Applied Digital Corp. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. You can identify these forward-looking statements through our use of words such as “will,” “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. Statements that contain these words and other statements that are forward-looking in nature should be read carefully because they discuss future expectations, contain projections of future results of operations or of financial positions, or state other “forward-looking” information. These statements are based on our management’s beliefs and assumptions, which are based on currently available information. Our actual results, and the assumptions on which we relied, could prove materially different from our expectations. You are cautioned not to place undue reliance on forward-looking statements. Except as otherwise may be required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or actual operating results. There are a number of important factors that could cause our actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to: • our ability to complete construction of our HPC facilities at each of the Polaris Forge 1 and Polaris Forge 2 campuses; • our ability to complete the negotiation and execution of the definitive transaction documents to close the sale of our Cloud Services Business that is currently held for sale and treated as discontinued operations; • our dependence on principal customers, including our ability to execute leases with key customers, including leases for our Polaris Forge 1 and Polaris Forge 2 data center campuses; • availability of financing to continue to grow our business; • labor and other workforce shortages and challenges; • power or other supply disruptions and equipment failures; • the addition or loss of significant customers or material changes to our relationships with these customers; • delays or denials of entitlements or permits, including zoning, siting, utility and other permits, or other delays resulting from requirements of public agencies and utility companies; • our sensitivity to general economic conditions including changes in disposable income levels and consumer spending trends; • our ability to timely and successfully build new hosting facilities with the appropriate contractual margins and efficiencies; • our ability to continue to grow sales in our hosting business; • volatility of cryptoasset prices; and • uncertainties of cryptoasset regulation policy; and • our ability to keep up with the use and continued pace of developments in AI and evolving data center requirements and regulatory frameworks for AI. You should carefully review the risks described in Item 1A of the Company’s Annual Report on Form 10-K for the year ended May 31, 2025, which was filed with the SEC on July 30, 2025, as well as any other cautionary language in this Quarterly Report on Form 10-Q, as the occurrence of any of these events could have an adverse effect, which may be material, on our business, results of operations, financial condition or cash flows. A comparison of our results of operations and cash flows for the three and six months ended November 30, 2024 can be found under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q for the quarter ended November 30, 2024, filed with the SEC on October 9, 2025. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time, and it is not possible for our management to predict all risk factors and uncertainties, nor are we able to assess the impact of all of these risk factors on our business or the extent to which any risk factor, or combination of risk factors, may cause actual results to differ materially from those contained in any forward-looking statements. These risks are not exhaustive. 43 Table of Contents Executive Overview The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. Business Overview We are a U.S. designer, developer, and operator of high-performance, sustainably engineered data centers and colocation services for artificial intelligence (“AI”), networking, and blockchain workloads. Headquartered in Dallas, TX, and founded in 2021, the Company combines hyperscale expertise, proprietary waterless cooling, and rapid deployment capabilities to deliver secure, scalable compute at industry-leading speed and efficiency, while creating economic opportunities in underserved communities through its award-winning Polaris Forge AI Factory model. We operate in two distinct business segments, data center hosting (the "Data Center Hosting Business") and HPC data center hosting (the "HPC Hosting Business"), as further discussed below. The Company consolidates a Variable Interest Entity (“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 variable interest holders. The Company also evaluates its economic interests in the VIE. During the fiscal quarter ended May 31, 2025, we determined that our Cloud Services Business met the criteria for held for sale and discontinued operations. As such, the results of the Cloud Services Business, which was previously included as a reportable segment, 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. Trends and Other Factors Affecting Our Business Regulatory Environment The regulatory landscape surrounding AI and blockchain hosting services is evolving rapidly, and we anticipate increased scrutiny and potential regulation in the near and long term. Any such developments may significantly impact our business and operations in ways that are difficult to predict. Governments and regulatory bodies are considering measures to ensure the responsible development and deployment of AI systems, including transparency, accountability, and fairness guidelines. For example, in the U.S Senate, committees of jurisdiction have passed several AI bills that establish industry standards and impose significant obligations in relation to the use of AI systems. On the state level, several U.S. states have considered AI legislation, which aims to reduce risk associated with the use of AI; while certain states have passed comprehensive AI legislation. On September 29, 2025, California passed the Transparency in Frontier Artificial Intelligence Act into law, which requires certain AI companies to fulfill transparency requirements and report AI-related safety incidents, among other things. In Europe, the EU AI Act has been adopted, portions of which have started to take effect this year. The amount of energy used for AI and crypto mining has also received significant attention. For example, in January 2024, the U.S. Energy Information Administration conducted an emergency survey of electricity consumption data from cryptocurrency mining companies in the U.S. This indicates that more focus is being placed on the energy usage of these activities. It is unclear how the information collected will be used for future regulations, but it is expected that energy efficiency and sustainability will be critical factors regulating both AI data centers and cryptocurrency mining. As a company operating at the intersection of data center and HPC hosting services, we are committed to maintaining a proactive and adaptive approach to regulatory compliance. We closely monitor legislative and regulatory developments and engage in dialogue with relevant stakeholders to ensure our business practices align with the evolving legal and regulatory framework. Despite the uncertainties posed by the changing regulatory landscape, we remain committed to delivering innovative and responsible solutions in the data center and HPC hosting markets while prioritizing compliance and risk management. However, if we fail to comply with applicable laws and regulations, we may be subject to significant liabilities, including fines and penalties, and our business, financial condition, or results of operations could be adversely affected. 44 Table of Contents Critical Accounting Estimates Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our unaudited condensed consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Our critical accounting estimates are identified and described in our annual consolidated financial statements and the related notes included in our Annual Report on Form 10-K and our subsequent Quarterly Reports on Form 10-Q. Fair Value Measurements - Derivative Assets In connection with the issuance of the redeemable noncontrolling interest, we evaluated the instrument for any features that must be bifurcated and separately accounted for as embedded derivatives. We determined that the Redemption features and Contingent Dividend Rate Increase feature met all the requirements to be separately accounted for as bifurcated derivatives. The bifurcated derivatives are remeasured to fair value each reporting period with changes in fair value recorded in earnings. We utilized third party valuation specialists to estimate the fair value of the derivative assets using a binomial lattice model. Inherent in a binomial lattice model are unobservable inputs and assumptions. The inputs for the valuation of the derivative assets included the volatility, credit spread, and term. 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 fair value. The remainder of the proceeds were then allocated to the warrants and noncontrolling interests based on their relative fair values. Business Update Data Center Hosting Business Our Data Center Hosting Business provides energized infrastructure services to crypto mining customers. Our custom-designed data centers allow customers to rent space based on their power requirements. As of November 30, 2025, our 106 MW facility in Jamestown, North Dakota and our 180 MW facility in Ellendale, North Dakota continue to operate at full capacity. We recognized $41.6 million and $79.5 million, in revenue from this business segment during the three and six months ended November 30, 2025, respectively. HPC Hosting Business Our HPC Hosting Business designs, constructs, and operates next-generation data centers, which are designed to provide massive computing power and support HPC applications within a cost-effective model. We recently commenced operations at our first HPC data center at our Polaris Forge 1 campus with 100MW of capacity. We continue building our second HPC data center at Polaris Forge 1 to provide an additional 150MW of capacity. These facilities are being designed and purpose-built to host high-density graphics processing unit architecture or other HPC applications, such as artificial intelligence, natural language processing, machine learning, and additional HPC developments. Our third HPC focused data center facility at Polaris Forge 1, which is expected to provide an additional 150MW of capacity, is currently under construction, with an anticipated ready for service date in 2027. On May 28, 2025, APLD ELN-02 LLC and APLD ELN-03 LLC, our subsidiaries, each entered into a data center lease (together, the “Data Center Leases”) with CoreWeave, Inc. (“CoreWeave”) to deliver 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 our 100 MW data center that was completed and became operational in October 2025, and the second lease is for the full capacity of our 150 MW data center that is also under construction. We have guaranteed the obligations of APLD ELN-02 LLC and APLD ELN-03 LLC under the respective Data Center Lease to which such subsidiary is a party. 45 Table of Contents On August 28, 2025, APLD ELN-02 C LLC, our subsidiary, entered into a third data center lease, the (“Building 4 Lease”) with CoreWeave to deliver an additional 150 MW at Polaris Forge 1, bringing the total capacity under contract at Polaris Forge 1 to 400 MW. We have guaranteed the obligations of APLD ELN-02 C LLC under the Building 4 Lease. On August 18, 2025, we also announced that we would be breaking ground on our Polaris Forge 2 campus with an initial 200 MW data center near Harwood, North Dakota. The project has begun and we currently anticipate reaching initial capacity in 2026 and reaching full capacity in early 2027. On October 22, 2025, we announced that we entered into an approximately 15-year lease agreement with a U.S. based investment grade hyperscaler for 200 MW of critical IT load at our Polaris Forge 2 campus. We recognized $85.0 million and $111.3 million , in revenue from this business segment during the three and six months ended November 30, 2025, respectively. Discontinued Operations The Cloud Services Business provides high-performance computing power for AI and machine learning applications. Near the end of the fiscal third quarter 2024, this business began generating revenue. In the fourth quarter of fiscal year 2025, we determined that the Cloud Services Business met the criteria to be classified as “held for sale,” and as the sale represents a strategic shift for the Company, discontinued operations. As such, for the three and six months ended November 30, 2025, we have reported the Cloud Services Business as held for sale on the unaudited condensed consolidated balance sheets and discontinued operations on the unaudited condensed consolidated statement of operations. The comparative periods have been updated to present the Cloud Services Business as held for sale and discontinued operations as of June 1, 2024. We recognized $18.4 million and $35.1 million in revenue from this business segment during three and six months ended November 30, 2025, respectively, and $27.7 million and $53.6 million during the three and six months ended November 30, 2024, respectively, within discontinued operations. The Cloud Services Business operates in three states: Colorado, Minnesota and Utah, by renting space at third party co-location centers and providing customers with Company-owned equipment. On December 30, 2025, we announced we 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, we expect 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. Management Update On August 1, 2025, we entered into an employment agreement with Jason Zhang, one of the Company’s founders and former directors, to serve in the role of Chief Strategy Officer of the Company. Organizational Update In part to facilitate the Notes Offering (as defined below), we completed a targeted reorganization of the entities and assets related to the Polaris Forge 1 campus. This reorganization included a series of steps such as renaming certain existing entities and forming new direct and indirect wholly owned subsidiaries of APLD HPC Holdings LLC and APLD HPC Holdings 2 LLC, including APLD ComputeCo LLC, the issuer of the Notes (“APLD ComputeCo LLC”), and additional internal transactions, including equity distributions and contributions and asset transfers, resulting in APLD ELN-02 LLC, APLD ELN-03 LLC, ELN-02 and ELN-03 being owned by APLD ComputeCo. APLD ComputeCo is wholly owned by a joint venture entity, APLD HPC TopCo 2, in which we own 92.5% of fully diluted common equity, and an affiliate of funds and investment vehicles managed by entities within MAM owns 7.5% of fully diluted common equity, as well as preferred equity. 46 Table of Contents Debt and Equity Offerings and Changes to Equity 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. Series G Preferred Stock On August 14, 2025, we entered into the first amendment (the “First Amendment”) to the Preferred Equity Purchase Agreement (the “PEPA”), dated April 30, 2025, to, among other things, (i) increase the aggregate commitment amount of the shares of Series G Convertible Preferred Stock (the “Series G Preferred Stock”) from $150 million to $300 million, and (ii) increase our 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, we 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 we determine to do so in our discretion. The First CoD Amendment further amended the status of converted or repurchased preferred stock such that any shares of 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, we entered into the second amendment (the “Second Amendment”) to the PEPA, dated April 30, 2025, by and between us and the investors signatory thereto, as amended by the First Amendment, dated August 14, 2025 in order to increase our access to capital to fund the continued construction and development of our Polaris Forge 1 data center campus in Ellendale, North Dakota and other general corporate purposes. The Second Amendment amends the PEPA to, among other things, increase the aggregate commitment amount of the shares of Series G Preferred Stock from $300 million to $450 million. Concurrent with the Second Amendment, the Company filed an amendment to the Certificate of Designations 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, dated April 30, 2025, by and between the Company and the investors signatory thereto, as amended by the First Amendment and the Second Amendment, in order to increase its access to capital to fund the continued construction and development of its Polaris Forge I data center in Ellendale, North Dakota. The Third Amendment amends 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. On October 21, 2025, Applied Digital entered into the fourth amendment (the “Fourth Amendment”) to the PEPA in order to increase its access to capital to fund the continued construction and development of its Polaris Forge 1 and Polaris Forge 2 data centers in Ellendale and Harwood, North Dakota, as well as general working capital purposes and for transaction expenses. The Fourth Amendment amended 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 $1.6 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 Applied Digital filed an amendment (the “Fifth Certificate of 47 Table of Contents Designations Amendment”) to the Certificate of the Designations, Powers, Preferences and Rights of Series G Convertible Preferred Stock, 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 Certificate of Designations 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 Certificate of Designations Amendment, the Applied Digital’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. CoreWeave Warrants 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 on May 28, 2025. In addition, we agreed to file a resale registration statement with the SEC to register the resale of the shares of common stock issuable upon exercise of the Building 4 Warrant pursuant to the Registration Rights Agreement, dated May 28, 2025, between us and CoreWeave (“CoreWeave Registration Rights Agreement”). On October 31, 2025, CoreWeave assigned the Building 4 Warrant and its rights under the CoreWeave Registration Rights Agreement to Jane Street Global Trading, LLC. Promissory Note On September 9, 2025, APLD FAR-01 LLC, our subsidiary, entered into a promissory note (the “Promissory Note”) with Macquarie Equipment Capital, Inc., a Delaware corporation (the “Lender”). The Promissory Note provides for a principal sum of (a) $50 million (the “Initial Loan”), which was drawn on the Closing Date, plus (b) subject to the mutual consent of us and the Lender, additional loans in an aggregate principal amount not to exceed $25 million (the “Additional Loans” and together with the Initial Loan, the “Loan”). 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”). From the Closing Date until the date that is twelve months following the Closing Date (the “PIK Period”), accrued interest will be paid in kind, with such payment in kind being capitalized to principal monthly and at such other times as may be specified in the Promissory Note. After the PIK Period, accrued interest will be paid in cash, provided that (i) the Post-Default Rate interest is payable in cash on demand and (ii) accrued interest on any principal amount repaid or prepaid is payable on the date of such repayment or prepayment. The Promissory Note matures 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 will accelerate and we must mandatorily 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 (90) days following the occurrence of the 200 MW Lease Execution, and (c) within thirty (30) days following a Qualifying Preference Share Issuance (as defined therein). We 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 1.10x return hurdle applies to repayment at maturity. Amounts repaid under the Promissory Note will not be available to be re-borrowed. Proceeds of the Loan under the Promissory Note will be 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 48 Table of Contents 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, have 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. Amended and Restated Unit Purchase Agreement 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 “Unit Purchase Agreement” or “UPA”) for its HPC Hosting Business with MIP VI HPC Holdings, LLC, which is an affiliate of funds and investment vehicles managed by entities within 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 Company (the “Subsidiary Issuer”), and MIP HPC Holdings, LLC (formerly, MIP VI HPC Holdings, LLC) (the “Purchaser”) entered into an Amended and Restated Unit Purchase Agreement (the “A&R UPA”). On October 6, 2025, all conditions to the Initial Closing (as defined in the A&R UPA) were satisfied and the Initial Closing occurred. At the Initial Closing, the Subsidiary Issuer sold to the Purchaser 112,500 Preferred Units in the Subsidiary Issuer at a price per Preferred Unit of $1,000, for an aggregate purchase price of $112.5 million, and for no additional consideration, the Subsidiary Issuer agreed to issue to the Purchaser such number of Common Units of the Subsidiary Issuer representing, in the aggregate, seven and a half percent (7.5%) of the fully diluted common equity of the Subsidiary Issuer as of immediately following the Initial Closing. The proceeds of the Initial Closing will be used to pay, among other things, construction and development costs of Polaris Forge 1 and transaction expenses. MAM has the right to invest up to an additional $4.9 billion under the A&R UPA. In addition, pursuant to the A&R UPA, on October 6, 2025, the Company issued to the designated affiliates of the Purchaser, warrants to purchase an aggregate of 2.4 million shares of the Company’s common stock. The warrants will become exercisable upon the Purchaser funding the full $450 million in Polaris Forge 1. Also on October 6, 2025, the Company entered into a registration rights agreement with the Purchaser, pursuant to which the Company agreed to file with the SEC a registration statement registering the resale of the shares of common stock issuable upon exercise of the warrants within 60 days of the execution of the registration rights agreement. On November 25, 2025, the Subsidiary Issuer sold to the Purchaser 450,000 Preferred Units in the Subsidiary Issuer at a price per Preferred Unit of $1,000, for an aggregate purchase price of $450.0 million. Retirement of Treasury Stock On October 7, 2025, the Board of Directors approve and authorized 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. STB Warrant During the quarter ended November 30, 2025, 800,000 of the STB Warrants were exercised for $6.3 million. 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. 49 Table of Contents 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. Increase in 2024 Plan Authorized Shares On November 5, 2025, at the Annual Stockholders’ Meeting, the Company’s stockholders approved an amendment to the Applied Digital Corporation 2024 Omnibus Equity Incentive Plan to increase the number of shares of common stock authorized for issuance thereunder by 15,000,000 shares. Revolving Credit Facility On November 10, 2025, we 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. 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. Senior Secured Notes On November 20, 2025, our subsidiary APLD ComputeCo, closed a $2.35 billion offering (the “Notes Offering”) of 9.250% senior secured notes due 2030 (the “Notes”) at an issue price of 97.000%. The Notes were issued and sold in a private offering to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended, and outside the United States to non-U.S. persons in reliance on Regulation S under the Securities Act. The Notes are senior secured obligations of APLD ComputeCo and bear interest at a rate of 9.250% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2026. 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. The Notes will mature on December 15, 2030, unless earlier redeemed or repurchased in accordance with their terms. The Notes are fully and unconditionally guaranteed by the subsidiary guarantors, all of which are wholly owned subsidiaries of APLD ComputeCo. Other than a customary completion guarantee, the Company is not providing credit support for the Notes Offering. SMBC Loan Extinguishment Concurrently with the closing of the Notes Offering, we repaid in full the aggregate principal balance plus accrued interest under the Credit and Guaranty Agreement, dated as of February 11, 2025, by and among APLD HPC Holdings LLC, the Subsidiary Guarantors thereunder (as defined therein), the lenders party thereto and Sumitomo Mitsui Banking Corporation (“SMBC”), as administrative agent. Recent Developments Additional Issuance under the A&R UPA As described above, on October 3, 2025, the Company, TopCo 1, APLD HPC TopCo 2 LLC, an indirect wholly-owned subsidiary of the Company (the “Subsidiary Issuer”), and MIP HPC Holdings, LLC (formerly, MIP VI HPC Holdings, LLC) (the “Purchaser”) entered into an Amended and Restated Unit Purchase Agreement (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”), our subsidiary, entered into an ongoing credit arrangement with Macquarie Equipment Capital, Inc., a 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 50 Table of Contents 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, our 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”). Mr. Cummins Award On January 6, 2026 (the “Grant Date”), our Board of Directors (the “Board”), 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. RSUs are subject to time based vesting conditions as further described in “Note 18 – Subsequent Events” of our unaudited condensed consolidated financial statements, and the PSUs are eligible to vest based on achievement of certain stock price hurdles, measured based on the average closing price per share of our common stock over a 90 consecutive day period, as further described in “Note 18 – Subsequent Events.” 51 Table of Contents Results of Operations Comparative Results for the Three and Six Months Ended November 30, 2025 and November 30, 2024: The following table sets forth key components of the results of operations (in thousands) during the three and six months ended November 30, 2025 and November 30, 2024. 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 as 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 52 Table of Contents Adjusted Amounts (3) Adjusted operating income $ 11,614 $ 1,415 $ 7,999 $ 3,579 Adjusted operating margin 9 % 4 % 4 % 5 % Adjusted net income (loss) from continuing operations $ 115 $ (1,515) $ (7,455) $ (2,310) Adjusted net income (loss) from continuing operations per diluted share $ — $ (0.01) $ (0.03) $ (0.01) Other Financial Data (3) EBITDA $ (6,478) $ (120,721) $ (24,617) $ (97,707) as a percentage of revenues (5) % (334) % (13) % (138) % Adjusted EBITDA $ 20,200 $ 6,127 $ 20,738 $ 12,389 as a percentage of revenues 16 % 17 % 11 % 17 % (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. (3) Adjusted Amounts and Other Financial Data are non-GAAP performance measures. A reconciliation of reported amounts to adjusted amounts can be found in the "Non-GAAP Measures and Reconciliation" section of Management’s Discussion and Analysis. Commentary on Results of Operations Comparative Results for the Three Months Ended November 30, 2025 compared to the Three Months Ended November 30, 2024 Revenue Revenue increased $90.4 million, or 250%, from $36.2 million for the three months ended November 30, 2024 to $126.6 million for the three months ended November 30, 2025. Approximately $85.0 million of the increase was due to revenue generated related to our HPC Hosting Business, with approximately $73.0 million related to tenant fit-out services and $12.0 million related to rental revenues as ELN-02 at Polaris Forge 1 fully energized during the current quarter. The remaining $5.4 million increase in revenue is related to the Data Center Hosting Business and is due to performance improvements compared to the three months ended November 30, 2024. Cost of revenues Cost of revenues increased $77.9 million, or 344%, from $22.7 million for the three months ended November 30, 2024 to $100.6 million for the three months ended November 30, 2025. The increase was primarily driven by an increase of $69.5 million in expenses associated with tenant fit-out services for our HPC Hosting Business, an increase of $3.2 million in energy costs associated with our Data Center Hosting Business, and an increase of $5.2 million in other expenses directly attributable to generating revenue. Selling, general and administrative expense Selling, general and administrative expense increased $31.0 million, or 119%, from $26.0 million for the three months ended November 30, 2024 to $57.0 million for the three months ended November 30, 2025. The change in selling, general and administrative expense is categorized as follows: • approximately $23.8 million increase in stock based compensation primarily due to an increase in shares awarded related to the increase in headcount during the three months ended November 30, 2025 compared to the three months ended November 30, 2024; • approximately $4.7 million increase in professional service expense primarily related to legal services provided on discrete transactions and projects, as well as general support of the business; and • approximately $2.5 million increase in personnel expenses for employee costs and other costs attributable to supporting the growth of the business. 53 Table of Contents Interest expense, net Interest expense, net increased $8.6 million, or 292%, from $2.9 million for the three months ended November 30, 2024, to $11.5 million for the three months ended November 30, 2025. The increase was primarily driven by a $10.8 million increase in loan interest due to loan activity during the three months ended November 30, 2025. These increases were partially offset by a $2.3 million increase in interest income due to an increase in funds held in money market accounts. Gain on change in fair value of derivative Gain on change in fair value of derivative was $13.1 million for the three months ended November 30, 2025, due to the change in fair value of our Babcock & Wilcox Enterprises, Inc. (“B&W”) common stock warrant. There was no such gain recorded in the prior year comparative period. Gain on change in fair value of investment Gain on change in fair value of investment was $2.8 million for the three months ended November 30, 2025, due to the change in fair value of our investment in B&W common stock. There was no such gain recorded in the prior year comparative period. Net (loss) income from discontinued operations Net loss (income) from discontinued operations decreased $22.5 million, or 217%, from a net loss of $10.4 million for the three months ended November 30, 2024 to a net income of $12.1 million for the three months ended November 30, 2025 and represents the income statement activity related to the Cloud Services Business. The increase in net income from the Cloud Services Business was the result of an increase of $20.6 million in operating income for the comparative periods and a decrease in interest expense of $1.9 million for the comparative periods. Commentary on Results of Operations Comparative Results for the Six Months Ended November 30, 2025 compared to the Six Months Ended November 30, 2024 Revenue Revenue increased $121.7 million, or 176%, from $69.1 million for the six months ended November 30, 2024 to $190.8 million for the six months ended November 30, 2025. Approximately $111.3 million of the increase was due to revenue generated related to our HPC Hosting Business, with approximately $99.3 million related to tenant fit-out services and $12.0 million related to rental revenues as ELN-02 at Polaris Forge 1 fully energized during the six months ended November 30, 2025. The remaining $8.5 million increase in revenue is related to the Data Center Hosting Business and is due to performance improvements compared to the six months ended November 30, 2024. Cost of revenues Cost of revenues increased by $110.8 million, or 244%, from $45.4 million for the six months ended November 30, 2024 to $156.2 million for the six months ended November 30, 2025. The increase was primarily driven by the growth in the business as more facilities were energized and more services were provided to customers compared to the six months ended November 30, 2024, which resulted in an increase of $94.5 million in expenses associated with tenant fit-out services for our HPC Hosting Business, an increase of $10.4 million in energy costs associated with our Data Center Hosting Business, and an increase of $5.8 million in other expenses directly attributable to generating revenue. Selling, general and administrative expense Selling, general and administrative expense increased by $49.2 million, or 133%, from $37.0 million for the six months ended November 30, 2024 to $86.1 million for the six months ended November 30, 2025. The increase was primarily due to the overall growth in the business. The change in selling, general and administrative expense is categorized as follows: • approximately $40.4 million increase in stock based compensation primarily due to an increase in shares awarded related to the increase in headcount during the six months ended November 30, 2025 compared to the six months ended November 30, 2024 as well as the lack of PSU cancellations during the six months ended November 30, 2025 compared to the six months ended November 30, 2024; • approximately $2.8 million increase in personnel expenses, related to an increase in salaries, wages and bonuses associated with the increase in headcount period over period; and • approximately $6.0 million increase in other selling, general, and administrative expense such as professional service expenses, travel, computer and software expenses. 54 Table of Contents Loss on abandonment of assets Loss on abandonment of assets increased by $1.0 million, or 128%, from $0.8 million for the six months ended November 30, 2024 to $1.8 million for the six months ended November 30, 2025, driven by the write down of assets to their fair value upon disposal. Interest expense, net Interest expense, net increased $9.5 million, or 162%, from $5.9 million for the six months ended November 30, 2024 to $15.4 million for the six months ended November 30, 2025. The increase was primarily driven by a $12.3 million increase in loan interest due to loan activity in the six months ended November 30, 2025. These increases were partially offset by a $2.8 million increase in interest income due to an increase in funds held in money market accounts. Gain on change in fair value of derivative Gain on change in fair value of derivative was $13.1 million for the six months ended November 30, 2025, due to the change in fair value of our Babcock & Wilcox Enterprises, Inc. (“B&W”) common stock warrant. There was no such gain recorded in the prior year comparative period. Gain on change in fair value of investment Gain on change in fair value of investment was $2.8 million for the six months ended November 30, 2025, due to the change in fair value of our investment in B&W common stock. There was no such gain recorded in the prior year comparative period. Net (loss) income from discontinued operations Net (loss) income from discontinued operations decreased $52.0 million, or 170%, from a net loss of $30.5 million for the six months ended November 30, 2024 to a net income of $21.4 million for the six months ended November 30, 2025 and represents the income statement activity related to the Cloud Services Business. The increase in net income from the Cloud Services Business was the result of an increase of $48.9 million in operating income for the comparative periods as well as a decrease in interest expense of $3.1 million for the comparative periods. Comparative Segment Data for the Three and Six Months Ended November 30, 2025 and November 30, 2024: The following table sets forth our operating profit (loss) for each of our segments for the three and six months ended November 30, 2025 and November 30, 2024 (in thousands): Three Months Ended Six Months Ended November 30, 2025 November 30, 2024 November 30, 2025 November 30, 2024 Segment profit (loss) 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 (loss) profit $ 13,363 $ 6,705 $ 17,375 $ 39,605 Commentary on Segment Data Comparative Results for the Three Months Ended November 30, 2025 compared to the Three Months Ended November 30, 2024 Data Center Hosting Business Operating Profit Data Center Hosting Business operating profit increased $3.4 million, or 27%, from a profit of $12.5 million for the three months ended November 30, 2024 to a profit of $16.0 million for the three months ended November 30, 2025. This increase was primarily due to site performance improvements for the three months ended November 30, 2025 compared to the three months ended November 30, 2024. Additionally, for the three months ended November 30, 2025, there was a decrease of $0.3 million in selling, general and administrative expenses when compared to the to the three months ended November 30, 2024 and no loss on classification of held for sale and no loss on abandonment of assets for the three months ended November 30, 2025. 55 Table of Contents HPC Hosting Business Operating Loss HPC Hosting Business operating loss decreased $3.2 million, or 56%, from a loss of $5.8 million for the three months ended November 30, 2024 to a loss of $2.6 million for the three months ended November 30, 2025. The change is primarily due to revenue generated related to tenant fit-out services, net of expenses, as well as rental revenues from ELN-02 at Polaris Forge 1 as it fully energized during the three months ended November 30, 2025. Commentary on Segment Data Comparative Results for the Six Months Ended November 30, 2025 compared to the Six Months Ended November 30, 2024 Data Center Hosting Business Operating Profit Data Center Hosting Business operating profit decreased $26.4 million, or 55%, from a profit of $48.4 million for the six months ended November 30, 2024 to a profit of $22.0 million for the six months ended November 30, 2025. This decrease in operating profit is primarily due to the recognition of a $25.0 million gain on classification of held for sale due to the release of escrowed funds related to the sale of the Garden City facility during the six months ended November 30, 2024 as there was no such gain recorded during the six months ended November 30, 2025. Also contributing to the decrease in operating profit was a larger increase in cost of revenues compared to revenue. HPC Hosting Business Operating Loss HPC Hosting Business operating loss decreased $4.2 million, or 47% , from a loss of $8.8 million for the six months ended November 30, 2024 to a loss of $4.6 million for the six months ended November 30, 2025. The change is primarily due to revenue generated related to tenant fit-out services, net of expenses, as well as rental revenues from ELN-02 at Polaris Forge 1 as it fully energized during the six months ended November 30, 2025. Non-GAAP Measures To supplement our unaudited condensed consolidated financial statements presented under GAAP, we are presenting certain non-GAAP financial measures. We are providing these non-GAAP financial measures to disclose additional information to facilitate the comparison of past and present operations by providing perspective on results absent one-time or significant non-cash items. We utilize these measures in the business planning process to understand expected operating performance and to evaluate results against those expectations. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results, provide management and investors with an additional understanding of our business operating results regarding factors and trends affecting our business and provide a reasonable basis for comparing our ongoing results of operations . These non-GAAP financial measures are provided as supplemental measures to our performance measures calculated in accordance with GAAP and therefore, are not intended to be considered in isolation or as a substitute for comparable GAAP measures. Further, these non-GAAP financial measures have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. Because of the non-standardized definitions of non-GAAP financial measures, we caution investors that the non-GAAP financial measures as used by us in this Quarterly Report on Form 10-Q have limits in their usefulness to investors and may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. Further, investors should be aware that when evaluating these non-GAAP financial measures, these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, from time to time in the future there may be items that we may exclude for purposes of our non-GAAP financial measures and we may in the future cease to exclude items that we have historically excluded for purposes of our non-GAAP financial measures. Likewise, we may determine to modify the nature of the adjustments to arrive at our non-GAAP financial measures. Investors should review the non-GAAP reconciliations provided below and not rely on any single financial measure to evaluate our business. Adjusted Operating Income, Adjusted Net Income (Loss) from Continuing Operations, and Adjusted Net Income (Loss) from Continuing Operations per Diluted Share “Adjusted Operating Income” and “Adjusted net income (loss) from continuing operations” are non-GAAP financial measures that represent operating (loss) income and net loss from continuing operations, respectively. Adjusted Operating Income is Operating (loss) income excluding stock-based compensation, non-recurring repair expenses, diligence, 56 Table of Contents acquisition, disposition and integration expenses, litigation expenses, loss on abandonment of assets, loss (gain) on classification of held for sale, accelerated depreciation and amortization, restructuring expenses and other non-recurring expenses that Management believes are not representative of the Company’s expected ongoing costs. Adjusted net income (loss) from continuing operations is Adjusted Operating Income further adjusted for gain on change in fair value of derivative, gain on change in fair value of investment, loss on conversion of debt and loss on change in fair value of debt. We define “Adjusted net income (loss) from continuing operations per diluted share” as Adjusted net income (loss) from continuing operations divided by weighted average diluted share count. EBITDA and Adjusted EBITDA “EBITDA” is defined as earnings before interest expense, net, income tax expense, and depreciation and amortization. “Adjusted EBITDA” is defined as EBITDA adjusted for stock-based compensation, non-recurring repair expenses, diligence, acquisition, disposition and integration expenses, litigation expenses, loss (gain) on classification of held for sale, gain on change in fair value of derivative, gain on change in fair value of investment, loss on abandonment of assets, loss on conversion of debt, loss on change in fair value of debt, restructuring expenses and other non-recurring expenses that Management believes are not representative of our expected ongoing costs. 57 Table of Contents Reconciliation of GAAP to Non-GAAP Measures Three Months Ended Six Months Ended $ in thousands November 30, 2025 November 30, 2024 November 30, 2025 November 30, 2024 Adjusted operating income Operating (loss) income (GAAP) $ (30,957) $ (12,805) $ (53,249) $ 12,489 Stock-based compensation 28,051 4,283 42,497 1,900 Non-recurring repair expenses (1) — 139 173 170 Diligence, acquisition, disposition and integration expenses (2) 13,562 8,493 14,759 11,368 Litigation expenses (3) 361 759 551 1,167 Loss on abandonment of assets — 141 1,751 769 Loss (gain) on classification of held for sale — 192 — (24,616) Accelerated depreciation and amortization (4) — — — 45 Loss on legal settlement — — — — Restructuring expenses (5) 304 — 735 — Other non-recurring expenses (6) 293 213 782 287 Adjusted operating income (Non-GAAP) $ 11,614 $ 1,415 $ 7,999 $ 3,579 Adjusted operating margin 9 % 4 % 4 % 5 % Adjusted net income (loss) from continuing operations Net loss from continuing operations (GAAP) $ (26,563) $ (128,363) $ (52,810) $ (112,451) Stock-based compensation 28,051 4,283 42,497 1,900 Non-recurring repair expenses (1) — 139 173 170 Diligence, acquisition, disposition and integration expenses (2) 13,562 8,493 14,759 11,368 Litigation expenses (3) 361 759 551 1,167 Loss on abandonment of assets — 141 1,751 769 Loss (gain) on classification of held for sale — 192 — (24,616) Accelerated depreciation and amortization (4) — — — 45 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 Restructuring expenses (5) 304 — 735 — Other non-recurring expenses (6) 293 213 782 287 Adjusted net income (loss) from continuing operations (Non-GAAP) $ 115 $ (1,515) $ (7,455) $ (2,310) Adjusted net income (loss) from continuing operations per diluted share (Non-GAAP) $ — $ (0.01) $ (0.03) $ (0.01) EBITDA and Adjusted EBITDA Net loss from continuing operations (GAAP) $ (26,563) $ (128,363) $ (52,810) $ (112,451) Interest expense, net 11,484 2,929 15,431 5,888 Income tax expense 15 1 23 1 Depreciation and amortization (4) 8,586 4,712 12,739 8,855 EBITDA (Non-GAAP) $ (6,478) $ (120,721) $ (24,617) $ (97,707) Stock-based compensation 28,051 4,283 42,497 1,900 Non-recurring repair expenses (1) — 139 173 170 58 Table of Contents Diligence, acquisition, disposition and integration expenses (2) 13,562 8,493 14,759 11,368 Litigation expenses (3) 361 759 551 1,167 Loss (gain) on classification of held for sale — 192 — (24,616) 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 abandonment of assets — 141 1,751 769 Loss on conversion of debt — 25,410 — — 33,612 Loss on change in fair value of debt — 87,218 — 85,439 Restructuring expenses (5) 304 — 735 — Other non-recurring expenses (6) 293 213 782 287 Adjusted EBITDA (Non-GAAP) $ 20,200 $ 6,127 $ 20,738 $ 12,389 (1) Represents costs incurred for the non-recurring repair and replacement of equipment at our Data Center Hosting facilities. (2) Represents legal, accounting and consulting costs incurred in association with certain discrete transactions and projects. (3) Represents non-recurring litigation expense associated with our defense of class action lawsuits and legal fees related to matters with certain former employees. We do not expect to incur these expenses on a regular basis. (4) Represents the acceleration of expense related to assets that were abandoned by us due to operational failure or other reasons. Depreciation and amortization in this amount is included in Depreciation and Amortization expense within our calculation of EBITDA, and therefore is not added back as a management adjustment in our calculation of Adjusted EBITDA. (5) Represents non-recurring expenses associated with employee separations. (6) Represents expenses that are not representative of our expected ongoing costs. Sources of Liquidity As of November 30, 2025, we had unrestricted cash and cash equivalents of $1.9 billion and restricted cash of $382.3 million. Historically, we have incurred losses and have relied on equity and debt financings to fund our operations. We have primarily generated cash in the last 12 months from the proceeds of our term loans, issuances of common stock, preferred stock, convertible promissory notes, senior unsecured convertible notes, debt facilities and the receipt of contractual deposits and revenue payments from customers. We believe that existing cash balances, cash flows from operations, existing debt facilities, and access to capital markets will provide sufficient liquidity to meet our debt obligations, including any repayment of debt or refinancing of debt, working capital needs, planned capital expenditures, and other contractual obligations, for at least the next twelve months. Recent Financing Activities See Note 7 - Debt in the notes to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for more information on our term loans and other debt instruments. 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. Series G Convertible Preferred Stock 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. 59 Table of Contents During the six months ended November 30, 2025, we received $80.2 million in payments for future data center hosting. Promissory Note On September 9, 2025, APLD FAR-01 LLC, our subsidiary, entered into a promissory note with Macquarie Equipment Capital, Inc., a Delaware corporation. The Promissory Note provides for a principal sum of (a) $50 million, which was drawn on the Closing Date, plus (b) subject to the mutual consent of us and the Lender, additional loans in an aggregate principal amount not to exceed $25 million. On November 28, 2025, the Company repaid the Promissory Note in full, including all outstanding and unpaid principal, accrued interest, and rate of return. Amended and Restated Unit Purchase Agreement On October 6, 2025, as described above, the Subsidiary Issuer sold to the Purchaser 112,500 Preferred Units in the Subsidiary Issuer at a price per Preferred Unit of $1,000, for an aggregate purchase price of $112.5 million. On November 25, 2025, the Subsidiary Issuer sold to the Purchaser 450,000 Preferred Units in the Subsidiary Issuer at a price per Preferred Unit of $1,000, for an aggregate purchase price of $450.0 million. Revolving Credit Facility On November 10, 2025, we 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. As of November 30, 2025, there have been no draws on the facility. Senior Secured Notes On November 20, 2025, our subsidiary APLD ComputeCo LLC closed a $2.35 billion offering of 9.250% Senior Secured Notes due 2030 at an issue price of 97.000%. The net proceeds from the Senior Secured Notes after issuance costs and repayment of the SMBC loan were approximately $1.9 billion. Material Contractual Obligations In the ordinary course of business, we enter into contractual arrangements that require future cash payments. The following table sets forth information regarding our anticipated future cash payments under our contractual obligations as of November 30, 2025 (in thousands): Payments Due by Period Total Remainder of FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Thereafter Debt obligations (1) 2,859,061 6,226 13,184 100,771 187,329 184,158 2,367,393 Interest on debt obligations (2) 1,092,939 7,773 232,428 253,327 221,763 204,856 172,792 Operating lease obligations (3) 775 383 365 27 — — — Financing lease obligations (4) 1,402 1,387 14 1 — — — Power commitments (5) 33,140 13,962 19,178 — — — — Preferred share dividends (6) 484,304 3,119 6,237 6,237 6,237 6,237 456,237 (1) Debt obligations presented in the table reflect scheduled principal payments related to our outstanding debt as described in Note 7 to the unaudited condensed consolidated financial statements for further discussion. (2) Estimated interest payments on our debt obligations include estimated future interest payments based on the terms of the debt agreements. See Note 7 to the unaudited condensed consolidated financial statements for further discussion. (3) Operating lease obligations include future minimum payments for our operating leases. (4) Financing lease obligations include future minimum payments for our finance leases. We have entered into various leases which are executed but not yet commenced with total minimum payments of approximately $16.6 million and terms of 1.5 years to 2.0 years. (5) Power commitments represents our obligation related to the energy services agreement for our Jamestown, North Dakota co-hosting facility payable. See Note 15 to the unaudited condensed consolidated financial statements for further discussion. (6) Preferred share dividends represent estimated future dividend payments per year in accordance with preferred stock that has been issued. The estimated future dividend payments will continue until preferred stock is redeemed. 60 Table of Contents Funding Requirements We have experienced net losses through the period ended November 30, 2025. Our transition to profitability is dependent on the successful operation of our business. We expect to have sufficient liquidity, including cash on hand, payments from customers, access to debt financing, and access to public capital markets, to support ongoing operations and meet our working capital needs for at least the next 12 months and all of our known requirements and plans for cash. We expect that our general and administrative expenses and our operating expenditures will continue to increase as we continue to expand our operations. We believe that the significant investments in property and equipment will remain throughout fiscal year 2026 as we continue construction of our HPC hosting facilities. Summary of Cash Flows The following table provides information about our net cash flow for the six months ended November 30, 2025 and November 30, 2024, respectively. Six Months Ended $ in thousands November 30, 2025 November 30, 2024 Net cash used in operating activities $ (97,868) $ (128,154) Net cash used in investing activities (818,490) (207,539) Net cash provided by financing activities 3,088,806 618,584 Net increase in cash, cash equivalents, and restricted cash 2,172,448 282,891 Cash, cash equivalents, and restricted cash at beginning of period, including cash from discontinued operations 123,318 31,688 Cash, cash equivalents, and restricted cash at 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 Commentary on the change in cash flows between the Six Months Ended November 30, 2025 and Six Months Ended November 30, 2024 Operating Activities The net cash used in operating activities increased by $30.3 million, or 24%, from $128.2 million for the six months ended November 30, 2024 to $97.9 million for the six months ended November 30, 2025. The increase was primarily driven by prior period activities which were not present in the current period, including losses on the conversion and fair value of debt and the gain on classification of held for sale, as well as a decrease in accounts payable due to the timing of payments. Also contributing to the increase was a decrease in depreciation and amortization due to the Cloud Services Business being classified as held for sale during the six months ended November 30, 2025. These impacts were partially offset by an increase in stock based compensation expense due to awards granted between the comparative periods and an increase in deferred revenue associated with our tenant fit-out services. Investing Activities The net cash used in investing activities increased by $611.0 million, or 294%, from $207.5 million for the six months ended November 30, 2024, to $818.5 million for the six months ended November 30, 2025. This increase was primarily due to an increase of approximately $575.6 million in investments in property and equipment during the six months ended November 30, 2025 as our payments in the current periods for construction of the Polaris Forge 1 data center facilities outpaced the comparative period construction payments as well as an increase in investments in other companies. Additionally, there were no proceeds from sale of assets during the six months ended November 30, 2025, compared to the six months ended November 30, 2024 to offset the increase in cash used in investing activities. Financing Activities The net cash provided by financing activities increased by $2.5 billion, or 399%, from $618.6 million for the six months ended November 30, 2024 to $3.1 billion for the six months ended November 30, 2025. The primary reason for the change was an increase in the net borrowings of long-term debt of $1.8 billion as well as receipt of net proceeds from offerings of our common and preferred stock of approximately $526.1 million during the six months ended November 30, 2025. Also 61 Table of Contents contributing to the increase was a capital contribution from our noncontrolling interest partners of $562.5 million. These increases were partially offset by a decrease of $450.0 million in borrowings under our Convertible Notes which occurred during the six months ended November 30, 2024. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in our exposure to market risk from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk of our Annual Report on Form 10-K for the fiscal year ended May 31, 2025.