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) February 28, 2026 May 31, 2025 ASSETS Current assets: Cash and cash equivalents $ 1,730,440 $ 43,950 Restricted cash 198,423 72,368 Accounts receivable 20,753 6,830 Prepaid expenses and other current assets 478,705 9,652 Total current assets 2,428,321 132,800 Property and equipment, net 3,011,751 1,252,287 Operating lease right of use assets, net 77,457 92,335 Finance lease right of use assets, net 135,581 213,315 Other assets 593,708 179,353 TOTAL ASSETS $ 6,246,818 $ 1,870,090 LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 377,429 $ 251,491 Accrued liabilities 376,985 30,121 Current portion of operating lease liability 18,101 16,785 Current portion of finance lease liability 51,151 147,040 Current portion of debt 98,174 10,331 Customer deposits 16,752 16,125 Deferred revenue 12,550 3,594 Due to customer 2,658 4,807 Other current liabilities 65,518 19,431 Total current liabilities 1,019,318 499,725 Long-term portion of operating lease liability 45,051 58,800 Long-term portion of finance lease liability 20,502 15 Long-term debt 2,594,501 677,825 Total liabilities 3,679,372 1,236,365 Commitments and contingencies (Note 14) 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 February 28, 2026, 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 62,189 shares outstanding at February 28, 2026, and 62,500 shares issued and 62,485 shares outstanding at May 31, 2025 56,728 57,011 Series G preferred stock, $ 0.001 par value, 1,030,000 shares authorized, no shares issued and outstanding at February 28, 2026, and 78,000 shares issued and outstanding at May 31, 2025 — 72,094 Redeemable noncontrolling interest 923,065 — Stockholders' equity: Common stock, $ 0.001 par value, 600,000,000 shares authorized, 292,549,415 shares issued and 285,384,115 shares outstanding at February 28, 2026, and 234,200,868 shares issued and 224,909,669 shares outstanding at May 31, 2025 293 230 Treasury stock, 7,165,300 shares at February 28, 2026 and 9,291,199 shares at May 31, 2025, at cost ( 52,737 ) ( 31,400 ) Additional paid in capital 2,216,722 1,009,913 Accumulated deficit ( 583,057 ) ( 481,055 ) Total stockholders’ equity attributable to Applied Digital Corporation 1,581,221 497,688 TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY $ 6,246,818 $ 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 Nine Months Ended February 28, 2026 February 28, 2025 February 28, 2026 February 28, 2025 Revenue: Revenue $ 126,637 $ 52,921 $ 352,562 $ 175,567 Related party revenue — — — 1,926 Total revenue 126,637 52,921 352,562 177,493 Costs and expenses: Cost of revenues (1) 72,832 49,141 235,398 162,562 Selling, general and administrative (2) (3) 79,723 22,723 166,814 66,852 Loss (gain) on classification of held for sale (4) 59,650 — 59,650 ( 24,616 ) Loss on abandonment of assets 99 — 2,343 769 Total costs and expenses 212,304 71,864 464,205 205,567 Operating loss ( 85,667 ) ( 18,943 ) ( 111,643 ) ( 28,074 ) Interest (income) expense, net ( 2,387 ) 8,897 18,883 23,687 Gain on change in fair value of derivatives ( 9,417 ) — ( 22,543 ) — Gain on change in fair value of investment (5) ( 3,305 ) — ( 6,072 ) — Loss on conversion of debt — — — 33,612 Loss on change in fair value of debt — — — 85,439 Loss on extinguishment of debt — 1,177 — 1,177 Loss on change in fair value of warrants — 6,421 — 6,421 Net loss before income tax expense ( 70,558 ) ( 35,438 ) ( 101,911 ) ( 178,410 ) Income tax (benefit) expense ( 2 ) 117 21 118 Net loss ( 70,556 ) ( 35,555 ) ( 101,932 ) ( 178,528 ) Net loss attributable to redeemable noncontrolling interest ( 28,747 ) — ( 31,910 ) — Preferred dividends ( 1,558 ) ( 540 ) ( 4,705 ) ( 1,213 ) Net loss attributable to common stockholders $ ( 100,861 ) $ ( 36,095 ) $ ( 138,547 ) $ ( 179,741 ) Basic and diluted net loss per share attributable to common stockholders $ ( 0.36 ) $ ( 0.16 ) $ ( 0.51 ) $ ( 0.93 ) Basic and diluted weighted average number of shares outstanding 281,982,553 222,454,578 271,670,830 193,405,721 (1) Includes depreciation and amortization of $ 19.5 million and $ 17.5 million for the three months ended February 28, 2026 and February 28, 2025, and $ 30.4 million and $ 75.4 million for the nine months ended February 28, 2026 and February 28, 2025, respectively. (2) Includes depreciation and amortization of $ 1.3 million and $ 1.2 million for the three months ended February 28, 2026 and February 28, 2025, and $ 3.1 million and $ 4.1 million for the nine months ended February 28, 2026 and February 28, 2025, respectively. (3) Includes related party selling, general and administrative expense of $ 0.1 million for each of the three months ended February 28, 2026 and February 28, 2025, and $ 0.2 million for each of the nine months ended February 28, 2026 and February 28, 2025, respectively. See Note 5 - Related Party Transactions for further discussion of related party transactions. (4) Includes $ 25 million received in connection with the sale of the Company’s Garden City facility upon the achievement of conditional approval requirements and escrowed funds were released during the nine months ended February 28, 2025. (5) Includes related party gain on change in fair value of investment of $ 2.0 million for each of the three and nine months ended February 28, 2026. See Note 5 - Related Party Transactions for further discussion of related party transactions. 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 February 28, 2026 (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, 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 Issuance of common stock from stock compensation plans — — — 651,935 1 — — ( 1 ) — — Tax payments for restricted stock upon vesting — — — — — — — ( 9,371 ) — ( 9,371 ) Issuance of Preferred Stock, net of costs 154,500 149,927 — — — — — — — — Conversion of Preferred Stock ( 197,750 ) ( 191,917 ) — 5,648,970 5 — — 191,912 — 191,917 Redemption of Preferred Stock ( 71 ) ( 68 ) — — — — — — — — Preferred Stock dividends — — — — — — — ( 1,558 ) — ( 1,558 ) Contributions from noncontrolling interest, net of costs — — 377,104 — — — — — — — Noncontrolling interest preferred stock dividends — — 28,868 — — — — ( 28,868 ) — ( 28,868 ) Stock-based compensation — — — — — — — 50,149 — 50,149 Net income (loss) — — 121 — — — — — ( 70,677 ) ( 70,677 ) Balance, February 28, 2026 343,862 $ 63,160 $ 923,065 292,549,415 $ 293 ( 7,165,300 ) $ ( 52,737 ) $ 2,216,722 $ ( 583,057 ) $ 1,581,221 (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 February 28, 2025 (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, November 30, 2024 351,032 $ 55,782 225,846,268 $ 222 ( 9,291,199 ) $ ( 31,400 ) $ 858,713 $ ( 392,963 ) $ 434,572 Issuance of common stock from stock compensation plans — — 641,585 1 — — ( 1 ) — — Tax payments for restricted stock upon vesting — — — — — — ( 2,970 ) — ( 2,970 ) Issuance of warrants, at fair value — — — — — — 6,471 — 6,471 Conversion of warrants — — 1,051,651 1 — — ( 1 ) — — Issuance of Preferred Stock, net of costs 33,404 30,437 — — — — — — — Conversion of Preferred Stock ( 43,000 ) ( 43,000 ) 6,142,855 6 — — 42,994 — 43,000 Preferred Stock Dividends — — — — — — ( 540 ) — ( 540 ) Stock-based compensation — — — — — — 9,691 — 9,691 Common stock issuance costs — — — — — — ( 21 ) — ( 21 ) Net loss — — — — — — — ( 35,555 ) ( 35,555 ) Balance, February 28, 2025 341,436 $ 43,219 233,682,359 $ 230 ( 9,291,199 ) $ ( 31,400 ) $ 914,336 $ ( 428,518 ) $ 454,648 (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 Nine Months ended February 28, 2026 (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 — — — 2,288,154 3 — — ( 3 ) — — Tax payments for restricted stock upon vesting — — — — — — — ( 24,838 ) — ( 24,838 ) Issuance of Preferred Stock, net of costs 758,550 728,130 — — — — — — — — Conversion of Preferred Stock ( 836,550 ) ( 800,214 ) — 49,231,031 48 — — 800,166 — 800,214 Redemption of Preferred Stock ( 20,296 ) ( 793 ) — — — — — — — — Preferred Stock dividends — — — — — — — ( 4,705 ) — ( 4,705 ) 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 — — 891,015 — — — — — — — Noncontrolling interest preferred stock dividends — — 31,980 — — — — ( 31,980 ) — ( 31,980 ) Stock-based compensation — — — — — — — 94,741 — 94,741 Net income (loss) — — 70 — — — — — ( 102,002 ) ( 102,002 ) Balance, February 28, 2026 343,862 $ 63,160 $ 923,065 292,549,415 $ 293 ( 7,165,300 ) $ ( 52,737 ) $ 2,216,722 $ ( 583,057 ) $ 1,581,221 (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 Nine Months ended February 28, 2025 (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 — — 180,762 — 180,818 Issuance of common stock from stock compensation plans — — 1,908,764 3 — — ( 3 ) — — Tax payments for restricted stock upon vesting — — — — — — ( 2,970 ) — ( 2,970 ) Conversions of debt — — 19,050,204 19 — — 104,926 — 104,945 Issuance of other common stock — — 628,541 1 — — 518 — 519 Issuance of warrants, at fair value — — — — — — 50,586 — 50,586 Conversion of warrants — — 4,905,256 5 — — ( 5 ) — — Issuance of preferred stock, net of costs 394,627 91,569 — — — — ( 4,835 ) — ( 4,835 ) Preferred stock dividends — — — — — — ( 1,213 ) — ( 1,213 ) Conversion of preferred stock ( 53,191 ) ( 48,350 ) 7,598,712 7 — — 53,185 — 53,191 Stock-based compensation — — — — — — 10,233 — 10,233 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 — — — — — — — ( 178,528 ) ( 178,528 ) Balance, February 28, 2025 341,436 $ 43,219 233,682,359 $ 230 ( 9,291,199 ) $ ( 31,400 ) $ 914,336 $ ( 428,518 ) $ 454,648 (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) For the Nine Months ended February 28, 2026 and February 28, 2025 Nine Months Ended February 28, 2026 February 28, 2025 CASH FLOW FROM OPERATING ACTIVITIES Net loss $ ( 101,932 ) $ ( 178,528 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 33,552 79,540 Stock-based compensation 94,741 10,233 Lease expense 16,310 23,911 Gain on change in fair value of derivatives ( 22,543 ) — Gain on change in fair value of investment ( 6,072 ) — Loss on extinguishment of related party debt — 1,177 Non-cash interest expense 74,989 11,515 Loss (gain) on classification of held for sale 59,650 ( 24,616 ) Loss on conversion of debt — 33,612 Loss on change in fair value of debt — 85,439 Loss on abandonment of assets 2,343 769 Loss on change in fair value of warrants issued — 6,421 Changes in operating assets and liabilities: Accounts receivable ( 13,923 ) ( 10,722 ) Prepaid expenses and other current assets ( 88,229 ) ( 4,072 ) Customer deposits 627 2,306 Related party customer deposits — ( 1,549 ) Deferred revenue 8,956 ( 32,795 ) Related party deferred revenue — ( 1,692 ) Accounts payable ( 171,583 ) ( 88,378 ) Accrued liabilities 64,613 ( 12,319 ) Due to customer ( 2,149 ) ( 8,195 ) Lease assets and liabilities 14,773 ( 13,557 ) Other assets ( 6,983 ) ( 757 ) CASH FLOW USED IN OPERATING ACTIVITIES ( 42,860 ) ( 122,257 ) CASH FLOW FROM INVESTING ACTIVITIES Purchases of property and equipment and other assets ( 1,576,697 ) ( 483,340 ) Proceeds from satisfaction of contingency on sale of assets — 25,000 Finance lease prepayments — ( 4,840 ) Investment in companies ( 17,000 ) ( 2,498 ) CASH FLOW USED IN INVESTING ACTIVITIES ( 1,593,697 ) ( 465,678 ) CASH FLOW FROM FINANCING ACTIVITIES Repayment of finance leases ( 94,455 ) ( 93,992 ) Borrowings of long-term debt 2,504,863 650,000 Repayments of long-term debt ( 432,536 ) ( 290,535 ) Payment of deferred financing costs ( 81,168 ) ( 42,903 ) Tax payments for restricted stock upon vesting ( 24,838 ) ( 2,970 ) Noncontrolling interest contributions 900,000 — Noncontrolling interest issuance costs ( 62,018 ) — Proceeds from issuance of common stock 196,366 191,590 Common stock issuance costs ( 5,949 ) ( 10,253 ) Proceeds from issuance of preferred stock 739,998 100,489 Preferred stock issuance costs ( 11,868 ) ( 8,914 ) Redemption of preferred stock ( 793 ) — Dividends issued on preferred stock ( 4,705 ) ( 1,213 ) 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 3,620,912 817,471 7 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) For the Nine Months ended February 28, 2026 and February 28, 2025 Nine Months Ended February 28, 2026 February 28, 2025 NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 1,984,355 229,536 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD 123,318 31,688 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD 2,107,673 261,224 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid $ 93,455 $ 54,855 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES Operating right-of-use assets obtained by lease obligation $ — $ 20,280 Finance right-of-use assets obtained by lease obligation $ 25,214 $ 106,754 Property and equipment in accounts payable and accrued liabilities $ ( 564,230 ) $ 142,787 Conversion of debt to common stock $ — $ 104,945 Consideration for guarantee of an affiliate's obligations $ 2,000 $ — Conversion of preferred stock to common stock $ 800,214 $ 53,191 Cashless exercise of warrants $ 1 $ 5 Issuance of warrants, at fair value $ 104,705 $ 50,586 Non-cash dividends paid in-kind $ ( 31,980 ) $ — 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 Nine Months Ended February 28, 2026 1. Business and Basis of Presentation 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 three 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. In the fourth quarter of fiscal year 2025, management determined that the Cloud Services Business, which operates primarily through our wholly-owned subsidiary, Applied Digital Cloud Corporation, met the criteria to be classified as “held for sale.” As a sale would represent a strategic shift for the Company, the Cloud Services Business was classified as discontinued operations. 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 with EKSO Bionics Holdings, Inc. (Nasdaq: EKSO) (“EKSO”), which, once closed, will go forward as ChronoScale Corporation (“ChronoScale”), an accelerated compute platform purpose-built to support AI workloads (the “Proposed Transaction”). On February 15, 2026, APLD Intermediate HoldCo LLC, a Delaware limited liability company (“APLD Intermediate”), APLD ChronoScale HoldCo LLC, a Delaware limited liability company and a wholly owned subsidiary of APLD Intermediate (“Contributor”), each a wholly owned direct or indirect subsidiary of the Company, and Applied Digital Cloud Corporation, which at the time of the closing of the Proposed Transaction, will be a wholly owned subsidiary of Contributor, entered into a Contribution and Exchange Agreement with EKSO (the “Contribution and Exchange Agreement”) for purposes of consummating the Proposed Transaction (the “Business Combination”), as a result of which (i) Applied Digital Cloud Corporation will become a wholly owned subsidiary of Ekso, (ii) Ekso will, immediately after the consummation of the Business Combination, continue as the parent of the combined company, and (iii) Ekso will change its name to ChronoScale. Upon closing of the Proposed Transaction, the Company expects to initially own approximately 97 % of the combined company. The Applied Digital Cloud and EKSO businesses would continue to operate upon consummation of the Proposed Transaction. Closing of the Proposed Transaction is subject to customary regulatory approval and satisfaction of closing conditions. During the quarter ended February 28, 2026, the Company determined that the Cloud Services Business, which had previously been classified and reported as held for sale in accordance with ASC 360-10 and discontinued operations in accordance with ASC 205-20, no longer met the criteria for classification as held for sale and discontinued operations due to the Company entering into the Contribution and Exchange Agreement. As a result, effective February 15, 2026, the assets and liabilities of the Cloud Services Business have been reclassified from held for sale to held and used in their respective financial statement lines on the Company’s unaudited condensed consolidated balance sheets for all periods presented. Similarly, the results of the Cloud Services Business have been reclassified from discontinued operations to continuing operations in the Company’s unaudited condensed consolidated statements of operations for all periods presented. In connection with this change in classification, the long‑lived assets of the Cloud Services Business were remeasured in accordance with ASC 360‑10‑35‑44 at the lower of (i) their carrying amounts immediately before classification as held for sale, adjusted for depreciation and amortization that would have been recognized had the assets been continuously classified as held and used, and (ii) their fair values at the date the Company determined that the held‑for‑sale criteria were no longer met. Management determined that as of February 15, 2026, when the Cloud Services Business no longer met the criteria for held for sale and discontinued operations, the carrying value of the long-lived assets of the Cloud Business was less than the fair value. As such, the Company recorded a loss on classification of held for sale of $ 59.7 million for the three and nine months ended February 28, 2026 representing the write down of the Cloud Services Business assets to their carrying value as of February 15, 2026 when it no longer qualified as held for sale. 9 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 The Company has restated its comparative financial statements for prior periods to reflect this change in classification. The statements of operations, cash flows, and segment information for prior periods have been adjusted to include the results of the Cloud Services Business within continuing operations rather than within discontinued operations, and previously classified assets and liabilities of the Cloud Services Business are presented within the respective held‑and‑used asset and liability line items as of each balance sheet date. Revenues, income (loss) before income taxes, net income (loss), total assets and liabilities, and cash flows previously reported as related to discontinued operations and asset and liabilities held for sale of the Cloud Services Business are now reported in the corresponding line items within continuing operations and held‑and‑used asset and liability categories for all periods presented. There was no material impact on the Company’s previously reported net income, total assets, or equity as a result of this reclassification. The reclassification was necessary because the Cloud Services Business no longer met the requirements for held for sale presentation and discontinued operations presentation as set forth in ASC 360-10 and ASC 205-20, respectively, as the planned sale did not occur and the segment remains part of the Company’s ongoing operations as of February 28, 2026. 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. 2. Significant Accounting Policies 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 Data Center Hosting Revenue The Company recognizes revenue associated with our data center hosting in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. 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 10 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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 We generate the majority of our HPC hosting revenue by leasing our properties to customers under operating lease agreements, which are accounted for under ASC 842, Leases (“ASC 842”). We recognize the total minimum lease payments provided for under the leases on a straight-line basis over the lease term if we determine it is probable that substantially all of the lease payments will be collected over the lease term. We commence recognition of revenue from rentals at the date the property is ready for its intended use by the tenant and the tenant takes possession or controls the physical use of the leased asset. The excess of rents recognized as revenue over amounts contractually due pursuant to the underlying leases is included in Accounts receivable and Other assets on the unaudited condensed consolidated balance sheets. Rental payments received in excess of revenue recognized are classified as Deferred revenue on the unaudited condensed consolidated balance sheets. Generally, under the terms of our leases, the majority of our rental expenses, including power and security cost, are recovered from our customers. We record amounts reimbursable by customers (“tenant recoveries”) as revenue in the period the applicable expenses are incurred – which is generally on a ratable basis through the term of the lease. We account for and present rental revenue and tenant recoveries as a single component under rental and other services as the timing of recognition is the same, the pattern with which we transfer the right of use of the property and related services to the lessee are both on a straight-line basis and our leases qualify as operating leases. Interconnection services include port and cross-connect services generally provided on terms that align with the respective lease term. We bill for these services on a monthly basis and recognize the revenue over the period the service is provided. Revenue for cross-connect installations is generally recognized in the period the cross-connect is installed. Tenant fit-out services include the procurement and installation of customer equipment provided in accordance with the terms of the agreement with the customer. In the course of providing its services, the Company routinely subcontracts for services and incurs other direct costs on behalf of its clients which costs are passed through to the client and is recognized as revenue. The Company recognizes revenue using the percentage of completion model where by total costs incurred are divided by total costs expected to be incurred, which it believes to be the best measure of progress towards completion of the performance obligation. We utilize the practical expedient in ASC 842 that allows us to account for lease and non-lease components associated with each lease as a single lease component recorded within revenue, instead of accounting for such items separately under Accounting Standards Codification 606, Revenue (“ASC 606”). The Company began recognizing revenue associated with certain of its data center leases as accounted for under ASC 842 in the second quarter of the current fiscal year. See Note 14 - Leases for further information. Cloud Services Revenue The Company recognizes revenue associated with its cloud services business in accordance with ASC 606, Revenue from Contracts with Customers. The Company provides managed cloud infrastructure services to customers, such as artificial intelligence and machine learning developers, to help develop their advanced products. Customers pay a fixed rate to the Company in exchange for managed cloud services supported by Company-provided equipment. Revenues are recognized based on the fixed rate, net of any credits for non-performance, over the term of the agreements. Segments The Company has identified three reportable segments: data center hosting (“Data Center Hosting Business”), cloud services (“Cloud Services 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. 11 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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 interest (income) expense, net, gain on change in fair value of derivatives, gain on change in fair value of investment, loss on conversion of debt, loss on change in fair value of debt, loss on extinguishment of debt, loss on change in fair value of warrants 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 Cloud Services Business primarily operates through our wholly-owned subsidiary, Applied Digital Cloud Corporation, and provides cloud services to customers at third party colocation centers located in Colorado, Minnesota and Utah, such as artificial intelligence and machine learning developers, to develop their advanced products. Customers pay a fixed rate to the Company in exchange for an energized space supported by Company-provided equipment. 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 - 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. Investments in equity securities The Company’s long-term investments include equity securities without readily determinable fair values and equity securities with readily determinable fair values. Equity securities without readily determinable fair values The Company invests in equity securities, which are accounted for in accordance with ASC 321, Investments - Equity Securities. Equity securities are measured at fair value, with changes in fair value recognized within gain (loss) on change in fair value of investments on the unaudited condensed consolidated statement of operations. For equity securities without readily determinable fair values, the Company has elected the measurement alternative, recording these investments at cost minus impairment, adjusted for observable price changes. Quarterly, the Company performs a qualitative assessment for impairment of equity securities without readily determinable fair values. If impairment is indicated, the investment is written down to fair value through earnings. Equity investments with readily determinable fair values The Company accounts for certain of its investments in equity securities in accordance with ASU 2016-01 Financial Instruments-Overall (Subtopic 825- 10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). In accordance with ASU 2016-01, the Company records all equity investments with readily determinable fair values at fair value calculated by the publicly traded stock price at the close of the reporting period within gain (loss) on change in fair value of investments on the unaudited condensed consolidated statement of operations. . For further discussion of the Company’s investments in equity securities, see Note 5 - Related Party Transactions, Note 7 - Balance Sheet Components , and Note 8 - Derivative Assets . 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 12 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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. 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. 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 6 - Debt. Additionally, the Company has letters of credit totaling $ 16.5 million and $ 38.3 million, as of February 28, 2026 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. 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 February 28, 2026 and May 31, 2025 were as follows (in thousands): February 28, 2026 May 31, 2025 Cash and cash equivalents $ 1,730,440 $ 43,950 Restricted cash 198,423 72,368 Restricted cash included in other assets 178,810 7,000 Total cash, cash equivalents, and restricted cash $ 2,107,673 $ 123,318 Recent Accounting Pronouncements Accounting Pronouncements Adopted In August 2023, the FASB issued Accounting Standards Update (“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 13 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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. Accounting Pronouncements Not Yet Adopted 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 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. In December 2025, the FASB issued ASU 2025-12, Codification Improvements. The amendments in this update are to make other incremental improvements to GAAP and facilitate codification updates for a broad range of Topics arising from technical corrections, unintended application of the codification, clarifications, and other minor improvements. The resulting amendments are collectively referred to as Codification improvements. ASU 2025-12 is effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual 14 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 reporting periods. The Company is currently evaluating the impact the adoption of ASU 2025-12 may have on the Company’s consolidated financial statements. 3. Property and Equipment Property and equipment consisted of the following as of February 28, 2026 and May 31, 2025 (in thousands): Estimated Useful Life February 28, 2026 May 31, 2025 Networking equipment, electrical equipment, and software 3 years - 5 years $ 38,163 $ 33,611 Mechanical infrastructure 20 years 71,934 — Electrical infrastructure 15 years 104,238 — Electric generation and transformers 15 years - 30 years 193,828 9,914 Land and building Building 39 years 278,456 109,672 Building improvements 15 years - 25 years 677,001 — Land 59,713 20,047 Land improvements 15 years 43,729 1,423 Leasehold improvements 3 years - 7 years 1,142 1,142 Construction in progress 1,544,734 1,090,587 Other equipment and fixtures 5 years - 10 years 55,616 12,447 Total cost of property and equipment 3,068,554 1,278,843 Accumulated depreciation ( 56,803 ) ( 26,556 ) Property and equipment, net $ 3,011,751 $ 1,252,287 Depreciation expense totaled $ 17.6 million and $ 27.7 million for the three and nine months ended February 28, 2026, respectively, and $ 3.2 million and $ 9.3 million for the three and nine months ended February 28, 2025, respectively. 4. Revenue from Contracts with Customers Below is a summary of the Company’s revenue concentration by major customers for the three and nine months ended February 28, 2026 and February 28, 2025, respectively. Three Months Ended Nine Months Ended February 28, 2026 February 28, 2025 February 28, 2026 February 28, 2025 Customer A 56 % — % 52 % — % Customer B 30 % 66 % 33 % 54 % Customer C 14 % 34 % 15 % 29 % Customer D — % — % — % 11 % Deferred Revenue Changes in the Company's deferred revenue balances for the nine months ended February 28, 2026 and February 28, 2025, respectively, are shown in the following table (in thousands): Nine Months Ended February 28, 2026 February 28, 2025 Balance, beginning of period $ 3,593 $ 39,366 Advance billings 300,141 136,559 Revenue recognized ( 295,209 ) ( 177,243 ) Other adjustments 4,025 6,197 Balance, end of period $ 12,550 $ 4,879 15 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 Unbilled Revenue Changes in the Company's unbilled revenue balances, which are captured in the unaudited condensed consolidated balance sheets in accounts receivable and other assets for the nine months ended February 28, 2026 and February 28, 2025, respectively, are shown in the following table (in thousands): Nine Months Ended February 28, 2026 February 28, 2025 Balance, beginning of period $ — $ — Billings 44,727 — Revenue recognized ( 57,352 ) — Balance, end of period $ ( 12,625 ) $ — Customer Deposits Changes in the Company's customer deposits balances for the nine months ended February 28, 2026 and February 28, 2025, respectively, are shown in the following table (in thousands): Nine Months Ended February 28, 2026 February 28, 2025 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. Related Party Transactions Related Party Revenue Previously, related party revenue consisted of revenue from two customers, Customer E and Customer F. During the three months ended February 28, 2026 and 2025, there was no related party revenue. Similarly, during the nine months ended February 28, 2026, there was no related party revenue. During the nine months ended February 28, 2025, there was approximately $ 1.2 million of related party revenue from Customer E and approximately $ 0.7 million of related party revenue from Customer F, neither of which is currently a customer of the Company. Customer E 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 F 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. Base Electron Base Electron, Inc., a Nevada corporation, (“Base Electron”) is an independent power producer owned and managed by a combination of third parties, as well as certain officers and directors of the Company acting in their individual capacities, for the purpose of developing stabilized power generation and infrastructure to support the broader AI industry. The Company is party to a Guarantee (the “Guarantee”) in favor of The Babcock & Wilcox Company (“B&W”), pursuant to which it has agreed to unconditionally and irrevocably guarantee the full and timely performance by Base Electron, of its obligations under a Design-Build Agreement, dated February 26, 2026, by and between Base Electron and B&W (the 16 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 “Design-Build Agreement”). The Design-Build Agreement contemplates the engineering, procurement, construction and commissioning of a power generation facility with an expected nameplate capacity of approximately 1.2 GW anticipated to expand power and capacity supplied to the grid and utility customers in the Midcontinent Independent System Operator (“MISO”) region. The Company may, in its sole discretion, terminate the Guarantee and all of its existing and future obligations thereunder upon the occurrence of any one of the following events, (i) the listing of Base Electron’s equity securities on a national securities exchange, (ii) the consummation by Base Electron of a financing transaction resulting in gross proceeds of at least $ 50 million (provided that Base Electron is current in its payments to B&W), or (iii) the payment by the Company of a termination fee equal to either $ 50 million (if paid by August 1, 2026 and Base Electron is current in its payments to B&W) or $ 100 million. As of February 28, 2026, no liability has been recognized in the unaudited condensed consolidated financial statements, as the Company has determined that the likelihood of Base Electron failing to perform or the Company terminating the Guarantee is not probable. In connection with and as partial consideration for the Company’s entry into the Guarantee, Base Electron issued to the Company approximately 10 % of Base Electron’s outstanding equity. The investment in Base Electron will be accounted for at cost under ASC 321 as it is an equity security without a readily determinable fair value and will be evaluated quarterly for impairment indicators. There were no impairment indicators during the quarter. As of February 28, 2026, the Company determined the fair value of the investment was $ 2.0 million, which was recorded as an other asset on the unaudited condensed consolidated balance sheets and a gain on change in fair value of investment on the unaudited condensed consolidated statements of operations. 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 $ 0.1 million during the three months ended February 28, 2026 and 2025, each, respectively, and $ 0.2 million during the nine months ended February 28, 2026 and 2025, each, respectively, which were incurred with a company whose chairman is also a member of the Company’s Board of Directors. 6. Debt The Company’s outstanding debt consisted of the following components (in thousands): Interest Rate Maturity Date February 28, 2026 May 31, 2025 2030 Senior Secured Notes 9.25 % December 2030 $ 2,350,000 $ — Convertible Notes, senior unsecured (1) 2.75 % June 2030 450,000 450,000 DevCo Facility 8.00 % December 2027 87,104 — SMBC Loan (2) (2) August 2026 — 375,000 Starion Ellendale Loan (3) 7.48 % February 2028 9,183 12,283 Cornerstone Bank Loan (4) 8.59 % March 2029 10,682 12,866 Starion Term Loan (5) 6.50 % July 2027 4,711 7,061 Other long-term debt (6) 31,439 12,275 Deferred financing costs, net of amortization ( 250,444 ) ( 181,329 ) Less: Current portion of debt ( 98,174 ) ( 10,331 ) Long-term debt, net $ 2,594,501 $ 677,825 (1) The net carrying amount of the Convertible Notes was $ 275.3 million and $ 273.3 million and the remaining unamortized deferred financing costs related to the issuance was $ 174.7 million and $ 176.7 million, each as of February 28, 2026 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. 17 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 During the quarter ended February 28, 2026, concurrent with the closing of the 2030 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 February 28, 2026. (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 second fiscal quarter for a total of approximately $ 19.0 million. Remaining Principal Payments Below is a summary of the remaining principal payments due over the life of the term loans as of February 28, 2026 (in thousands): FY26 $ 90,283 FY27 13,184 FY28 100,772 FY29 187,329 FY30 184,158 Thereafter (1) 2,367,393 Total $ 2,943,119 (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 February 28, 2026, the Company had letters of credit secured by cash totaling $ 16.5 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 February 28, 2026, approximately $ 61.9 million of letters of credit were issued under the revolving credit facility. 18 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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. 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. 2030 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 “2030 Notes”). The 2030 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 2030 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. 19 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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 2030 Notes with Wilmington Trust, National Association, as trustee (the “Trustee”) and collateral agent (the “Collateral Agent”). The 2030 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 2030 Notes will mature on December 15, 2030, unless earlier redeemed or repurchased in accordance with their terms. The principal amount of the 2030 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 2030 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 2030 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 2030 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 2030 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 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 2030 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 data center lease in the event that the proceeds of the 2030 Notes and the available funds (including previous equity contributions from the Company) are insufficient to do so. As of February 28, 2026, remaining unamortized deferred financing costs related to the issuance of the loan was $ 6.4 million. DevCo Facility On December 18, 2025, APLD DevCo LLC (the “Borrower”), a subsidiary of the Company, entered into an ongoing credit arrangement with MEC (as defined above), 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, that certain Promissory Note (as amended, the “Promissory Note”) executed by the Borrower in favor of MEC. The Promissory Note provides for a principal sum of (a) $ 45 million (the “First Draw”), which was drawn on the Initial Closing Date, plus (b) $ 40 million (the “Second Draw”) which was drawn on February 24, 2026, plus (c) $ 15 million (the “Third Draw,”, and, together with the First Draw and the Second Draw, collectively, the “Initial Loan” and each, individually, a “Draw”), with the Third Draw to be funded upon the Borrower’s request at any time after the Initial Closing Date subject to satisfaction of or waiver by MEC of certain conditions precedent on or prior to the Third Draw, plus (d) the principal sum of any Additional Loans (as defined below, and, together with the Initial Loan, the “Loan”), if applicable, made by MEC (at the mutual consent of the Borrower and MEC). 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 20 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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 MEC (in its sole discretion) and the satisfaction of the conditions specified by MEC. Each Draw is fully committed, but any Additional Loans or Rollover Loans made by MEC 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 Borrower 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, (a) with respect to the amount outstanding under the First Draw, such prepayment is accompanied by the payment of amounts sufficient to achieve a rate of return that equals 1.25 to 1.00; provided that, such rate of return shall be reduced to (i) on or prior to the date that is four (4) months after the date on which the First Draw is funded, 1.06 :1.00 or (ii) after the date that is four (4) months after the date on which the First Draw is funded but prior to the date that is twelve (12) months after the date on which the First Draw is funded, 1.10 :1.00; (b) with respect to the amount outstanding under the Second Draw, such prepayment is accompanied by the payment of amounts sufficient to achieve a rate of return that equals 1.25 to 1.00; provided that, (x) if the Second Draw is funded within six (6) months of the date on which the First Draw is funded, and the prepayment occurs at any time thereafter, such rate of return shall be reduced to (i) on or prior to the date that is four (4) months after the date on which the Second Draw is funded, 1.06 :1.00 or (ii) after the date that is four (4) months after the date on which the Second Draw is funded but prior to the date that is twelve (12) months after the date on which the Second Draw is funded, 1.10 :1.00 and (y) if the Second Draw is funded more than within six (6) months after the date on which the First Draw is funded, and such prepayment occurs at any time thereafter, such rate of return shall be reduced to, after the date that is six (6) months after the date on which the First Draw is funded but prior to the date that is twelve (12) months after the date on which the First Draw is funded, 1.10 :1.00; and (c) with respect to the amount outstanding under the Rollover Loans (as defined below) or any Additional Loans, such prepayment is accompanied by the payment of amounts sufficient to achieve a rate of return on capital as determined by mutual agreement of MEC and the Borrower. The same return hurdles apply to repayment at maturity. 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”). As such, as of February 28, 2026, the Promissory Note is classified as current portion of debt on the unaudited condensed consolidated balance sheet. 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) APLD Intermediate HoldCo LLC, a Delaware limited liability company, as direct parent of the Borrower (“Intermediate Holdings”), the Borrower, and the Borrower’s subsidiaries have entered into a guarantee and collateral agreement, as grantors thereunder, in favor of MEC (the “Guarantee and Collateral Agreement”), and (ii) the Company has entered into a parent guarantee in favor of MEC to guarantee the obligations of the Note Parties under the Promissory Note. 21 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 7. Balance Sheet Components Certain balance sheet components are as follows (in thousands): February 28, 2026 May 31, 2025 Prepaid expenses and other current assets Short term equipment deposit $ 380,824 $ — Deferred issuance costs 2,800 5,469 Short term lease incentive 4,380 1,290 Prepaid expenses 14,136 1,421 Other current assets 76,565 1,472 Total Prepaid expenses and other current assets $ 478,705 $ 9,652 February 28, 2026 May 31, 2025 Other assets Long term lease incentive $ 201,810 $ 84,416 Restricted cash 178,810 7,000 Deposits on assets & construction 40,424 69,500 Deferred construction costs 12 45 Deferred lease costs 12,566 7,342 Derivative assets (1) 98,833 — Investments in other companies (2) 43,620 6,073 Investment in related party (3) 2,000 — Other 15,633 4,977 Total Other assets $ 593,708 $ 179,353 (1) Balance as of February 28, 2026 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 and Note 8 - Derivative Assets for further discussion. (2) Includes $ 20.9 million of warrants and $ 4.4 million of common shares issued by B&W to the Company in association with the Company’s investment in B&W. See further discussion of the transaction in Note 8 - Derivative Assets . The balance also includes a $ 15.0 million investment by the Company in Corintis SA (“Corintis”) in exchange for Series A1 preferred shares, approximating 6 % of Corintis’s outstanding equity. The Series A1 preferred shares are convertible preferred shares with no redemption rights. The investment in Corintis will be accounted for at cost under ASC 321 as it is an equity security without a readily determinable fair value and will be evaluated quarterly for impairment indicators. There were no impairment indicators during the quarter. (3) Includes a $ 2.0 million investment in Base Electron. See further discussion of the transaction in Note 5 - Related Party Transactions. 22 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 February 28, 2026 May 31, 2025 Accrued liabilities Accrued construction payables $ 266,709 $ — Accrued expenses 42,656 23,354 Accrued interest 64,323 2,694 Other accrued liabilities 3,297 4,073 Total Accrued liabilities $ 376,985 $ 30,121 February 28, 2026 May 31, 2025 Other current liabilities Construction retainer $ 65,494 $ 19,338 Other 24 93 Total Other current liabilities $ 65,518 $ 19,431 8. Derivative Assets APLD HPC TopCo 2’s Noncontrolling Interest The preferred units and corresponding common units associated with APLD HPC TopCo 2’s noncontrolling interest 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). 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 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: October 6, 2025 December 9, 2025 February 28, 2026 Expected maturity date October 6, 2032 October 6, 2032 October 6, 2032 Credit spread (annual) 9.00 % 9.50 % 9.62 % Yield volatility 35.00 % 35.00 % 35.00 % Put right/trigger event de minimus de minimus de minimus Risk-free rate USD Yield Curve USD Yield Curve USD Yield Curve Number of time-steps 100 100 100 As of February 28, 2026, the derivative assets were fair valued at $ 98.8 million. During the three and nine months ended February 28, 2026, the Company recorded a gain on change in fair value of derivatives of $ 3.3 million for each of the periods on the unaudited condensed consolidated statement of operations. B&W Warrants 23 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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 for 500,000 shares of B&W’s common stock and a warrant to purchase 2.6 million shares of B&W’s common stock with an exercise price of $ 4.11 (the “Initial Warrant”). Additionally, under the agreement, to incentivize the Company to execute a definitive agreement with B&W related to B&W designing and installing natural gas technology that will provide one gigawatt of efficient energy for an APLD AI data center, B&W agreed to issue an additional warrant to purchase 7,860,000 shares of common stock for $ 4.11 per share (the “Additional Warrant”) to the Company upon execution of such a definitive agreement. During the quarter ended February 28, 2026, a definitive agreement was executed between Base Electron and B&W, with the Company as the guarantor. See Note 5 - Related Party Transactions. The warrants were determined to be derivative assets and were required to be measured at fair value at issuance under ASC 815. They 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 initial contribution between the common stock and the warrants, the Company determined the fair value of each and utilized the relative fair value allocation method. The B&W warrants are 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 B&W Warrants are based on the following significant inputs: November 4, 2025 February 28, 2026 Time to expiry 7 years 6.68 years Stock price $ 3.74 $ 8.86 Volatility 115.0 % 107.5 % Risk-free rate 3.84 % 3.65 % Dividend yield — % — % During the three and nine months ended February 28, 2026, the Company recorded gains of $ 6.1 million and $ 19.2 million, related to the change in fair value of derivatives, respectively, on the unaudited condensed consolidated statement of operations. 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 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, 24 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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. On December 9, 2025, TopCo 2 completed a third closing under its A&R UPA, selling 337,500 preferred units for $ 337.5 million and issuing an additional 27,778 common units. This brought the total amount funded to date under the A&R UPA to $ 900.0 million as of quarter-end and MIP HPC Holdings, LLC holdings to 10 % of TopCo 2’s fully diluted common equity. 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 February 28, 2026, which are included in the unaudited condensed consolidated balance sheets (in thousands): February 28, 2026 Assets: Cash and cash equivalents $ 1,364,118 Restricted cash 179,820 Accounts receivable 8,329 Prepaid expenses and other current assets 469,040 Property and equipment, net 2,752,211 Other assets 506,191 Total assets $ 5,279,709 Liabilities: Accounts payable $ 332,849 Accrued liabilities 355,340 Current portion of debt 11 Current deferred revenue 12,293 Other current liabilities 65,489 Long-term debt 2,276,420 Total liabilities $ 3,042,402 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 (loss) 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. 25 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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 February 28, 2026. 11. Warrants A summary of warrant activity for the nine months ended February 28, 2026 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 8.52 Forfeited — — — Exercised ( 800,300 ) 7.83 — Outstanding at February 28, 2026 28,091,029 $ 8.61 8.11 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 February 28, 2026, 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 February 28, 2026. 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. As of February 28, 2026, 800,000 of the STB Warrants have been 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 26 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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. As of February 28, 2026, 300 warrant shares have been exercised through cashless exercise. 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 27 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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 February 28, 2026, the Company had issued awards of approximately 23.2 million shares of common stock of the Company under the 2022 Plans, 18.9 million under the 2024 Plan, and 600,000 shares of common stock outside of either plan, related to an employment inducement award. As of February 28, 2026, there are approximately 6.6 million shares of common stock available for issuance under the 2024 Plan. During the three months ended February 28, 2026, under the 2024 Plan, the Company issued 100,000 shares to certain consultants as settlement for work performed. 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 Nine Months Ended February 28, 2026 February 28, 2025 February 28, 2026 February 28, 2025 Cost of revenue $ 1,089 $ 502 $ 2,724 $ 1,990 Selling, general, and administrative 47,932 8,668 88,961 7,415 Capitalized (1) 1,128 521 3,056 828 Total stock-based compensation $ 50,149 $ 9,691 $ 94,741 $ 10,233 (1) Capitalized to CIP in the unaudited condensed consolidated balance sheets. Restricted Stock Awards The following is a summary of the activity and balances for unvested restricted stock awards granted during the nine months ended February 28, 2026: Number of Shares Weighted Average Grant Date Fair Value Per Share Outstanding as of May 31, 2025 271,444 $ 3.55 Granted — — Vested ( 15,397 ) 4.33 Forfeited — — Outstanding as of February 28, 2026 256,047 $ 3.50 As of February 28, 2026, total remaining expense to be recognized related to these awards was $ 0.6 million and the weighted average remaining recognition period for the unvested awards was 1.2 years. 28 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 Restricted Stock Units The following is a summary of the activity and balances for unvested restricted stock units granted during the nine months ended February 28, 2026: Number of Shares Weighted Average Grant Date Fair Value Per Share Outstanding as of May 31, 2025 6,659,830 $ 6.56 Granted 5,532,549 25.16 Vested ( 3,337,514 ) 8.80 Forfeited ( 253,713 ) 8.76 Outstanding as of February 28, 2026 8,601,152 $ 17.60 As of February 28, 2026, total remaining expense to be recognized related to these awards was $ 134.4 million and the weighted average remaining recognition period for the unvested awards was 2.7 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 performance goals and continued employment during the vesting period (provided that the PSUs may remain outstanding and eligible to vest following certain terminations during the vesting period). PSUs granted by the Company vest depending on the achievement of Company and individual performance financial, operational and/or market-price driven measures, which must occur on or prior to the deadline set forth in each applicable PSU aware. The fair value of PSUs, except PSUs for which vesting is based on the market price, 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 conditions and the number of awards expected to vest. PSUs that Vest Based on Market Price On January 6, 2026, the Company granted the CEO 4.5 million PSUs with market-price based and service-based vesting conditions. The awards vest based on the achievement of certain stock price targets as well as his continued employment with the Company (except that continued employment is not required if his employment is terminated by the Company without “cause,” he resigns for “good reason,” he dies or incurs a “disability,” or the Company elects not to renew his employment term). The total grant date fair value of the awards was determined to be $ 122.1 million, with each tranche of the awards representing approximately $ 42.7 million, $ 40.6 million, and $ 38.8 million of the total expense, respectively. The fair value of the PSUs was calculated on the grant date using a Monte Carlo simulation model. The estimated fair value was based on the following significant inputs: January 6, 2026 Valuation date stock price $ 30.26 Simulation term 5.0 years Expected volatility 100.62 % Risk free rate 3.69 % Dividend yield — % 29 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 The following is a summary of the activity and balances for unvested performance stock units granted during the nine months ended February 28, 2026: Number of Shares Weighted Average Grant Date Fair Value Per Share Outstanding as of May 31, 2025 7,207,500 $ 6.59 Granted 7,485,000 29.42 Vested — — Forfeited — — Outstanding as of February 28, 2026 14,692,500 $ 18.22 As of February 28, 2026, total remaining expense to be recognized related to these awards was $ 202.9 million and the weighted average remaining recognition period for the unvested awards was 2.7 years. 13. Temporary Equity Preferred Stock The following is a summary of the activity and balances for preferred stock during the three and nine months ended February 28, 2025 (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 November 30, 2024 301,673 $ 6,932 43,000 $ 43,000 6,359 $ 5,850 Issuances, net of costs — — — — 33,404 30,437 Conversions — — ( 43,000 ) ( 43,000 ) — — Redemptions — — — — — — Outstanding as of February 28, 2025 301,673 $ 6,932 — $ — 39,763 $ 36,287 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 39,763 36,287 Conversions — — ( 53,191 ) ( 48,350 ) — — Redemptions — — — — — — Outstanding as of February 28, 2025 301,673 $ 6,932 — $ — 39,763 $ 36,287 30 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 The following is a summary of the activity and balances for preferred stock during the three and nine months ended February 28, 2026 (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 November 30, 2025 281,673 $ 6,432 62,260 $ 56,796 43,250 $ 41,990 Issuances, net of costs — — — — 154,500 149,927 Conversions — — — — ( 197,750 ) ( 191,917 ) Redemptions — — ( 71 ) ( 68 ) — — Outstanding as of February 28, 2026 281,673 $ 6,432 62,189 $ 56,728 — $ — 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 — — — 10 758,550 728,120 Conversions — — — — ( 836,550 ) ( 800,214 ) Redemptions ( 20,000 ) ( 500 ) ( 296 ) ( 293 ) — — Outstanding as of February 28, 2026 281,673 $ 6,432 62,189 $ 56,728 — $ — 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 nine months ended February 28, 2026, the Company declared and paid approximately $ 158,000 and $ 498,000 , respectively, of dividends related to Series E Preferred Stock as presented on the unaudited condensed consolidated statement of operations while during the three and nine months ended February 28, 2025, approximately $ 170,000 and $ 440,000 , 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 31 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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 nine months ended February 28, 2026, 20,000 shares of Series E Preferred Stock were redeemed. 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 nine months ended February 28, 2026, the Company declared and paid approximately $ 1.4 million and $ 4.2 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 nine months ended February 28, 2025, approximately $ 370,000 and $ 418,000 , respectively, 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. 32 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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 nine months ended February 28, 2026, 296 shares of Series E-1 Preferred Stock 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 “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. 33 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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 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 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 nine months ended February 28, 2026, the Company issued and sold 154,500 and 758,550 shares of Series G Preferred Stock, respectively, for gross proceeds of $ 150.0 million and $ 740.0 million, respectively. During the three and nine months ended February 28, 2026, 197,750 and 836,550 shares 34 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 of Series G Preferred Stock, respectively, were converted into 5.6 million and 49.2 million shares of the Company’s common stock, respectively. As of February 28, 2026, no 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 three closings under its A&R UPA as of February 28, 2026, issuing 900,000 preferred units and 102,778 corresponding common units for $ 900.0 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 35 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 embedded derivatives using a binomial lattice model, which includes Level 3 unobservable inputs. See Note 8 - Derivative Assets for further details. 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. 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 $ 28.7 million and $ 31.9 million for the three and nine months ended February 28, 2026, respectively. 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 carrying value of the noncontrolling interest was $ 923.1 million as of February 28, 2026. There was no noncontrolling interest at May 31, 2025. The change in noncontrolling interest consists of $ 891.0 million of contributions from noncontrolling interest, net of costs, $ 32.0 million of preferred stock dividends paid in-kind, and $ 0.1 million in current year net income 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 36 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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 $ 36,000 FY27 479,540 FY28 855,950 FY29 883,279 FY30 908,393 Thereafter 12,351,943 Total $ 15,515,105 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 Nine Months Ended February 28, 2026 February 28, 2025 February 28, 2026 February 28, 2025 Operating lease cost: Operating lease expense $ 1,109 $ 9,889 $ 1,457 $ 27,771 Short-term lease expense 13 166 1,002 251 Total operating lease cost 1,122 10,055 2,459 28,022 Finance lease expense: Amortization of right-of-use assets (1) 5,455 15,792 11,983 70,443 Interest on lease liabilities 715 5,064 1,735 14,343 Total finance lease cost 6,170 20,856 13,718 84,786 Variable lease cost 588 795 2,018 1,829 Total net lease cost $ 7,880 $ 31,706 $ 18,195 $ 114,637 (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. 37 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 The following table represents the Company’s future minimum lease payments as of February 28, 2026: Operating Leases Finance Leases Total FY26 $ 5,484 $ 14,951 $ 20,435 FY27 22,163 51,069 73,232 FY28 22,650 10,968 33,618 FY29 17,152 — 17,152 FY30 3,536 — 3,536 Thereafter — — — Total lease payments 70,985 76,988 147,973 Less: imputed interest ( 7,833 ) ( 5,335 ) ( 13,168 ) Total lease liabilities 63,152 71,653 134,805 Less: Current portion of lease liability ( 18,101 ) ( 51,151 ) ( 69,252 ) Long-term portion of lease liability $ 45,051 $ 20,502 $ 65,553 Supplemental cash flow and other information related to leases is as follows: Nine Months Ended February 28, 2026 February 28, 2025 Weighted-average years remaining (in years): Operating leases 2.6 years 2.9 years Finance leases 2.1 years 3.5 years Weighted-average discount rate: Operating leases 7.6 % 7.7 % Finance leases 9.9 % 10.5 % 15. Commitments and Contingencies Commitments Energy Contracts As of February 28, 2026, the Company had a minimum commitment of approximately $ 26.2 million related to the energy services agreement for its Jamestown, North Dakota co-hosting facility payable over, approximately, the next 0.9 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. B&W Guarantee The Company is party to a Guarantee (the “Guarantee”) in favor of The Babcock & Wilcox Company (“B&W”), pursuant to which it has agreed to unconditionally and irrevocably guarantee the full and timely performance by Base Electron, Inc., a Nevada corporation (“Base Electron”), of its obligations under a Design-Build Agreement, dated February 26, 2026, by and between Base Electron and B&W (the “Design-Build Agreement”). The Design-Build Agreement contemplates the engineering, procurement, construction and commissioning of a power generation facility with an expected nameplate capacity of approximately 1.2 GW anticipated to expand power and capacity supplied to the grid and utility customers in the MISO region. 38 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 The Company may, in its sole discretion, terminate the Guarantee and all of its existing and future obligations thereunder upon the occurrence of any one of the following events, (i) the listing of Base Electron’s equity securities on a national securities exchange, (ii) the consummation by Base Electron of a financing transaction resulting in gross proceeds of at least $ 50 million (provided that Base Electron is current in its payments to B&W), or (iii) the payment by the Company of a termination fee equal to either $ 50 million (if paid by August 1, 2026 and Base Electron is current in its payments to B&W) or $ 100 million. As of February 28, 2026, no liability has been recognized in the unaudited condensed consolidated financial statements, as the Company has determined that the likelihood of Base Electron failing to perform or the Company terminating the Guarantee is not probable. 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. 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. 39 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 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 February 28, 2026, 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 three operating segments: the Data Center Hosting Business, Cloud Services Business, and the 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 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 (income) expense, net, gain on change in fair value of derivatives, gain on change in fair value of investment, loss on conversion of debt, loss on change in fair value of debt, loss on extinguishment of debt, loss on change in fair value of warrants 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. The following tables present segment information, including revenue by segment and segment profit (loss) for the three months ended February 28, 2026 and February 28, 2025 (in thousands): Three Months Ended February 28, 2026 Data Center Hosting Business Cloud Services Business HPC Hosting Business Revenue $ 37,542 $ 18,087 $ 71,008 Costs and expenses: Cost of revenues 22,992 6,282 43,558 Selling, general and administrative (1) 688 4,242 9,885 Loss on classification of held for sale — 59,650 — Loss on abandonment of assets 3 107 — Total costs and expenses 23,683 70,281 53,443 Segment profit (loss) $ 13,859 $ ( 52,194 ) $ 17,565 (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. 40 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 Three Months Ended February 28, 2025 Data Center Hosting Business Cloud Services Business HPC Hosting Business Revenue $ 35,167 $ 17,754 $ — Costs and expenses: Cost of revenues 25,664 23,342 45 Selling, general and administrative (1) 723 4,720 177 Total costs and expenses 26,387 28,062 222 Segment profit (loss) $ 8,780 $ ( 10,308 ) $ ( 222 ) (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 present segment information, including revenue by segment and segment profit (loss) for the nine months ended February 28, 2026 and February 28, 2025 (in thousands): Nine Months Ended February 28, 2026 Data Center Hosting Business Cloud Services Business HPC Hosting Business Revenue $ 117,059 $ 53,207 $ 182,296 Costs and expenses: Cost of revenues 78,554 12,690 144,189 Selling, general and administrative (1) 2,138 5,188 23,921 Loss on classification of held for sale — 59,650 — Loss on abandonment of assets 515 598 1,240 Total costs and expenses 81,207 78,126 169,350 Segment profit (loss) $ 35,852 $ ( 24,919 ) $ 12,946 (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. Nine Months Ended February 28, 2025 Data Center Hosting Business Cloud Services Business HPC Hosting Business Revenue $ 104,254 $ 71,313 $ — Related party revenue 1,926 — — Total segment revenue 106,180 71,313 — Costs and expenses: Cost of revenues 70,607 91,359 100 Selling, general and administrative (1) 2,290 11,882 8,922 Gain on classification of held for sale ( 24,616 ) — — Loss on abandonment of assets 718 — — Total costs and expenses 48,999 103,241 9,022 Segment profit (loss) $ 57,181 $ ( 31,928 ) $ ( 9,022 ) (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. 41 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 The following tables present the reconciliation to net loss before income tax expense (in thousands): Three Months Ended Nine Months Ended February 28, 2026 February 28, 2025 February 28, 2026 February 28, 2025 Segment profit Data Center Hosting Business $ 13,859 $ 8,780 $ 35,852 $ 57,181 Cloud Services Business ( 52,194 ) ( 10,308 ) ( 24,919 ) ( 31,928 ) HPC Hosting Business 17,565 ( 222 ) 12,946 ( 9,022 ) Total segment (loss) profit ( 20,770 ) ( 1,750 ) 23,879 16,231 Other (1) ( 64,897 ) ( 17,193 ) ( 135,522 ) ( 44,305 ) Operating loss ( 85,667 ) ( 18,943 ) ( 111,643 ) ( 28,074 ) Interest (income) expense, net ( 2,387 ) 8,897 18,883 23,687 Gain on change in fair value of derivatives ( 9,417 ) — ( 22,543 ) — Gain on change in fair value of investment ( 3,305 ) — ( 6,072 ) — Loss on conversion of debt — — — 33,612 Loss on change in fair value of debt — — — 85,439 Loss on change in fair value of warrants — 6,421 — 6,421 Loss on extinguishment of debt — 1,177 — 1,177 Net loss before income tax expense $ ( 70,558 ) $ ( 35,438 ) $ ( 101,911 ) $ ( 178,410 ) (1) Other includes corporate related items not allocated to reportable segments. We also provide the following additional segment disclosures (in thousands): Three Months Ended Nine Months Ended February 28, 2026 February 28, 2025 February 28, 2026 February 28, 2025 Depreciation and amortization: Data Center Hosting Business $ 3,363 $ 3,333 $ 10,101 $ 9,990 Cloud Services Business 2,289 14,403 2,289 66,355 HPC Hosting Business 14,415 982 19,828 3,056 Other (1) 746 60 1,334 183 Total depreciation and amortization (2) $ 20,813 $ 18,778 $ 33,552 $ 79,584 (1) Other includes corporate related items not allocated to reportable segments. (2) Includes amortization of the finance lease right-of-use assets. 42 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 Information on segment assets and a reconciliation to consolidated assets are as follows (in thousands): February 28, 2026 May 31, 2025 Data Center Hosting Business $ 119,634 $ 141,764 Cloud Services Business 255,986 304,466 HPC Hosting Business 5,441,305 1,363,341 Total segment assets 5,816,925 1,809,571 Other (1) 429,893 60,519 Total assets $ 6,246,818 $ 1,870,090 (1) 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. 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 Nine Months Ended February 28, 2026 February 28, 2025 February 28, 2026 February 28, 2025 Net loss $ ( 70,556 ) $ ( 35,555 ) $ ( 101,932 ) $ ( 178,528 ) Net loss attributable to redeemable noncontrolling interest ( 28,747 ) — ( 31,910 ) — Preferred dividends ( 1,558 ) ( 540 ) ( 4,705 ) ( 1,213 ) Net loss attributable to common stockholders $ ( 100,861 ) $ ( 36,095 ) $ ( 138,547 ) $ ( 179,741 ) Basic and diluted net loss per share attributable to common stockholders $ ( 0.36 ) $ ( 0.16 ) $ ( 0.51 ) $ ( 0.93 ) Basic and diluted weighted average number of shares outstanding 281,982,553 222,454,578 271,670,830 193,405,721 As of February 28, 2026 and February 28, 2025, the Company had approximately 23.5 million and 10.9 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 February 28, 2026 and February 28, 2025, the Company had approximately 2.5 million and 5.9 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 4.0 million warrants outstanding as of February 28, 2026 and February 28, 2025, 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 February 28, 2026, approximately 46.1 million shares were excluded from the calculations of earnings per share because the effect of those shares would be antidilutive. 43 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 18. Subsequent Events 2031 Senior Secured Notes On March 10, 2026, our subsidiary APLD ComputeCo 2 LLC, closed a $ 2.15 billion offering (the “2031 Notes Offering”) of 6.750 % senior secured notes due 2031 (the “2031 Notes”) at an issue price of 98.000 %. The 2031 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 2031 Notes are senior secured obligations of APLD ComputeCo 2 LLC and bear interest at a rate of 6.750 % per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2026. The principal amount of the 2031 Notes will amortize on a semi-annual basis on March 15 and September 15 of each year, in amounts set forth in the Indenture. The 2031 Notes will mature on March 15, 2031, unless earlier redeemed or repurchased in accordance with their terms. The 2031 Notes are fully and unconditionally guaranteed by the subsidiary guarantors, all of which are wholly owned subsidiaries of APLD ComputeCo 2. The Company provided a customary completion guarantee for the 2031 Notes Offering. The gross proceeds from the 2031 Notes Offering were deposited into a segregated escrow account pending the execution of an electric service agreement with certain providers on the terms and conditions of a related escrow agreement. Once the escrow release condition thereunder is satisfied, the escrowed funds will be released into the project accounts to fund the development and construction of the facilities. If the escrow release condition is not satisfied on or prior to June 30, 2026, or is deemed incapable of being satisfied by such date, the 2031 Notes will be subject to a special mandatory redemption at a price equal to 100 % of the aggregate principal amount thereof, plus accrued and unpaid interest. B&W Warrants On November 4, 2025, the Company and Babcock & Wilcox Enterprises (“BWE”) entered into an agreement under which the Company contributed $ 2.0 million to BWE in exchange for 500,000 shares of BWE’s common stock and warrants to purchase 2,600,000 shares of BWE’s common stock with an exercise price of $ 4.11 (the “Initial Warrants”). Additionally, under the agreement, to incentivize the Company to execute a definitive agreement with B&W related to B&W designing and installing natural gas technology that will provide one gigawatt of efficient energy for an APLD AI data center, BWE agreed to issue additional warrants to purchase 7,860,000 shares of common stock for $ 4.11 per share (the “Additional Warrants”) to the Company upon execution of such a definitive agreement between B&W and the Company. As described in Note 5 - Related Party Transactions and Note 8 - Derivative Assets , on February 26, 2026 a definitive agreement was executed between Base Electron and B&W, with the Company as the guarantor. Subsequent to the end of the quarter, the Company entered into an Assignment and Assumption Agreement, by and among the Company, Base Electron, BWE and B&W, pursuant to which the Company partially assigned its rights with respect to the Additional Warrants (such partial assignment representing the right to purchase up to 5,230,000 shares of BWE common stock) to Base Electron. The warrants were assigned by the Company to Base Electron in connection with Base Electron’s entry into a Design-Build Agreement with B&W. On March 18, 2026, the Company received the remaining Additional Warrants (representing the right to purchase up to 2,630,000 shares of BWE common stock). Base Electron is an independent power producer owned and managed by a combination of third parties, as well as certain officers and directors of the Company acting in their individual capacities, for the purpose of developing stabilized power generation and infrastructure to support the broader AI industry. CoreWeave Restructuring Agreements On March 30, 2026, the Company and CoreWeave amended the lease for Building 2 (the “ELN-02 Parent Lease”) to suspend the term for two of the four data halls covered by the lease (the “ELN-02 Parent Lease Amendment”) and the Company entered into a new data center lease with CoreWeave Compute Acquisition Co. VIII, LLC (“CoreWeave SPV”), a wholly owned subsidiary of CoreWeave, for those same two data halls on substantially the same terms as the ELN-02 Parent Lease (the “ELN-02 SPV Lease”). The ELN-02 SPV Lease is conterminous with the initial term of the ELN-02 44 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three and Nine Months Ended February 28, 2026 Parent Lease. Upon the expiration or earlier termination of the ELN-02 SPV Lease, the suspended term under the ELN-02 Parent Lease will resume and all four data halls of Building 2 will once again be governed by the ELN-02 Parent Lease. As further credit enhancement, CoreWeave delivered to APLD ELN-02 LLC an Unconditional Springing Guaranty of Payment and Performance (the “ELN-02 Guaranty”) in connection with CoreWeave SPV’s obligations under the ELN-02 SPV Lease. CoreWeave is obligated to provide a letter of credit in the amount of $ 50,000,000 to secure obligations under the ELN-02 Parent Lease within 30 days of March 30, 2026. In addition, on March 30, 2026, CoreWeave entered into an Assignment, Assumption and Consent Agreement with CoreWeave SPV and APLD ELN-03 LLC (the “Assignment Agreement”), assigning all of CoreWeave’s rights and obligations under its lease with the Company for Building 3 (the “ELN-03 Parent Lease”) to CoreWeave SPV for the remaining term of the ELN-03 Parent Lease and releasing CoreWeave from the ELN-03 Parent Lease. In addition, CoreWeave also provided an Unconditional Springing Guaranty of Payment and Performance in connection with CoreWeave SPV’s obligations under the ELN-03 Parent Lease (the “ELN-03 Guaranty”), similar to the ELN-02 Guaranty. 45 Table of Contents