APLD HPC Holdings LLC novated and assigned its rights, title and interests and duties, liabilities and obligations under the UPA to APLD HPC TopCo LLC, an indirect wholly-owned subsidiary of the Company (“TopCo 1”). On October 3, 2025, the Company, TopCo 1, APLD HPC TopCo 2 LLC, an indirect wholly-owned subsidiary of the 21 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Company, and MIP HPC Holdings, LLC (formerly, MIP VI HPC Holdings, LLC) entered into an Amended and Restated Unit Purchase Agreement (the “A&R UPA”). On October 6, 2025, TopCo 2, completed the initial closing under its A&R UPA, selling 112,500 preferred units for $ 112.5 million and issuing 75,000 common units representing 7.5 % of its fully diluted common equity. In addition, pursuant to the A&R UPA, on October 6, 2025, the Company issued warrants to purchase an aggregate of 2.4 million shares of the Company’s common stock as described in Note 11 - Warrants . On November 25, 2025, TopCo 2 completed a second closing under its A&R UPA, selling 450,000 preferred units for $ 450.0 million. The issuance of the preferred units at closing resulted in a redeemable noncontrolling interest - see Note 13 - Temporary Equity for further discussion. The purpose of TopCo 2 is to design, build and operate high-performance, sustainably engineered data centers and colocation services for artificial intelligence, cloud, and networking workloads in North Dakota. TopCo 2 is a bankruptcy-remote legal entity with separate assets and liabilities. The creditors of TopCo2 have recourse to the Company’s assets and general credits. The following table presents the assets and liabilities held by TopCo 2 as of November 30, 2025, which are included in the unaudited condensed consolidated balance sheets (in thousands): November 30, 2025 Assets: Cash and cash equivalents $ 1,639,558 Restricted cash 178,208 Accounts receivable 10,314 Prepaid expenses and other current assets 265,885 Property and equipment, net 1,831,519 Other assets 466,101 Total assets $ 4,391,585 Liabilities: Accounts payable $ 75,980 Accrued liabilities 193,045 Current portion of debt 10 Current deferred revenue 29,339 Other current liabilities 38,228 Long-term debt 2,273,309 Total liabilities $ 2,609,911 Third-party equity ownership interests in APLD HPC TopCo 2 LLC represents a noncontrolling interest and is presented as temporary equity in the unaudited condensed consolidated balance sheets separate from the Company’s stockholders’ equity. The amount of net income attributable to noncontrolling interests is disclosed in the unaudited condensed consolidated statement of operations. 10. Stockholders' Equity Common Stock June 2025 At-the-Market Sales Agreement On June 2, 2025, the Company entered into a Sales Agreement with Northland Securities, Inc. and Wells Fargo Securities, LLC (the “June 2025 Sales Agreement”), pursuant to which, up to $ 200,000,000 of shares of the Company's common stock may be issued if and when sold. As of the date of this report, the Company has issued and sold approximately 15.3 million shares under the June 2025 Sales Agreement for gross proceeds of approximately $ 196.4 million. 22 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Increase In Authorized Shares On November 5, 2025, at the Annual Stockholders’ Meeting, the Company’s stockholders approved an amendment to the Second Amended and Restated Articles of Incorporation, increasing the number of shares of common stock authorized for issuance thereunder to 600,000,000 shares, which became effective upon filing on November 6, 2025. Treasury Stock Retirement On October 7, 2025, the Board of Directors authorized and approved 9,291,199 shares of the Company’s capital stock that was currently held in treasury stock to be retired and returned to the authorized but unissued capital stock. Settlement of Prepaid Forward Transaction On November 3, 2025, the Company’s Prepaid Forward Transaction associated with the Convertible Notes matured and the Company received 7,165,300 shares of common stock which are now held in treasury stock as of November 30, 2025. 11. Warrants A summary of warrant activity for the six months ended November 30, 2025 is presented below: Warrants Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life (Years) Outstanding at May 31, 2025 18,097,718 $ 7.63 8.52 Granted 10,793,611 10.20 8.76 Forfeited — — — Exercised ( 800,300 ) 7.83 — Outstanding at November 30, 2025 28,091,029 $ 8.61 8.31 AI Warrants The Company issued warrants to purchase up to 3,000,000 shares of Common Stock related to the AI Bridge Loan during the fiscal year ended May 31, 2024 (the “AI Warrants”). The AI Warrants are exercisable upon payment of the applicable exercise price in cash or through cashless exercise for a period of five years . 1,500,000 AI Warrants have an exercise price of $ 10.00 per share of Common Stock and 1,500,000 AI Warrants have an exercise price of $ 7.50 per share of Common Stock. As of November 30, 2025, all of the AI Warrants were outstanding. Macquarie Warrants On November 27, 2024, as partial consideration for the Macquarie Promissory Note, the Company issued warrants to purchase up to 1,035,197 shares of the Company’s common stock. The Macquarie Warrants are exercisable from and after the date that is six months following the date of issuance thereof and will have a five and one-half-year term and an exercise price of $ 9.66 per share, which exercise price must be paid in cash. The Macquarie Warrants survived the termination of the Macquarie Promissory Note and remain outstanding as of November 30, 2025. STB Warrant On February 27, 2025, the Company issued a warrant to STB Applied Holdings LLC to purchase 1,000,000 shares of the Company’s common stock at the exercise price of $ 7.83 per share (the “STB Warrant”) for consideration of $ 50,000 . The warrant is exercisable upon payment of the applicable exercise price in cash or through cashless exercise for a period of five years from the Initial Exercise Date. During the quarter ended November 30, 2025, 800,000 of the STB Warrants were exercised for $ 6.3 million. CoreWeave Warrants On May 28, 2025, in connection with the entry into the data center leases with CoreWeave (the "CoreWeave Leases"), the Company issued to CoreWeave a warrant (the “CoreWeave Warrant”) to acquire up to 13,062,521 shares of the Company's 23 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 common stock at an exercise price of $ 7.19 per share, subject to adjustment in accordance with the terms and conditions set forth in the CoreWeave Warrant. The CoreWeave Warrant is exercisable upon issuance, upon payment of the applicable exercise price in cash or through cashless exercise for a period of 10 years. During the quarter ended November 30, 2025, 300 warrant shares were exercised. Additionally, on August 28, 2025, in connection with the entry into the Building 4 Lease, the Company issued to CoreWeave a warrant (the “Building 4 Warrant”) to acquire up to 8,393,611 shares of the Company’s common stock at an exercise price of $ 10.75 per share, subject to adjustment in accordance with the terms and conditions set forth in the Building 4 Warrant. The Building 4 Warrant is on the same Form of Warrant as the initial warrant issued to CoreWeave on May 28, 2025, in connection with the data center leases entered into for Building 2 and Building 3. The Building 4 Warrant was measured at fair value using the Black-Scholes Option Pricing model. Inherent in pricing models are assumptions related to expected share-price volatility, contractual term, risk-free interest rate and dividend yield, which are considered Level 3 inputs. The estimated fair value of the Building 4 Warrant was based on the following significant inputs: Building 4 Warrant Contractual term 10 years Volatility 80 % Risk-free rate 4.18 % Dividend yield — % The resulting fair value of the Building 4 Warrant was $ 14.44 per share, totaling $ 121.2 million, which was recorded to lease incentive asset and additional paid in capital on the Company's unaudited condensed consolidated balance sheets, and will be amortized over the life of the Building 4 Lease once it commences. MAM Warrants On October 6, 2025, in connection with the Amended and Restated Unit Purchase Agreement dated October 3, 2025 (the “Purchase Agreement”), the Company issued MIP VI REIT AIV, L.P. and MIP VI DC REIT AIV, L.P. two warrants (the “MAM Warrants”) to acquire up to 2,400,000 shares of the Company’s common stock at an exercise price of $ 8.29 per share, subject to adjustment in accordance with the terms and conditions set forth in the warrants. The MAM Warrants were measured at fair value using the Black-Scholes Option Pricing model. Inherent in pricing models are assumptions related to expected share-price volatility, contractual term, risk-free interest rate and dividend yield, which are considered Level 3 inputs. The estimated fair value of the MAM Warrants are based on the following significant inputs: MAM Warrants Contractual term 5.5 years Volatility 95 % Risk-free rate 3.76 % Dividend yield — % The resulting fair value of the MAM Warrants was $ 24.47 per share, totaling $ 58.7 million. The Company elected a relative fair value approach to record the warrants as part of the overall MAM transaction and as such, $ 34.2 million, net of issuance costs, was recorded as additional paid in capital on the Company's unaudited condensed consolidated balance sheets. 12. Stock-Based Compensation Plans 2024 Plan On October 8, 2024, the Company’s Board of Directors approved the Applied Digital Corporation 2024 Omnibus Equity Incentive Plan (the “2024 Plan”), which the Company’s stockholders approved on November 20, 2024. The 2024 Plan provides for grants of various equity awards for eligible employees, officers, non-employee directors and other service 24 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 providers. Upon stockholder approval of the 2024 Plan, the 2022 Plans (as defined below) were terminated; provided that all awards (as defined in the 2022 Plans) outstanding under the 2022 Incentive Plan and the 2022 Non-Employee Director Stock Plan shall continue in effect in accordance with their terms. On November 5, 2025, at the Annual Stockholders’ Meeting, the Company’s stockholders approved an amendment to the 2024 Plan to increase the number of shares of common stock authorized for issuance thereunder by 15,000,000 shares. 2022 Plans On October 9, 2021, the Company’s Board of Directors (the “Board”) approved two equity incentive plans, which the Company’s stockholders approved on January 20, 2022. The two plans consist of the 2022 Incentive Plan, previously referred to in the Company’s SEC filings as the 2021 Incentive Plan (the “Incentive Plan”), which provides for grants of various equity awards to the Company’s employees and consultants, and the 2022 Non-Employee Director Stock Plan previously referred to in the Company’s SEC filings as the 2021 Non-Employee Director Stock Plan (the “Director Plan” and, together with the Incentive Plan, the “2022 Plans”), which provides for grants of restricted stock to non-employee directors and for deferral of cash and stock compensation if such deferral provisions are activated at a future date. As of November 30, 2025, the Company had issued awards of approximately 23.2 million shares of common stock of the Company under the 2022 Plans, 9.3 million under the 2024 Plan, and 600,000 shares of common stock outside of either plan, related to an employment inducement award. As of November 30, 2025, there are approximately 16.0 million shares of common stock available for issuance under the 2024 Plan. The Company capitalizes a portion of stock-based compensation costs for employees who work directly on construction and development of the Company's data centers. The Company recognized stock-based compensation associated with the 2022 and 2024 Plans as follows (in thousands): Three Months Ended Six Months Ended November 30, 2025 November 30, 2024 November 30, 2025 November 30, 2024 Cost of revenue $ 777 $ 834 $ 1,468 $ 1,258 Selling, general, and administrative 27,274 3,450 41,029 642 Capitalized (1) 999 152 1,928 306 Total stock-based compensation $ 29,050 $ 4,436 $ 44,425 $ 2,206 (1) Capitalized to CIP in the unaudited condensed consolidated balance sheets. Restricted Stock Awards As of May 31, 2025 and November 30, 2025, there were 271,444 shares outstanding with a weighted average grant date fair value per share of $ 3.55 as there were no restricted stock awards granted, vested, or forfeited during the six months ended November 30, 2025. As of November 30, 2025, total remaining expense to be recognized related to these awards was $ 0.7 million and the weighted average remaining recognition period for the unvested awards was 1.4 years. 25 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Restricted Stock Units The following is a summary of the activity and balances for unvested restricted stock units granted during the six months ended November 30, 2025: Number of Shares Weighted Average Grant Date Fair Value Per Share Outstanding as of May 31, 2025 6,659,830 $ 6.56 Granted 2,839,449 19.22 Vested ( 2,534,584 ) 8.93 Forfeited ( 159,557 ) 7.89 Outstanding as of November 30, 2025 6,805,138 $ 10.93 As of November 30, 2025, total remaining expense to be recognized related to these awards was $ 66.1 million and the weighted average remaining recognition period for the unvested awards was 2.0 years. Performance Stock Units Performance stock units (“PSUs”) represent a right to receive a certain number of shares of common stock based on the achievement of company performance goals, individual performance measures, and continued employment during the vesting period. Performance stock units cliff-vest depending on the achievement of Company and individual performance measures the achievement of which must occur on or prior to December 31, 2027 for all awards currently outstanding. Such performance measures are based on the Company entering into data center leases with a hyperscaler, the consummation of project financing, receipt of sustainable revenue with respect to the data center leases that implies positive net operating income, and data center buildings achieving "ready for service" dates. The fair value of PSUs is based on the closing price on the date of grant. The compensation expense related to these PSUs is recognized over the vesting period when the achievement of the performance conditions becomes probable. The total compensation cost for the PSUs is determined based on the most likely outcome of the performance condition and the number of awards expected to vest. The following is a summary of the activity and balances for unvested performance stock units granted during the six months ended November 30, 2025: Number of Shares Weighted Average Grant Date Fair Value Per Share Outstanding as of May 31, 2025 7,207,500 $ 6.59 Granted 635,000 26.00 Vested — — Forfeited — — Outstanding as of November 30, 2025 7,842,500 $ 8.16 As of November 30, 2025, total remaining expense to be recognized related to these awards was $ 34.3 million and the weighted average remaining recognition period for the unvested awards was 1.8 years. 26 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 13. Temporary Equity Preferred Stock The following is a summary of the activity and balances for preferred stock during the three and six months ended November 30, 2024 (in thousands, other than share data): Series E Redeemable Preferred Stock Series F Convertible Preferred Stock Series E-1 Redeemable Preferred Stock Shares Amount Shares Amount Shares Amount Outstanding as of August 31, 2024 301,673 $ 6,932 53,191 $ 48,350 — $ — Issuances, net of costs — — — — 6,359 5,850 Conversions — — ( 10,191 ) ( 5,350 ) — — Redemptions — — — — — — Outstanding as of November 30, 2024 301,673 $ 6,932 43,000 $ 43,000 6,359 $ 5,850 Series E Redeemable Preferred Stock Series F Convertible Preferred Stock Series E-1 Redeemable Preferred Stock Shares Amount Shares Amount Shares Amount Outstanding as of May 31, 2024 — $ — — $ — — $ — Issuances, net of costs 301,673 6,932 53,191 48,350 6,359 5,850 Conversions — — ( 10,191 ) ( 5,350 ) — — Redemptions — — — — — — Outstanding as of November 30, 2024 301,673 $ 6,932 43,000 $ 43,000 6,359 $ 5,850 The following is a summary of the activity and balances for preferred stock during the three and six months ended November 30, 2025 (in thousands, other than share data): Series E Redeemable Preferred Stock Series E-1 Redeemable Preferred Stock Series G Convertible Preferred Stock Shares Amount Shares Amount Shares Amount Outstanding as of August 31, 2025 301,673 $ 6,932 62,260 $ 56,796 — $ — Issuances, net of costs — — — — 424,050 407,807 Conversions — — — — ( 380,800 ) ( 365,817 ) Redemptions ( 20,000 ) ( 500 ) — — — — Outstanding as of November 30, 2025 281,673 $ 6,432 62,260 $ 56,796 43,250 $ 41,990 27 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Series E Redeemable Preferred Stock Series E-1 Redeemable Preferred Stock Series G Convertible Preferred Stock Shares Amount Shares Amount Shares Amount Outstanding as of May 31, 2025 301,673 $ 6,932 62,485 $ 57,011 78,000 $ 72,094 Issuances, net of costs — — — 10 604,050 578,193 Conversions — — — — ( 638,800 ) ( 608,297 ) Redemptions ( 20,000 ) ( 500 ) ( 225 ) ( 225 ) — — Outstanding as of November 30, 2025 281,673 $ 6,432 62,260 $ 56,796 43,250 $ 41,990 Series E Redeemable Preferred Stock During the fiscal year ended May 31, 2025, the Company closed on four offerings of the Series E Redeemable Preferred Stock (the “Series E Preferred Stock”). The Company sold total shares of 301,673 for proceeds of $ 6.9 million net of issuance costs of $ 0.6 million. The Series E Preferred Stock offering was terminated on August 9, 2024. The shares of Series E Preferred Stock have no voting or conversion rights. Holders of the Series E Preferred Stock are entitled to receive cumulative dividends at a fixed rate of 9.0 % per annum. Dividends are calculated based on a 360-day year, declared and accrued monthly, and payable at the discretion of the Board of Directors out of legally available funds. Dividends must be fully paid for all past periods before any distributions can be made to common stockholders or any junior series of equity securities. During the three and six months ended November 30, 2025, the Company declared and paid approximately $ 170,000 and $ 339,000 , respectively, of dividends related to Series E Preferred Stock as presented on the unaudited condensed consolidated statement of operations while during the three and six months ended November 30, 2024, approximately $ 226,000 and $ 270,000 , respectively, of dividends were declared and paid. The Series E Preferred Stock ranks senior to all classes of common stock and junior to all existing and future debt of the Company. Additionally, it is on parity with any future series of preferred stock with substantially identical terms but may rank junior to any future series of preferred stock if the holders of such series are entitled to rights and preferences with priority over the holders of the Series E Preferred Stock. In the event of liquidation, holders are entitled to receive $ 25.00 per share (the “Series E Stated Value”) plus any accrued but unpaid dividends before any distributions are made to common stockholders. The Series E Preferred Stock has no stated maturity and remains outstanding indefinitely unless redeemed or repurchased by the Company. Holders may require the Company to redeem any portion of their Series E Preferred Stock at any time for a "Settlement Amount" calculated as the Series E Stated Value plus any unpaid dividends, less a Holder Optional Redemption Fee, equal to a percentage of the Series E Stated Value based on the year when the redemption occurs as follows: 9.00 % prior to the first anniversary of the respective tranche closing date (the "Original Issuance Date"); 7.00 % on or after the first anniversary but prior to the second anniversary of the Original Issuance Date; 5.00 % on or after the second anniversary but prior to the third anniversary of the Original Issuance Date: and 0.00 % on or after the third anniversary of the Original Issuance Date. The Settlement Amount can be settled in cash or shares of common stock, subject to a share cap, which limits the total shares deliverable upon redemption to 19.99 % of the common stock outstanding prior to the Series E Preferred Stock offering ( 25,475,751 shares, the “Share Cap”). Any portion of the Settlement Amount exceeding the Share Cap will be settled in cash. The Company may also redeem shares of Series E Preferred Stock after the second anniversary of the original issuance date, with a minimum notice of 10 days, at the Company Optional Redemption Settlement Amount, which is equal to the Series E Stated Value per share plus any unpaid and accrued dividends. If the Company elects to pay the redemption amount in shares, then the number of shares to be delivered will be calculated as the Company Optional Redemption Settlement Amount divided by the closing price per share of the common stock on the date of the Company Optional Redemption exercise, subject to the Share Cap. During the three and six months ended November 30, 2025, 20,000 shares of Series E Preferred Stock were redeemed. 28 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Series E-1 Redeemable Preferred Stock On September 23, 2024, the Company entered into a dealer manager agreement for the offering of up to 62,500 shares of Series E-1 Redeemable Preferred Stock, par value $ 0.001 per share (“Series E-1 Preferred Stock”), at a price per share of $ 1,000 (the “Series E-1 Stated Value”). During the fiscal year ended May 31, 2025, the Company closed on eight offerings in which the Company issued 62,500 shares for gross proceeds of $ 62.5 million. The Series E-1 Preferred Stock offering was completed as of May 31, 2025. The shares of Series E-1 Preferred Stock have no voting or conversion rights. Holders of the Series E-1 Preferred Stock are entitled to receive cumulative dividends at a fixed rate of 9.0 % per annum of the Series E-1 Stated Value. Dividends are calculated based on a 360-day year, declared and accrued monthly, and payable at the discretion of the Board of Directors out of legally available funds. Dividends on the shares of Series E-1 Preferred Stock must be fully paid for all past periods before any distributions can be made to common stockholders or any junior series of equity securities. During the three and six months ended November 30, 2025, the Company declared and paid approximately $ 1.4 million and $ 2.8 million, respectively of dividends related to the Series E-1 Preferred Stock as presented on the unaudited condensed consolidated statements of operations while during the three and six months ended November 30, 2024, approximately $ 48,000 of dividends were declared and paid. The Series E-1 Preferred Stock ranks senior to all classes or series of common stock and junior to all existing and future debt of the Company. Additionally, the Series E-1 Preferred Stock is on parity with the Series E Preferred Stock and any future series of preferred stock with substantially identical terms but may rank junior to any future series of preferred stock if the holders of such series are entitled to rights and preferences with priority over the holders of the Series E-1 Preferred Stock. In the event of liquidation, holders of the Series E-1 Preferred Stock and holders of shares of any other class or series of capital stock ranking senior to or on a parity with the Series E-1 Preferred Stock, are entitled to receive an amount per share equal to the Series E-1 Stated Value plus an amount per share that is issuable as a result of any accrued but unpaid dividends before any distributions are made to common stockholders. The Series E-1 Preferred Stock has no stated maturity and remains outstanding indefinitely unless redeemed or repurchased by the Company. Holders may require the Company to redeem any portion of their Series E-1 Preferred Stock at any time for a "Settlement Amount" calculated as the Series E-1 Stated Value plus any unpaid dividends, less a Holder Optional Redemption Fee equal to a percentage of the Series E-1 Stated Value based on the year when the redemption occurs as follows: 9.00 % prior to the first anniversary of the respective tranche closing date (the "Original Issuance Date"); 7.00 % on or after the first anniversary but prior to the second anniversary of the Original Issuance Date; 5.00 % on or after the second anniversary but prior to the third anniversary of the Original Issuance Date: and 0.00 % on or after the third anniversary of the Original Issuance Date. The Settlement Amount can be settled in cash or shares of common stock at the sole option of the Company, subject to a share cap (if required by Nasdaq rules and regulations), which limits the total shares deliverable upon redemption to 19.99 % of the common stock outstanding immediately prior to the Series E-1 Preferred Stock offering ( 25,889,470 shares, the “Share Cap”), unless approval by the Company’s stockholders is obtained to exceed the Share Cap. Any portion of the Settlement Amount exceeding this cap will be settled in cash. Holders may not redeem any shares of Series E-1 Preferred Stock for common stock prior to the first anniversary of the Original Issuance Date. The Company may also redeem shares of the Series E-1 Preferred Stock after the second anniversary of the Original Issuance Date, with a minimum notice of 10 days, at a redemption price equal to the Series E-1 Stated Value plus any accrued but unpaid dividends. If the Company elects to pay the redemption amount in shares, then the number of shares to be delivered will be calculated as the Settlement Amount divided by the closing price per share of the common stock on the last trading day prior to the date upon which notice was provided to the holder, subject to the Share Cap, if applicable. During the six months ended November 30, 2025, 225 of shares were redeemed. Series G Convertible Preferred Stock On April 30, 2025, the Company entered into the Preferred Equity Purchase Agreement (the “PEPA”) with certain investors for the issuance and sale of up to 156,000 shares of Series G Convertible Preferred Stock (the “Series G Preferred Stock”) in a transaction (the “Private Placement”) pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The shares of the Series G Preferred Stock may be put to the investors from time to time at the Company’s discretion during the period commencing on April 30, 2025 (the 29 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 “Commitment Date”) and terminating on the earlier of (i) the 36-month anniversary of the Commitment Date or (ii) such date as there ceases to be a sufficient number of authorized but unissued shares of common stock remaining under the Exchange Cap (as defined in the PEPA). The Series G Preferred Stock became convertible on June 3, 2025, the Registration Effective Date (as defined in the PEPA). Pursuant to the PEPA, the Company filed a registration statement with the SEC, registering the resale of the shares of common stock issuable upon the conversion of the shares of Series G Preferred Stock, on June 3, 2025, as amended the post-effective amendment filed with the SEC on September 23, 2025, each of which was automatically effective upon filing. Conversion of the Series G Preferred Stock is subject to a customary 4.99 % beneficial ownership limitation, as well as a 19.99 % conversion limitation pursuant to the applicable Nasdaq Listing Rules (the “Exchange Cap”). The Series G Preferred Stock ranks senior to all classes of common stock and junior to all existing and future debt of the Company. Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of the Series G Preferred Stock will be entitled to receive distributions out of the assets of the Company in an amount per share equal to the then-current Series G Preferred Stock stated value, whether capital or surplus, before any distributions are made on any shares of our common stock. The Series G Preferred Stock is on parity with the Series E Preferred Stock, Series E-1 Preferred Stock and any future series of preferred stock with substantially identical terms. Holders have the right to require the Company to redeem the Series G Preferred Stock under certain conditions, such as a Trading Failure, as defined in the Series G Preferred Stock certificate of designation. If there is a Trading Failure, the redemption price is the greater of the Series G Preferred Stock stated value or the product of the lowest conversion price during the period beginning on the date immediately preceding the Trading Failure and ending on the date the holder delivers a Redemption Notice, multiplied by the number of shares of common stock into which the preferred stock is convertible at the then-effective conversion price. If any Investor is prevented from converting any portion of its Series G Preferred Stock because of the Exchange Cap, and such limitation continues for 18 months following the date that is 18 months following the issuance of such Series G Preferred Stock, or, if earlier, the date that is 36 months following the Commitment Date, then the portion of the Series G Preferred Stock held by such Investor at such time shall be redeemed by the Company, within 10 trading days after such earlier date, at a price equal to 110 % of the stated value of such Series G Preferred Stock. On each conversion date, the conversion price for the Series G Preferred Stock being converted (the “Conversion Price”) will equal the greater of (i) 95 % of the lowest daily Volume Weighted Average Price for each of the five trading days immediately preceding the conversion date and (ii) the initial floor price of $ 4.25 , which may be reduced by the Company at any time in its sole discretion, but in no event below $ 1.34 (as may be adjusted from time to time, the “Floor Price”). Based on its initial stated value of $ 1,000 per share and the $ 4.25 initial Floor Price, each share of Series G Preferred Stock would be convertible into an aggregate of 236 shares of common stock. No right of conversion may be exercised by the Investors in excess of $ 30 million of stated value, in the aggregate, per month, unless otherwise mutually agreed in writing by the Company and the holders holding a majority of the voting power of the Series G Preferred Stock outstanding at the time. On August 14, 2025, the Company entered into the first amendment (the “First Amendment”) to the PEPA to, among other things, (i) increase the aggregate commitment amount of the shares of Series G Preferred Stock from $ 150 million to $ 300 million, and (ii) increase its access to capital by removing the Put Limitation (as defined in the PEPA) that had previously limited the aggregate purchase price for any Put Issuance (as defined in the PEPA) to no more than $ 75 million. In connection with the First Amendment, on August 14, 2025, the Company filed an amendment (the “First CoD Amendment”) to the Series G Certificate of Designation, originally filed with the Secretary of State of the State of Nevada on April 30, 2025. The First CoD Amendment amends the Series G Certificate of Designation to, among other things, (i) increase the initial Floor Price (as set forth in Section 1.5(c)(i) of the Series G Certificate of Designation) to $ 12.50 from $ 4.25 , and (ii) change the limit below which the Floor Price may not be reduced (as set forth in Section 1.5(c)(ii) of the Series G Certificate of Designation) to $ 4.33 from $ 1.34 . The Floor Price sets the minimum floor for the conversion price of the Series G Preferred Stock, which price may not be reduced unless the Company determines to do so in its discretion. The First CoD Amendment further amended the status of converted or repurchased preferred stock such that any shares of 30 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Series G Preferred Stock that have been or will be converted will be retired and resume the status of authorized but unissued shares. On September 11, 2025, the Company entered into the second amendment (the “Second Amendment”) to the PEPA, as amended by the First Amendment, dated August 14, 2025 to, among other things, increase the aggregate commitment amount of the shares of Series G Convertible Preferred Stock from $ 300 million to $ 450 million. In connection with the Second Amendment, on September 11, 2025, the Company filed an amendment (the “Second CoD Amendment”) to the Series G Certificate of Designation, originally filed with the Secretary of State of the State of Nevada on April 30, 2025, as amended. The Second CoD Amendment amended the Series G Certificate of Designation, as amended, to increase the number of shares authorized for issuance as Series G Preferred Stock from 156,000 to 204,000 shares. On September 25, 2025, the Company filed an amendment (the “Third CoD Amendment”) to the Series G Certificate of Designation, originally filed with the Secretary of State of the State of Nevada on April 30, 2025, as amended. The Third CoD Amendment amended the Series G Certificate of Designation, as amended, to increase the Floor Price (as set forth in Section 1.5(c)(i) of the Certificate of Designation) to $ 22.00 from $ 12.50 . On October 7, 2025, the Company entered into the third amendment (the “Third Amendment”) to the PEPA to, among other things, increase the aggregate commitment amount of the shares of the Series G Preferred Stock from $ 450.0 million to $ 590.0 million. In addition, on October 14, 2025, the Company filed a fourth amendment (the “Fourth CoD Amendment”) to the Series G Certificate of Designation, as amended. The Fourth CoD Amendment amended the Series G Certificate of Designation, as amended, to increase the Floor Price (as set forth in Section 1.5(c)(i) of the Certificate of Designation) to $ 34.00 from $ 22.00 . On October 21, 2025, the Company entered into the fourth amendment (the “Fourth Amendment”) to the PEPA to, among other things: (i) increase the aggregate commitment amount of the shares of Series G Preferred Stock, from $ 590.0 million to $ 1.59 billion; (ii) subject to waiver by a majority-in-interest of the investors, (a) set the maximum put issuance amount to $ 75.0 million per issuance, (b) set the limit to one put issuance per seven (7) business day period, and (c) set the maximum aggregate stated value of Series G Preferred Stock outstanding at any one time to $ 75.0 million; (iii) increase the original discount from 2 % to 3 %; (iv) eliminate the placement agent fee; and (v) eliminate the prohibition on Variable Rate Transactions (as defined in the PEPA). On October 21, 2025, in connection with the entry into the Fourth Amendment, the the Company filed an amendment (the “Fifth CoD Amendment”) to the Series G Certificate of Designation, originally filed with the Secretary of State of the State of Nevada on April 30, 2025, as amended on each of August 14, 2025, September 11, 2025, September 25, 2025 and October 14, 2025 (as amended, the “Certificate of Designations”). The Fifth CoD Amendment amended the Certificate of Designations to, among other things, (i) increase the authorized shares of Series G Preferred Stock from 204,000 shares to 1,030,000 shares, and (ii) increase the limit below which the Floor Price (as defined in Section 1.5(c)(ii) of the Certificate of Designations) may not be reduced from $ 4.33 to $ 4.48 . In addition, under the Fifth CoD Amendment, the Company’s Corporation’s Board of Directors may increase or decrease the applicable Floor Price with respect to any put, at its sole discretion. As Series G Preferred Stock may be reissued, during the three and six months ended November 30, 2025, the Company issued and sold 424,050 and 604,050 shares of Series G Preferred Stock, respectively, for gross proceeds of $ 415.0 million and $ 590.0 million, respectively. During the three and six months ended November 30, 2025, 380,800 and 638,800 shares of Series G Preferred Stock, respectively, were converted into 15.4 million and 43.6 million shares of the Company’s common stock, respectively. As of November 30, 2025, 43,250 shares of Series G Preferred Stock were issued and outstanding. Redeemable Noncontrolling Interest APLD HPC TopCo 2 LLC As discussed within Note 9 - Variable Interest Entity above, APLD HPC TopCo 2 LLC (“TopCo 2”) completed two closings under its A&R UPA during the quarter ended November 30, 2025, issuing 562,500 preferred units and 75,000 31 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 corresponding common units for $ 562.5 million to MIP HPC Holdings, LLC, which resulted in a redeemable noncontrolling interest. The preferred units accrue dividends at a rate of 12.75 % per annum, which accrue daily and compound semi-annually, and which, if not redeemed by then, will increase by 87.5 basis points on each of October 7, 2030 and October 7, 2031, and by 200 basis points on October 7, 2035 and each one-year anniversary thereof, up to a maximum rate of 16.75 %. The dividend rate will be further increased (i) by the amount that the weighted average all-in annual interest rate on certain indebtedness exceeds 8.75 % per annum for so long as such indebtedness is outstanding and (ii) for so long as certain significant events of default or other “trigger events” under the A&R LLCA remain uncured, by 200 basis points per annum. Subject to limited exceptions, the dividends are payable (i) from the initial closing through October 6, 2035, at TopCo 2’s election, either in cash or in kind, and (ii) after October 6, 2035, in cash only. Additionally, the preferred units carry a minimum 1.80 x multiple of invested capital liquidation preference, inclusive of the value of the common units; provided, that (x) in connection with an initial public offering or a drag-along sale in which the sellers receive highly liquid securities, the minimum multiple of invested capital increases to 2.00 x and (y) with respect to any additional equity contributions with respect to the Polaris Forge 1 (other than pursuant to the additional closings under the A&R UPA), the then applicable minimum multiple of invested capital will be reduced by an amount that reflects the time between when MIP HPC Holdings, LLC first committed to make the investment and when the actual contribution is made, calculated as interest at a fixed annual rate of 12.75 %, accruing daily, on the amount of such additional equity contribution for such period. The preferred units and the common units are redeemable after April 6, 2028, in exchange for: (i) from April 6, 2028 up to October 6, 2029, the sum of (x) the applicable minimum multiple of invested capital, plus (y) 120 % of the fair market value of such common unit(s); (ii) from October 6, 2029 up to October 6, 2030, the sum of (x) the applicable minimum multiple of invested capital, plus (y) 112.5 % of the fair market value of such common unit(s); and (iii) from and after October 6, 2030, the greater of (x) the accreted amount, plus any accrued and unpaid dividend, plus the fair market value of such common units, plus certain indemnity payments by TopCo 2 for breaches of business representations of the TopCo 2 under the A&R UPA, if any, and (y) the applicable multiple of invested capital minus certain indemnity payments by the Company for breaches of fundamental representations of the Company under the A&R UPA (such greater amount, the “Liquidation Preference Amount”). If the preferred units and common units are outstanding on October 6, 2032, or if certain trigger events occurs and are not cured within specified time periods, MIP HPC Holdings, LLC may require TopCo 2 to commence a customary marketed sale process managed by an independent investment bank, where the proceeds of any such sale are to be used to redeem the preferred units and the common units on the terms set forth above. Distributions of available excess cash will be made in accordance with a multi-tiered waterfall, generally as follows: (i) first, to MIP HPC Holdings, LLC, to pay certain specified losses under the A&R UPA, if any; (ii) second, to MIP HPC Holdings, LLC, to pay any accrued but unpaid dividends on its preferred units; (iii) third, to the MIP HPC Holdings, LLC, until it has received its Liquidation Preference Amount; and (iv) fourth, to the holders of common units, pro rata in accordance with the number of common units held by them. The preferred units and corresponding common units were determined to have embedded derivative features, the Redemption features and the Contingent Dividend Rate Increase feature, requiring bifurcation and remeasurement at fair value at each reporting date, with the changes in fair value recorded through earnings. The Redemption features are inclusive of the Investor put option upon a Sale, APLD Holdings call option, and the Distribution Redemptions (all as defined within the A&R UPA). The Company engaged a third party valuation specialist in determining the value of the embedded derivatives using a binomial lattice model, which includes Level 3 unobservable inputs. The key inputs used were the estimated credit spread of the associated preferred stock and corresponding common units, volatility, and risk-free rate of the derivative assets. As the noncontrolling interest has embedded features that require bifurcation, the fair value at issuance was allocated between the components. As such, the net proceeds were first allocated to the derivatives at their 32 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 fair value. The remainder of the proceeds were then allocated to the warrants and noncontrolling interests based on their relative fair values. As of November 30, 2025, the derivative assets were fair valued at $ 55.7 million. The balance sheets and operating activities of TopCo 2 are included in the Company's unaudited condensed consolidated financial statements. The Company adjusts net income in the unaudited condensed consolidated statements of operations to exclude the proportionate share of results that is attributable to the noncontrolling interest. Additionally, the Company presents the proportionate share that is attributable to the noncontrolling interest as temporary equity within the unaudited condensed consolidated balance sheets. This temporary equity presentation is the result of the noncontrolling interest being subject to certain redemption rights that are not entirely within the Company's control. Due to these redemption rights, at each balance sheet date, the Company is required to adjust the carrying value of the derivatives to fair value and record any changes in fair value within earnings. The Company will adjust noncontrolling interest for the attribution of net income (loss) and preferred dividends of TopCo 2 to the noncontrolling interest holder. Net loss attributable to MIP HPC Holdings, LLC was $ 0.1 million for the three months ended November 30, 2025. The proportionate share of net income was accounted for as a reduction in deriving net income attributable to common stock in the Company's unaudited condensed consolidated statements of operations. The noncontrolling interest as measured at fair value was $ 517.0 million at November 30, 2025. There was no noncontrolling interest at May 31, 2025. The change in noncontrolling interest consists of $ 513.9 million of contributions from noncontrolling interest, net of costs, $ 3.1 million of preferred stock dividends paid in-kind, and $ 0.1 million in current year net loss attributable to non-controlling interest. 14. Leases Lessor Accounting On May 28, 2025, APLD ELN-02 LLC and APLD ELN-03 LLC, the Company's subsidiaries, each entered into a data center lease with CoreWeave, Inc. (together, the "CoreWeave Leases") to deliver up to an aggregate of 250 MW of infrastructure to host CoreWeave’s HPC operations at Polaris Forge 1. The first lease is for the full capacity of Building 2, our 100 MW data center, which was completed and became operational in November 2025. The second lease is for the full capacity of Building 3, a 150 MW data center that is also under construction and is expected to become operational during the calendar year 2026. On August 28, 2025, APLD ELN-02 C LLC, a subsidiary of the Company, entered into a third data center lease with CoreWeave to deliver an additional 150MW at Polaris Forge 1, bringing the total capacity under contract at Polaris Forge 1 to 400 MW. The Company has guaranteed the obligations of APLD ELN-02 C LLC under the data center lease. The third lease is for the full capacity of Building 4, which is currently in the design phase and is expected to be service-ready in middle of calendar year 2027. On October 20, 2025, APLD FAR-01 LLC and APLD FAR-02 LLC, the Company’s subsidiaries, entered into a data center lease with a U.S. based investment grade hyperscaler to deliver 200MW of critical IT load to support the hyperscaler’s AI and HPC infrastructure at Polaris Forge 2, which is currently under construction. The initial 200 MW are phased within two buildings expected to begin to come online during the calendar year 2026. A summary of minimum lease payments due from these leases is shown below. These amounts do not reflect future rental revenues from renewal or replacement of existing leases unless the Company is reasonably certain it will exercise the 33 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 option or the lessee has the sole ability to exercise the option. Reimbursements of operating expenses and variable rent increases are excluded from the table below (in thousands): Minimum Contracted Payments FY26 $ 72,000 FY27 479,540 FY28 855,950 FY29 883,279 FY30 908,393 Thereafter 12,351,943 Total $ 15,551,105 Lessee Accounting From time to time, the Company enters into leases for equipment and office space. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company presents operating and finance lease right of use assets and liabilities separately on the unaudited condensed consolidated balance sheets as their own captions, with the liabilities split between current and long-term. Components of lease expense were as follows (in thousands): Three Months Ended Six Months Ended November 30, 2025 November 30, 2024 November 30, 2025 November 30, 2024 Operating lease cost: Operating lease expense $ 174 $ 174 $ 348 $ 348 Short-term lease expense 108 51 806 85 Total operating lease cost 282 225 1,154 433 Finance lease expense: Amortization of right-of-use assets (1) 5,570 2,091 6,528 3,570 Interest on lease liabilities 724 619 1,020 834 Total finance lease cost 6,294 2,710 7,548 4,404 Variable lease cost ( 21 ) 62 ( 2 ) 118 Total net lease cost $ 6,555 $ 2,997 $ 8,700 $ 4,955 (1) Amortization of right-of-use assets is included within cost of revenues and selling, general and administrative expense in the unaudited condensed consolidated statements of operations. 34 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 The following table represents the Company’s future minimum lease payments as of November 30, 2025: Operating Leases Finance Leases Total FY26 $ 383 $ 1,387 $ 1,770 FY27 365 14 379 FY28 27 1 28 FY29 — — — FY30 — — — Thereafter — — — Total lease payments 775 1,402 2,177 Less: imputed interest ( 38 ) ( 28 ) ( 66 ) Total lease liabilities 737 1,374 2,111 Less: Current portion of lease liability ( 632 ) ( 1,366 ) ( 1,998 ) Long-term portion of lease liability $ 105 $ 8 $ 113 Supplemental cash flow and other information related to leases is as follows: Six Months Ended November 30, 2025 November 30, 2024 Weighted-average years remaining (in years): Operating leases 0.8 years 1.4 years Finance leases 0.3 years 4.8 years Weighted-average discount rate: Operating leases 9.4 % 9.9 % Finance leases 9.1 % 9.2 % 15. Commitments and Contingencies Commitments Energy Contracts As of November 30, 2025, the Company had a minimum commitment of approximately $ 33.1 million related to the energy services agreement for its Jamestown, North Dakota co-hosting facility payable over, approximately, the next 1.2 years. Construction Contracts The Company routinely engages with construction vendors for the construction of our facilities. These engagements are governed by contracts containing standard terms and conditions, including certain milestones that obligate the Company to pay as work is completed. In the event of termination of any of these contracts by the Company, the Company would be liable for all work that has been completed or in process, plus any applicable fees. The Company generally has the right to cancel these open purchase orders prior to delivery or terminate the contracts without cause. Claims and Litigation From time to time, the Company may be involved in litigation relating to claims arising out of operations in the ordinary course of business. 35 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Securities Lawsuit The Company, Wes Cummins, the Company's Chief Executive Officer, and David Rench, the Company's then Chief Financial Officer, have been named as defendants in a putative securities class action lawsuit in the matter styled, McConnell v. Applied Digital Corporation, et al., Case No. 3:23-cv-1805, filed in August 2023 in the U.S. District Court for the Northern District of Texas (the “Securities Lawsuit”). Specifically, the complaint asserts claims pursuant to Section 10(b) and 20(a) of the Securities and Exchange Act of 1934 based on allegedly false or misleading statements regarding the company’s business, operations, and compliance policies, including claims that the Company overstated the profitability of its Data Center Hosting Business and its ability to successfully transition into a low-cost cloud services provider and that the Company’s board of directors was not “independent” within the meaning of Nasdaq listing rules. On May 22, 2024, the court appointed lead plaintiff and approved lead counsel, and on July 22, 2024, l ead p laintiff filed an amended complaint which asserts the same claims based on similar allegations in the original complaint. On September 20, 2024, the defendants filed a motion to dismiss the amended complaint. On November 19, 2024, l ead p laintiff filed his opposition to the Motion to Dismiss. On January 3, 2025, the defendants filed their reply in further support of the Motion to Dismiss. On September 8, 2025, the Court issued an order staying the Securities Lawsuit and administratively closing it pending resolution of the Motion to Dismiss. The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in the Securities Lawsuit. If an unfavorable action were to occur, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable. Derivative Lawsuit On November 15, 2023, a derivative action was filed in the matter styled, Weich v. Cummins, et al., Case No. A-23-881629-C in the District Court of Clark County, Nevada (the “Derivative Lawsuit”). The Weich complaint named as defendants certain members of the Company’s Board of Directors and its Chief Executive Officer Wesley Cummins and purports to name the Company’s then Chief Financial Officer David Rench as a defendant. The complaint asserted claims for breach of fiduciary duties, corporate waste and unjust enrichment based upon allegations that the defendants caused or allowed the Company to make materially false and misleading statements regarding the Company’s business, operations, and compliance policies. Specifically, the complaint alleged that the Company overstated the profitability of the Data Center Hosting Business and its ability to successfully transition into a low-cost cloud services provider and that the Board was not “independent” within the meaning of Nasdaq listing rules. On February 27, 2024, the derivative plaintiff filed an amended complaint asserting the same claims as the original complaint. On June 5, 2024, following briefing and argument on the defendants’ motion to dismiss the Derivative Lawsuit, the Court entered an order granting the defendants’ motion without prejudice and dismissing all claims against all defendants, including the Company, on the grounds that the plaintiff failed to plead (1) demand futility as to each of plaintiff’s claims or (2) a claim for breach of fiduciary duty. The order dismissed all claims against all defendants, including the Company. The plaintiff can seek leave to file an amended complaint but to date has not done so. The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in this action. If an unfavorable action were to occur, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable. As of November 30, 2025, there were no other pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s consolidated operations. There are also no legal proceedings in which any of the Company’s management or affiliates is an adverse party or has a material interest adverse to the Company’s interest. 16. Business Segments The Company's business is made up of two operating segments: the Data Center Hosting Business and the HPC Hosting Business. These segments represent management's view of the business for which separate financial information is 36 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 available and evaluated regularly by the Chief Operating Decision Maker ("CODM"), which is the Company’s Chief Executive Officer. The Company's CODM evaluates performance and makes operating decisions primarily based on revenue and segment profit (loss) on a consolidated basis and for each of the Company's reportable segments. Operating results by segment include costs or expenses directly attributable to each segment, which include selling, general, and administrative expenses, gain on classification of held for sale and loss on abandonment of assets. The Company derives the segment results from its internal management reporting system. The accounting policies the Company uses to derive reportable segment results are the same as those used for external reporting purposes. Segment revenues and segment profit are regularly reviewed by the CODM and compared against historical results, forecast and budget information in order to make decisions about how to allocate capital and other resources to each segment. The Company does not allocate interest expense, net, gain on change in fair value of derivative, gain on change in fair value of investment, loss on conversion of debt, loss on change in fair value of debt or income tax expense to these segments for internal reporting purposes, as the Company does not believe that allocating these expenses is beneficial in evaluating segment performance. The "Other" includes corporate related items not allocated to reportable segments for purposes of making operating decisions or assessing financial performance. In accordance with applicable accounting guidance, the results of the Cloud Services Business are presented as discontinued operations in the unaudited condensed consolidated statements of operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. See "Note 5 - Discontinued Operations" for operations and segment results for the Cloud Services Business. The following tables present segment information, including revenue by segment and segment profit (loss) for the three months ended November 30, 2025 and November 30, 2024 (in thousands): Three Months Ended November 30, 2025 Six Months Ended November 30, 2025 Data Center Hosting Business HPC Hosting Business Data Center Hosting Business HPC Hosting Business Revenue $ 41,597 $ 84,992 $ 79,517 $ 111,288 Related party revenue — — — — Total segment revenue 41,597 84,992 79,517 111,288 Costs and expenses Cost of revenues 25,153 75,447 55,562 100,631 Selling, general and administrative (1) 485 12,141 1,450 14,036 Loss on abandonment of assets — — 512 1,239 Total costs and expenses 25,638 87,588 57,524 115,906 Segment profit (loss) $ 15,959 $ ( 2,596 ) $ 21,993 $ ( 4,618 ) (1) Does not include selling, general and administrative expense that is not allocated to reportable segments, such as certain amounts of stock-based compensation, personnel expenses, and professional service expenses. 37 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Three Months Ended November 30, 2024 Six Months Ended November 30, 2024 Data Center Hosting Business HPC Hosting Business Data Center Hosting Business HPC Hosting Business Revenue $ 36,163 $ — $ 69,086 $ — Related party revenue — — 1,926 — Total segment revenue 36,163 — 71,012 — Costs and expenses Cost of revenues 22,537 31 44,943 55 Selling, general and administrative (1) 795 5,813 1,567 8,740 Gain on classification of held for sale 192 — ( 24,616 ) — Loss on abandonment of assets 90 — 718 — Total costs and expenses 23,614 5,844 22,612 8,795 Segment profit (loss) $ 12,549 $ ( 5,844 ) $ 48,400 $ ( 8,795 ) (1) Does not include selling, general and administrative expense that is not allocated to reportable segments, such as certain amounts of stock-based compensation, personnel expenses, and professional service expenses. The following tables presents reconciliation to net (loss) income from continuing operations before income tax expense (in thousands): Three Months Ended Six Months Ended November 30, 2025 November 30, 2024 November 30, 2025 November 30, 2024 Segment profit Data Center Hosting Business $ 15,959 $ 12,549 $ 21,993 $ 48,400 HPC Hosting Business ( 2,596 ) ( 5,844 ) ( 4,618 ) ( 8,795 ) Total segment profit 13,363 6,705 17,375 39,605 Other (2) ( 44,320 ) ( 19,510 ) ( 70,624 ) ( 27,116 ) Operating (loss) income ( 30,957 ) ( 12,805 ) ( 53,249 ) 12,489 Interest expense, net 11,484 2,929 15,431 5,888 Gain on change in fair value of derivative ( 13,126 ) — ( 13,126 ) — Gain on change in fair value of investment ( 2,767 ) — ( 2,767 ) — Loss on conversion of debt — 25,410 — 33,612 Loss on change in fair value of debt — 87,218 — 85,439 Net (loss) income from continuing operations before income tax expense $ ( 26,548 ) $ ( 128,362 ) $ ( 52,787 ) $ ( 112,450 ) (2) Other includes corporate related items not allocated to reportable segments. 38 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 We also provide the following additional segment disclosures (in thousands): Three Months Ended Six Months Ended November 30, 2025 November 30, 2024 November 30, 2025 November 30, 2024 Depreciation and amortization: Data Center Hosting Business $ 3,347 $ 3,289 $ 6,739 $ 6,657 HPC Hosting Business 4,715 1,353 5,413 2,074 Other (2) 524 61 587 124 Total depreciation and amortization (3) $ 8,586 $ 4,703 $ 12,739 $ 8,855 (2) Other includes corporate related items not allocated to reportable segments. (3) Includes amortization of the finance lease right-of-use assets. Information on segment assets and a reconciliation to consolidated assets are as follows (in thousands): November 30, 2025 May 31, 2025 Data Center Hosting Business $ 130,760 $ 141,764 HPC Hosting Business 4,430,786 1,363,341 Total segment assets 4,561,546 1,505,105 Cloud Services Business (Discontinued operations) 313,403 304,466 Other (2) 354,395 60,519 Total assets $ 5,229,344 $ 1,870,090 (2) Other includes corporate related items not allocated to reportable segments. 17. Loss Per Share Basic net income (loss) per share (“EPS”) of common stock is computed by dividing a company’s net earnings (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the potential dilution that could occur if the securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. 39 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Potentially dilutive securities are excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive. The table below shows the calculation for earnings per share: Three Months Ended Six Months Ended November 30, 2025 November 30, 2024 November 30, 2025 November 30, 2024 Net loss $ ( 14,450 ) $ ( 138,726 ) $ ( 31,376 ) $ ( 142,973 ) Net loss attributable to noncontrolling interest ( 3,061 ) — ( 3,061 ) — Preferred dividends ( 1,571 ) ( 629 ) ( 3,146 ) ( 673 ) Net loss attributable to common stockholders $ ( 19,082 ) $ ( 139,355 ) $ ( 37,583 ) $ ( 143,646 ) Net (loss) income attributable to common stockholders: Continuing operations $ ( 31,195 ) $ ( 128,992 ) $ ( 59,017 ) $ ( 113,124 ) Discontinued operations 12,113 ( 10,363 ) 21,434 ( 30,522 ) Net loss $ ( 19,082 ) $ ( 139,355 ) $ ( 37,583 ) $ ( 143,646 ) Basic and diluted net (loss) income per share attributable to common stockholders: Continuing operations $ ( 0.11 ) $ ( 0.61 ) $ ( 0.22 ) $ ( 0.63 ) Discontinued operations 0.04 ( 0.05 ) 0.08 ( 0.17 ) Basic and diluted net loss per share $ ( 0.07 ) $ ( 0.66 ) $ ( 0.14 ) $ ( 0.80 ) Basic and diluted weighted average number of shares outstanding 277,423,733 209,560,339 266,599,490 179,119,398 As of November 30, 2025 and November 30, 2024, the Company had approximately 14.9 million and 7.6 million shares, respectively, of granted but unvested restricted stock awards, performance stock units, and restricted stock units that would have a potentially dilutive effect on earnings per share. As of November 30, 2025 and November 30, 2024, the Company had approximately 4.2 million and 7.5 million shares, respectively, associated with the Company’s preferred stock which have been excluded from the calculation of earnings per share because the effect of those shares would be antidilutive. Additionally, the Company had approximately 28.1 million and 6.3 million warrants outstanding as of November 30, 2025 and November 30, 2024, respectively, which have been excluded from the calculations of earnings per share because the effect of those shares would be antidilutive. Lastly, if the Company's Convertible Notes were converted into shares of the Company's common stock as of November 30, 2025, approximately 46.1 million shares were excluded from the calculations of earnings per share because the effect of those shares would be antidilutive. 18. Subsequent Events Additional Issuance under the A&R UPA On December 9, 2025, the Subsidiary Issuer sold to the Purchaser an additional 337,500 Preferred Units in the Subsidiary Issuer at a price per Preferred Unit of $ 1,000 , for an aggregate purchase price of $ 337.5 million, bringing the total amount funded to date under the A&R UPA to $ 900.0 million. DevCo Facility On December 18, 2025 (the “Closing Date”), APLD DevCo LLC (the “Borrower”), a Delaware limited liability company and a subsidiary of the Company, entered into an ongoing credit arrangement with Macquarie Equipment Capital, Inc., a 40 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Delaware corporation (the “Lender”), for the purposes of funding the initial sourcing, planning, development and construction costs associated with a new data center project (the “DevCo Facility”) and other potential projects. The DevCo Facility is evidenced by, among other documents, a promissory note (the “Promissory Note”) executed by the Borrower in favor of the Lender. The Promissory Note provides for a principal sum of (a) $ 45 million (the “First Draw”), which was drawn on the Closing Date, plus (b) $ 55 million (the “Second Draw,” and, together with the First Draw, each, a “Draw” and, collectively, the “Initial Loan”), to be funded upon the Borrower’s request at any time after the Closing Date subject to satisfaction of or waiver by the Lender of certain conditions precedent on or prior to the Second Draw, plus (c) the principal sum of any Additional Loans (as defined below, and, together with the Initial Loan, the “Loan”), if applicable, made by the Lender (at the mutual consent of the Borrower and the Lender). In addition, the Promissory Note provides for, upon request of the Borrower occurring prior to the Maturity Date (as defined below), (a) rolling over of the outstanding principal balance of the Loan from time to time into one or more loans for one or more new projects (such rollovers, the “Rollover Loans”), or (b) increasing the size of the existing Loan by advancing new loans to the Borrower (such loans, the “Additional Loans”), in either case, for the purpose of financing development activities at new or existing data center projects at direct or indirect, wholly owned domestic subsidiaries of the Borrower, each of which shall become a guarantor with respect to such Additional Loans or Rollover Loans, as applicable, subject to the prior written approval of the Lender (in its sole discretion) and the satisfaction of the conditions specified by the Lender. The First Draw is fully committed, but the Second Draw and any Additional Loans or Rollover Loans made by the Lender under the Promissory Note would be on an uncommitted, discretionary basis (with no specified maximum borrowing limit for any Additional Loans or Rollover Loans). The Loan shall bear interest at 8.0 % per annum, unless an Event of Default (as defined therein) has occurred and is continuing, in which case, the Secured Obligations (as defined therein) shall bear interest at the sum of 8.0 % per annum plus an additional 1.50 % per month (the “Post-Default Rate”). The Loan matures on the earliest of (i) the date of acceleration of the Loan, (ii) July 18, 2026, if the Initial Lease Execution (as defined therein) has not occurred on or before April 18, 2026, or (iii) December 18, 2027 (the “Maturity Date”). Proceeds from the Loan will be used, in part, to (i) pay transaction expenses, and (ii) fund the purchase, development and improvement of, and the purchase of equipment for, the Company’s latest new project under development. In connection with the Loan, (i) the Borrower, APLD Intermediate HoldCo LLC (“Intermediate Holdings”), a Delaware limited liability company, as parent of the Borrower, and the Borrower’s subsidiaries have entered into a guarantee and collateral agreement, as grantors thereunder, in favor of the Lender (the “Guarantee and Collateral Agreement”). Cloud Services Business Update On December 30, 2025, the Company announced it had entered into a non-binding term sheet for a proposed business combination of the Cloud Services Business, Applied Digital Cloud, with EKSO Bionics Holdings, Inc. (Nasdaq: EKSO) (“EKSO”), which, once closed, will go forward as ChronoScale Corporation, an accelerated compute platform purpose-built to support AI workloads (the “Proposed Transaction”). Upon closing of the Proposed Transaction, the Company expects to initially own over 80 % of the combined company, which will operate under the name ChronoScale. The Applied Digital Cloud and EKSO businesses would continue to operate upon consummation of the Proposed Transaction. The Proposed Transaction is subject to execution of final binding documents, completion of customary due diligence, customary regulatory and shareholder approvals, and satisfaction of closing conditions. 41 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended November 30, 2025 Mr. Cummins Award On January 6, 2026 (the “Grant Date”), the Board of Directors (the “Board”) of the Company, based on the recommendation of the Compensation Committee of the Board (the “Compensation Committee”), unanimously approved the grant of 4,500,000 performance stock units (“PSUs”) and 1,500,000 restricted stock units (the “RSUs”) to Wes Cummins, Chairman and Chief Executive Officer of the Company, under the Company’s 2024 Omnibus Equity Incentive Plan (as amended from time to time, the “Plan”). Each PSU and RSU represents a right to receive one share of the Company’s common stock upon vesting, subject to the terms and conditions described below. These awards are intended to be in lieu of any future equity awards to Mr. Cummins for the next five years (unless there are unexpected changes in the Company’s business or other unforeseen factors that the Board or the Compensation Committee determines would make it in the best interests of the Company and its stockholders to grant additional equity award(s) to Mr. Cummins), are structured to further align Mr. Cummins’ total compensation with the Company’s continued growth and would (in the case of the PSUs) require significant value creation for the Company’s stockholders before any value from the grant can be realized by Mr. Cummins. The RSUs are subject to vesting as follows: 300,000 of the RSUs shall vest on the one-year anniversary of the Grant Date (the “Cliff Date”), and the remainder will vest in equal installments of 150,000 every six months after the Cliff Date, such that the RSUs will be fully vested on the five-year anniversary of the Grant Date. The PSUs are eligible to vest based on the achievement of stock price hurdles, measured based on the Company’s average closing price per share over a 90 consecutive calendar day period (the “Average Closing Price”), as set forth in the table below. The PSUs will only be earned and vest if the Average Closing Price equals or exceeds the applicable stock price hurdle on a date that is on or before the five-year anniversary of the Grant Date, subject to Mr. Cummins’ continued full-time employment with the Company in a role approved by the Board on the applicable vesting date. Shares of common stock issued with respect to the PSUs may not be transferred for two years from the date of issuance, other than shares withheld in respect of tax withholding obligations, or shares transferred by Mr. Cummins for estate planning purposes. Company Average Closing Price PSUs Eligible to Vest 50 1,500,000 75 1,500,000 100 1,500,000 42 Table of Contents