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) August 31, 2026 May 31, 2026 ASSETS Current assets: Cash and cash equivalents $ 2,949,909 $ 1,591,988 Restricted cash 313,385 2,381,027 Accounts receivable 114,110 56,309 Prepaid expenses and other current assets (1) 685,638 613,692 Current assets held for sale 19,366 19,841 Total current assets 4,082,408 4,662,857 Property and equipment, net 6,330,411 4,236,300 Operating lease right of use assets, net 72,250 76,922 Finance lease right of use assets, net 109,887 122,523 Other assets 1,112,220 830,710 TOTAL ASSETS $ 11,707,176 $ 9,929,312 LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 336,865 $ 395,474 Accrued liabilities 850,355 548,493 Current portion of operating lease liability 19,199 18,484 Current portion of finance lease liability 43,490 47,585 Current portion of debt 112,645 16,422 Customer deposits 16,752 16,752 Deferred revenue 39,217 4,666 Due to customer 11,448 10,065 Current liabilities held-for-sale 4,988 7,426 Other current liabilities 158,273 97,489 Total current liabilities 1,593,232 1,162,856 Long-term deferred revenue 107 — Long-term portion of operating lease liability 41,670 47,178 Long-term portion of finance lease liability 2,457 10,731 Long-term debt 6,263,947 4,959,516 Other long-term liabilities 5,432 5,454 Total liabilities 7,906,845 6,185,735 Commitments and contingencies (Note 18) Temporary equity Series E preferred stock, $ 0.001 par value, 2,000,000 shares authorized, no shares issued and outstanding at August 31, 2026, and 276,673 shares issued and outstanding at May 31, 2026 — 6,306 Series E-1 preferred stock, $ 0.001 par value, 62,500 shares authorized, 61,831 shares issued and outstanding at August 31, 2026, and 61,909 shares issued and outstanding at May 31, 2026 56,373 56,460 Series G preferred stock, $ 0.001 par value, 1,030,000 shares authorized, 128,750 shares issued and outstanding at August 31, 2026, and no shares issued and outstanding at May 31, 2026 124,929 — Redeemable noncontrolling interest 2,010,873 1,956,303 Stockholders' equity: Common stock, $ 0.001 par value, 600,000,000 shares authorized, 304,232,295 shares issued and 297,066,995 shares outstanding at August 31, 2026, and 295,048,903 shares issued and 287,883,603 shares outstanding at May 31, 2026 305 296 Treasury stock, 7,165,300 shares at August 31, 2026 and 7,165,300 shares at May 31, 2026, at cost ( 52,737 ) ( 52,737 ) Additional paid in capital 2,492,725 2,432,250 Accumulated deficit ( 837,821 ) ( 662,333 ) Total stockholders’ equity attributable to Applied Digital Corporation 1,602,472 1,717,476 Noncontrolling interest 5,684 7,032 Total stockholders’ equity including noncontrolling interest 1,608,156 1,724,508 TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY $ 11,707,176 $ 9,929,312 (1) Includes a related party receivable of $ 59.3 million and $ 58.6 million as of August 31, 2026 and May 31, 2026, respectively. See Note 7 - Related Party Transactions for further discussion. 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 August 31, 2026 August 31, 2025 Revenue: Services and other revenue $ 262,755 $ 80,934 Data center rental and other revenue 79,120 — Total revenue 341,875 80,934 Costs and expenses: Services and other cost of revenue 245,709 58,831 Data center rental and other cost of revenue 43,862 140 Selling, general and administrative (1) 114,683 29,482 Loss on abandonment of assets — 2,243 Total costs and expenses 404,254 90,696 Operating loss ( 62,379 ) ( 9,762 ) Interest expense 77,383 8,013 Interest income (2) ( 35,821 ) ( 857 ) Loss on change in fair value of derivatives 49,511 — Loss on change in fair value of investment 11,352 — Other expense, net 1,311 — Net loss before income tax expense ( 166,115 ) ( 16,918 ) Income tax expense 1,886 8 Net loss from continuing operations ( 168,001 ) ( 16,926 ) Net loss from discontinued operations ( 16,054 ) — Net loss ( 184,055 ) ( 16,926 ) Net loss attributable to noncontrolling interest and redeemable noncontrolling interest ( 51,484 ) — Preferred dividends ( 1,543 ) ( 1,576 ) Net loss attributable to common stockholders $ ( 237,082 ) $ ( 18,502 ) Net loss attributable to common stockholders Continuing operations $ ( 221,028 ) $ ( 18,502 ) Discontinued operations ( 16,054 ) — Net loss attributable to common stockholders $ ( 237,082 ) $ ( 18,502 ) Basic and diluted net loss per share attributable to common stockholders Continuing operations $ ( 0.76 ) $ ( 0.07 ) Discontinued operations ( 0.06 ) — Basic and diluted net loss per share attributable to common stockholders $ ( 0.82 ) $ ( 0.07 ) Basic and diluted weighted average number of shares outstanding 291,557,618 255,892,902 (1) Includes related party selling, general and administrative expense of $ 49.7 thousand and $ 74.3 thousand for the three months ended August 31, 2026 and August 31, 2025, respectively. See Note 7 - Related Party Transactions for further discussion of related party transactions. (2) Includes related party income of $ 0.7 million for the three months ended August 31, 2026. See Note 7 - 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 August 31, 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 Noncontrolling Interest Total Equity Shares Amount Shares Amount Shares Amount Balance, May 31, 2026 338,582 $ 62,766 $ 1,956,303 295,048,903 $ 296 ( 7,165,300 ) $ ( 52,737 ) $ 2,432,250 $ ( 662,333 ) $ 1,717,476 $ 7,032 $ 1,724,508 Issuance of common stock from stock compensation plans — — — 4,730,140 5 — — ( 5 ) — — — — Tax payments for restricted stock upon vesting — — — — — — — ( 99,413 ) — ( 99,413 ) — ( 99,413 ) Issuance of Preferred Stock, net of costs 283,250 274,850 — — — — — — — — — — Conversion of Preferred Stock ( 154,500 ) ( 149,921 ) — 4,453,252 4 — — 149,917 — 149,921 — 149,921 Redemption of Preferred Stock ( 276,751 ) ( 6,393 ) — — — — — ( 603 ) — ( 603 ) — ( 603 ) Preferred Stock dividends — — — — — — — ( 1,543 ) — ( 1,543 ) — ( 1,543 ) Contributions from noncontrolling interest, net of costs — — 1,349 — — — — — — — — — Noncontrolling interest preferred stock dividends — — 60,051 — — — — ( 60,051 ) — ( 60,051 ) — ( 60,051 ) Stock-based compensation — — — — — — — 69,164 — 69,164 — 69,164 Issuance of equity by subsidiary, net of costs — — — — — — — 3,009 — 3,009 389 3,398 Net loss — — ( 6,830 ) — — — — — ( 175,488 ) ( 175,488 ) ( 1,737 ) ( 177,225 ) Balance, August 31, 2026 190,581 $ 181,302 $ 2,010,873 304,232,295 $ 305 ( 7,165,300 ) $ ( 52,737 ) $ 2,492,725 $ ( 837,821 ) $ 1,602,472 $ 5,684 $ 1,608,156 (1) See Note 16 - 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 August 31, 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, 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 — — 897,022 1 — — ( 1 ) — — Tax payments for restricted stock upon vesting — — — — — — ( 4,497 ) — ( 4,497 ) Issuance of Preferred Stock, net of costs 180,000 170,396 — — — — — — — Shares issued in offering, net of costs — — 15,320,373 15 — — 190,406 — 190,421 Conversion of warrants — — 188 — — — 1 — 1 Issuance of warrants, at fair value — — — — — — 121,204 — 121,204 Conversion of Series G ( 258,000 ) ( 242,480 ) 28,165,650 28 — — 242,452 — 242,480 Preferred stock dividends — — — — — — ( 1,576 ) — ( 1,576 ) Preferred stock redemption ( 225 ) ( 225 ) — — — — — — — Stock-based compensation — — — — — — 15,465 — 15,465 Net loss — — — — — — — ( 16,926 ) ( 16,926 ) Balance, August 31, 2025 363,933 $ 63,728 278,584,101 $ 274 ( 9,291,199 ) $ ( 31,400 ) $ 1,573,367 $ ( 497,981 ) $ 1,044,260 (1) See Note 16 - Temporary Equity for further discussion of preferred stock activity. See accompanying notes to the unaudited condensed consolidated financial statements 4 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) For the Three Months ended August 31, 2026 and August 31, 2025 Three Months Ended August 31, 2026 August 31, 2025 CASH FLOW FROM OPERATING ACTIVITIES Net loss $ ( 184,055 ) $ ( 16,926 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 41,912 4,152 Stock-based compensation 66,499 15,465 Lease expense 6,517 5,381 Loss on change in fair value of derivatives 49,511 — Loss on change in fair value of investment 11,352 — Amortization of debt issuance costs 5,896 4,851 Loss on classification of held for sale 14,126 — Loss on abandonment of assets — 2,243 Gain on change in fair value of warrants ( 22 ) — Changes in operating assets and liabilities: Accounts receivable ( 56,977 ) ( 29,525 ) Prepaid expenses and other current assets ( 47,786 ) ( 6,962 ) Customer deposits 107 627 Deferred revenue 34,480 ( 2,316 ) Accounts payable ( 7,981 ) ( 77,784 ) Accrued liabilities 106,701 28,684 Due to customer 1,383 ( 1,753 ) Lease assets and liabilities 5,856 ( 9,598 ) Other current liabilities 1,886 — Other assets 14,516 1,930 CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES 63,921 ( 81,531 ) CASH FLOW FROM INVESTING ACTIVITIES Purchases of property and equipment and other assets ( 2,074,698 ) ( 249,914 ) Investment in companies ( 8,181 ) — CASH FLOW USED IN INVESTING ACTIVITIES ( 2,082,879 ) ( 249,914 ) CASH FLOW FROM FINANCING ACTIVITIES Repayment of finance leases ( 14,252 ) ( 29,932 ) Borrowings of long-term debt 1,648,500 65 Draw on revolver 82,390 — Repayments of long-term debt ( 315,932 ) ( 2,416 ) Payment of deferred financing costs ( 28,879 ) ( 1 ) Tax payments for restricted stock upon vesting ( 99,413 ) ( 4,497 ) Noncontrolling interest issuance contributions 1,349 — Proceeds from issuance of common stock — 196,366 Common stock issuance costs — ( 5,945 ) Proceeds from issuance of preferred stock 274,999 175,000 Preferred stock issuance costs ( 149 ) ( 4,604 ) Redemption of preferred stock ( 6,996 ) ( 225 ) Dividends issued on preferred stock ( 1,543 ) ( 1,576 ) Exercise of warrants — 1 Issuance of equity by subsidiary, net of costs 3,398 — CASH FLOW PROVIDED BY FINANCING ACTIVITIES $ 1,543,472 $ 322,236 NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH $ ( 475,486 ) $ ( 9,209 ) CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD, INCLUDING CASH FROM DISCONTINUED OPERATIONS 4,153,431 123,318 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD, INCLUDING CASH FROM DISCONTINUED OPERATIONS 3,677,945 114,109 Less: CASH, CASH EQUIVALENTS, AND RESTRICTED CASH FROM DISCONTINUED OPERATIONS 2 — CASH, CASH EQUIVALENTS, AND RESTRICTED CASH FROM CONTINUED OPERATIONS $ 3,677,943 $ 114,109 5 APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) For the Three Months ended August 31, 2026 and August 31, 2025 Three Months Ended August 31, 2026 August 31, 2025 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid $ 242,852 $ 9,039 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES Operating right-of-use assets obtained by lease obligation $ 5,497 $ — Finance right-of-use assets obtained by lease obligation $ — $ 3,966 Property and equipment in accounts payable and accrued liabilities $ 142,284 $ 132,113 Conversion of preferred stock to common stock $ 149,921 $ 242,480 Issuance of warrants, at fair value $ — $ 121,204 Non-cash dividends paid in-kind $ 60,051 $ — See accompanying notes to the unaudited condensed consolidated financial statements 6 Table of Contents APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 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 two reportable segments. Financial information for each segment is contained in Note 19 - Business Segments . All references to “Applied Digital Corporation,” “we,” “us,” “our” or the “Company” mean Applied Digital Corporation and its subsidiaries. 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, 2026 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 or entities that meet the definition of a voting interest entity (“VOE”). The Company consolidates a VIE where it has been determined that the Company is the primary beneficiary of the entity's operation in accordance with ASC Topic 810, Consolidations. The primary beneficiary is the party that has both the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. In evaluating whether the Company is the primary beneficiary, the Company evaluates its power to direct the most significant activities of the VIE by considering the purpose and design of the entity and the risks the entity was designed to create and pass through to its variable interest holders. The Company also evaluates its economic interests in the VIE. See Note 12 - Variable Interest Entities for additional information related to the consolidation of investments. Intercompany accounts and transactions have been eliminated. The Company consolidates the results of ChronoScale Holdings Corporation, the Company’s majority owned subsidiary (“ChronoScale”) under the voting interest model because the Company holds a controlling financial interest in ChronoScale. The ownership interests in ChronoScale not attributable to the Company are presented as noncontrolling interests in the unaudited condensed consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. 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, 2026 filed with the SEC on July 29, 2026. 2. Significant Accounting Policies There have been no material changes to the Company’s significant accounting policies included in the Annual Report on Form 10-K for the year ended May 31, 2026, except as disclosed herein. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“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. On an on-going basis, the Company evaluates its estimates, including those related to stock-based compensation, specifically the likelihood of timing and achievement of performance conditions to its performance stock units, contingencies, and those related to the fair value of warrants and the fair value of the 7 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 redeemable noncontrolling interest. Although these estimates are based on historical facts and various other assumptions that the Company believes are reasonable, actual results could differ from those estimates. Revenue Recognition ChronoScale Revenue Revenue associated with ChronoScale is accounted for under ASC 606. ChronoScale, a VOE consolidated by the Company in accordance with ASC 810, 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 ChronoScale in exchange for managed cloud services supported by provided equipment. Revenues are recognized based on the fixed rate, net of any credits for non-performance, over the term of the agreements. During the three months ended August 31, 2026, the Company also completed certain one-time resale arrangements involving AI infrastructure, or GPU-related, hardware and ancillary support and maintenance services. Revenues from GPU hardware sales were recognized at a point-in-time, generally when control of the hardware transferred to the customer. Revenues from the related support and maintenance services were recognized on a net basis at a point-in-time, as the Company acted as an agent in the selling arrangement. Segments The Company has identified two reportable segments: data center hosting (“Data Center Hosting Business”) and high-performance compute hosting (“HPC Hosting Business”). These segments represent management's view of the business for which separate financial information is available and evaluated regularly by the Chief Operating Decision Maker (CODM), which is the Company’s Chief Executive Officer. Prior to the May 2026 business combination transaction (“Business Combination”) with Ekso Bionics Holdings, Inc., the Company identified its cloud services business operated through the Company’s wholly owned subsidiary Applied Digital Cloud Corporation (the “Cloud Services Business”) as a reportable segment. Following the transaction, pursuant to which the Cloud Services Business was contributed to Ekso Bionics Holdings, Inc. and became part of ChronoScale, ChronoScale is consolidated into the Company's financial statements; however, it is no longer identified by the Company as an operating or reportable segment because its activities are managed by a separate management team and its operating results are not regularly reviewed by the Company's CODM for purposes of resource allocation and performance assessment. 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 services and other cost of revenue, data center rental and other cost of revenue, and selling, general, and administrative expenses. The Company does not allocate interest expense, interest income, loss on change in fair value of derivatives, loss on change in fair value of investment, other expense, net or income tax expense to these segments for internal reporting purposes, as the Company does not believe that allocating these expenses is beneficial in evaluating segment performance. The Data Center Hosting Business operates data centers to provide energized space to crypto mining customers. Customer-owned hardware is installed in the Company’s facilities and the Company provides operational and maintenance services for a fixed fee. The HPC Hosting Business designs, constructs, and operates next-generation data centers, which are designed to provide massive computing power and support HPC applications within a cost-effective model. 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, 2026, as filed with the SEC, for additional information regarding the Company’s significant accounting policies and use of estimates. Reclassifications During the quarter ended August 31, 2025, the Cloud Services Business was presented as discontinued operations and held for sale. However, during the quarter ended February 28, 2026, the Company determined that the Cloud Services Business 8 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 no longer qualified for held-for-sale and discontinued operations accounting as a result of entering into the Contribution and Exchange Agreement with Ekso Bionics Holdings, Inc. ("Ekso") pursuant to which the Cloud Services Business became a wholly owned subsidiary of Ekso. As a result, the Cloud Services Business was reclassified to continuing operations, with its assets and liabilities returned to their respective held-and-used balance sheet line items and prior-period financial statements retrospectively revised to reflect this presentation. The Company has revised the presentation of revenue and cost of revenue within the unaudited condensed consolidated statements of operations to separately present services and other revenue and cost of revenue and data center rental and other revenue and cost of revenue. Prior period amounts have been reclassified to conform to the current period presentation. These presentation changes had no impact on previously reported total revenue, total cost of revenue, or net loss. During the quarter ended August 31, 2026, the Company has separately presented interest expense and interest income in its unaudited condensed consolidated statements of operations as the individual amounts are material. Prior period amounts have been reclassified to conform to the current period presentation. These presentation changes had no impact on previously reported net loss. Cash, Cash Equivalents, and Restricted Cash The Company’s restricted cash balances consist of debt service reserves and letters of credit secured by cash. The debt service reserves are held in separate accounts and are to be used to fund interest and principal on senior secured notes during construction. See further discussion in Note 9 - Debt. These balances are held in a combination of money market funds and demand deposit accounts, each of which the Company considers 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 August 31, 2026 and May 31, 2026 were as follows (in thousands): August 31, 2026 May 31, 2026 Cash and cash equivalents $ 2,949,909 $ 1,591,988 Restricted cash 313,385 2,381,027 Restricted cash included in other assets 414,649 180,415 Total cash, cash equivalents, and restricted cash $ 3,677,943 $ 4,153,430 Assets Held For Sale The Company generally considers assets to be held for sale when the following criteria are met: (i) management commits to a plan to sell the property, (ii) the property is available for sale immediately, (iii) management has initiated an active program to locate a buyer or buyers and other actions required to complete the plan to sell the disposal group, (iv) the sale of the property within one year is considered probable, (v) the property is actively being marketed for sale at a price that is reasonable in relation to its current fair value and (vi) significant changes to the plan to sell are not expected. Property classified as held for sale is no longer depreciated and is reported at the lower of its carrying value or its estimated fair value less estimated costs to sell in accordance with ASC 360, Property, Plant and Equipment - Impairment or Disposal of Long-Lived Assets . As of August 31, 2026, the Ekso business at ChronoScale met the held for sale criteria and was classified as such on the unaudited condensed consolidated balance sheet (see Note 6 - Discontinued Operations ) as well as $ 14.4 million of certain corporate assets. The sale of the Ekso business was completed on September 30, 2026. Refer to Note 21 - Subsequent Events for additional information regarding the sale of the Ekso business. Discontinued Operations The Company deems it appropriate to classify a business as a discontinued operation if the related disposal group meets all the following criteria: (i) the disposal group is a component of the Company, (ii) the component meets the held-for-sale criteria, and (iii) the disposal of the component represents a strategic shift that has a major effect on the Company's operations and financial results. As of August 31, 2026, the Ekso business at ChronoScale was deemed to be discontinued 9 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 operations due to meeting all three criteria (see Note 6 - Discontinued Operations ). The sale of the Ekso business was completed on September 30, 2026. Refer to Note 21 - Subsequent Events for additional information regarding the sale of the Ekso business. Recent Accounting Pronouncements 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 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 reporting periods. The Company is currently evaluating the impact the adoption of ASU 2025-12 may have on the Company’s consolidated financial statements and plans to adopt this pronouncement beginning with its fiscal year beginning June 1, 2027. In April 2026, the FASB issued ASU 2026‑01, Equity (Topic 505): Initial Measurement of Paid‑in‑Kind Dividends on Equity‑Classified Preferred Stock. The ASU provides guidance on the initial measurement of paid‑in‑kind (“PIK”) dividends on equity‑classified preferred stock and does not affect the timing of dividend recognition. The amendment is effective for fiscal years beginning after December 15, 2026, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU may have on the Company's consolidated financial statements and plans to adopt this pronouncement beginning with its fiscal year beginning June 1, 2027. 10 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 3. Business Combination On May 5, 2026, the Company, through APLD ChronoScale HoldCo LLC, a wholly owned subsidiary, (“Contributor”), completed the Business Combination pursuant to which Contributor contributed 100 % of the equity interests of Applied Digital Cloud (“Cloud”) to Ekso Bionics Holdings, Inc. (“Ekso”), a publicly traded company, in exchange for shares of Ekso common stock (the "May 2026 transaction"). Although Ekso was the legal acquirer, Cloud was identified as the accounting acquirer and the transaction was accounted for as a reverse acquisition under ASC 805, Business Combinations . Following the closing of the transaction, Ekso was renamed ChronoScale Corporation. As a result of the transaction, at closing, the Company owned approximately 97 % of ChronoScale’s outstanding common stock, and legacy Ekso shareholders retained approximately 3 % (before giving effect to any dilution from new investments) which represents a noncontrolling interest in ChronoScale. As of August 31, 2026, the Company owns approximately 96 % of ChronoScale’s outstanding common stock. As the transaction was accounted for as a reverse acquisition, the consideration transferred was measured based on the number of equity interests Cloud would have had to issue to provide legacy Ekso shareholders with the same percentage ownership interest in the combined company that resulted from the transaction. The fair value of the consideration transferred was approximately $ 57.6 million, based on 4,357,026 equity interests valued at Ekso's closing share price of $ 13.22 per share on the acquisition date. The consideration was entirely in the form of equity. 11 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition date: Cash and cash equivalents $ 13,492 Accounts receivable, net of allowance for doubtful accounts 4,125 Inventory 4,562 Prepaid expenses 1,150 Property and equipment, net 1,086 Operating lease right-of-use assets, net 315 Intangible assets, net 10,950 Other assets 369 Total assets acquired $ 36,049 Accounts payable $ ( 281 ) Accrued expenses ( 5,055 ) Deferred revenues ( 1,400 ) Operating lease liabilities ( 321 ) Debt, current ( 3,346 ) Deferred revenues non-current ( 1,288 ) Debt, non-current ( 464 ) Operating lease liabilities, non-current ( 114 ) Other non-current liabilities ( 3,305 ) Total liabilities assumed $ ( 15,574 ) Total identifiable net assets $ 20,475 Less: Cash acquired through PIPE (defined below) ( 15,000 ) Fair value of net assets acquired 5,475 Less: Impairment for assets held for sale (see Note 6 - Discontinued Operations ) 2,365 Fair value less costs to sell $ 3,110 Total consideration transferred $ 57,623 Less: Fair value less costs to sell 3,110 Goodwill $ 54,513 The fair value of acquired accounts receivable was approximately $ 4.1 million as of the acquisition date. ChronoScale expects to collect substantially all acquired receivables. The fair value of acquired intangible assets consists of Ekso's developed technology and trade name. The valuations of the developed technology and trade name were performed by a third-party valuation specialist using the relief-from-royalty method. Refer to Note 6 - Discontinued Operations — Loss on Impairment of Net Assets Held for Sal e for information regarding ChronoScale’s impairment loss of its net assets held for sale for the three months ended August 31, 2026. In connection with the transaction, ChronoScale arranged a private investment in public equity (“PIPE”), which refers to a private placement of ChronoScale’s equity to select investors concurrent with closing. Pursuant to the PIPE Agreement, ChronoScale agreed to issue and sell 1,311,407 shares of its common stock to Contributor at a price of $ 12.01 per share, resulting in aggregate gross proceeds of approximately $ 15.7 million with $ 0.8 million in offering costs. The Business Combination resulted in the recognition of goodwill of approximately $ 54.5 million, which is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired. The goodwill is primarily attributed to the expected operational synergies, assembled workforce, public company platform benefits, and 12 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 other intangible benefits that do not qualify for separate recognition. The goodwill was assigned to ChronoScale, which was expected to benefit from the synergies of the acquisition. As of May 31, 2026, ChronoScale was not a separate reportable segment under ASC 280, although the Cloud Business had previously been presented as a reportable segment. The assigned goodwill is included within the reporting unit used for goodwill impairment testing. The Company expects that $ 0.5 million of goodwill will be deductible for tax purposes. As the fair value of the acquired assets and assumed liabilities are subject to change during the measurement period, up to one year from the acquisition date, ChronoScale recorded a measurement adjustment which reduced goodwill by approximately $ 0.1 million to approximately $ 54.4 million. The acquisition-date fair value of the noncontrolling interest was approximately $ 4.6 million, based on the equity interests retained by legacy Ekso shareholders and Ekso's closing share price of $ 13.22 per share on the acquisition date. The noncontrolling interest is presented as a separate component of permanent equity in the Company’s consolidated balance sheet. Acquisition-related costs in connection with the transaction, including legal, accounting, valuation, and other professional fees of $ 5.3 million were expensed as incurred and are not included as a component of consideration transferred. The following unaudited pro forma financial information presents the combined results of operations as if the acquisition had occurred on June 1, 2025. The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had occurred as of that date, nor is it intended to project future results. Three Months Ended August 31, 2025 Pro forma revenue $ 82,991 Pro forma net loss $ ( 19,635 ) The unaudited pro forma results include adjustments directly attributable to the acquisition, including amortization of acquired intangible assets and the related income tax effects. No additional earnings per share impacts were identified other than the impact of amortization of acquired intangible assets. 13 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 4. Property and Equipment Property and equipment consisted of the following as of August 31, 2026 and May 31, 2026 (in thousands): Estimated Useful Life August 31, 2026 May 31, 2026 Networking equipment, electrical equipment, and software 3 years - 5 years $ 40,425 $ 38,669 Mechanical infrastructure 20 years 194,896 71,939 Electrical infrastructure 15 years 237,495 104,491 Electric generation and transformers 15 years - 30 years 344,021 188,110 Land and building Building 39 years 471,239 279,308 Building improvements 15 years - 25 years 1,085,386 682,348 Land 150,363 59,713 Land improvements 15 years 109,095 43,786 Leasehold improvements 3 years - 7 years 1,142 1,142 Construction in progress 3,670,267 2,776,232 Other equipment and fixtures 5 years - 10 years 132,918 68,128 Total cost of property and equipment 6,437,247 4,313,866 Accumulated depreciation ( 106,836 ) ( 77,566 ) Property and equipment, net $ 6,330,411 $ 4,236,300 Depreciation expense totaled $ 29.3 million and $ 2.7 million for the three months ended August 31, 2026 and August 31, 2025, respectively. The Company capitalizes a portion of the interest on funds borrowed to finance its capital expenditures. Capitalized interest is recorded as part of an asset’s cost and is depreciated over the same period as the related asset. Capitalized interest costs were $ 35.7 million and $ 8.7 million for the three months ended August 31, 2026 and August 31, 2025, respectively. 5. Revenue Below is a summary of the Company’s revenue concentration by major customers for the three months ended August 31, 2026 and August 31, 2025, respectively. Three Months Ended August 31, 2026 August 31, 2025 Customer A 56 % 32 % Customer B 21 % — % Customer C 11 % 47 % Customer D — % 21 % The Company’s contract liabilities consist of deferred revenue that arises when the Company receives consideration in advance of providing the goods or services provided in the contract. As of August 31, 2026 and May 31, 2026, the Company recorded $ 39.3 million and $ 4.7 million, respectively, of deferred revenue primarily related to advance billings for tenant fit-out services and the delivery of power. The Company classified deferred revenue based on the timing of when it expect to recognize revenue, which typically occurs within a short window after period-end. The full balance of deferred revenue at May 31, 2026 and May 31, 2025 was recognized as revenue during the three months ended August 31, 2026 and August 31, 2025, respectively. Further, the contract assets consist of unbilled receivables that are recorded when revenue is recognized in advance of billings to its customers. These amounts are primarily associated with difference between the revenue recognized under ASC 842 and billings per the lease agreement as well as the receivable arising from tenant fit-out services. The contract 14 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 assets balance was $ 103.1 million and $ 43.1 million as of August 31, 2026 and May 31, 2026, respectively, and is included in “accounts receivable, net” and “other assets” in the unaudited condensed consolidated balance sheet. Customer Deposits Changes in the Company's customer deposits balances for the three months ended August 31, 2026 and August 31, 2025, respectively, are shown in the following table (in thousands): Three Months Ended August 31, 2026 August 31, 2025 Balance, beginning of period $ 16,752 $ 16,125 Customer deposits received — 627 Customer deposits refunded — — Customer deposits applied — — Balance, end of period $ 16,752 $ 16,752 6. Discontinued Operations During the year ended May 31, 2026, the Board of Directors of ChronoScale committed to a plan to divest its wholly owned subsidiary, Ekso Bionics, Inc., a Delaware corporation (“Ekso”), and to focus ChronoScale's operations solely on its Cloud Services Business. As such, legacy Ekso met the criteria to be classified as "held for sale" on the unaudited condensed consolidated balance sheets. Therefore, upon consolidation, the Company reported Ekso's operations as discontinued operations in its unaudited condensed consolidated statements of operations for the three months ended August 31, 2026 in accordance with ASC 205-20, Discontinued Operations. The sale of the Ekso business was completed on September 30, 2026. Refer to Note 21 - Subsequent Events for additional information regarding the sale of the Ekso business. The financial results of Ekso are presented as net loss from discontinued operations on the unaudited condensed consolidated statements of operations. The following table presents the major components of the financial results of Ekso for the periods presented (in thousands): Three Months Ended August 31, 2026 Revenue $ 2,597 Cost of revenues 1,289 Selling, general and administrative 17,366 Operating loss from discontinued operations ( 16,058 ) Interest expense ( 4 ) Net loss from discontinued operations before income tax expense ( 16,054 ) Income tax expense — Net loss from discontinued operations $ ( 16,054 ) 15 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 As of August 31, 2026, the assets and liabilities of Ekso are classified as current in the unaudited condensed consolidated balance sheets, as it is probable that the sale will occur within one year. The following table represents the aggregated carrying amounts of classes of assets and liabilities that are classified as held for sale on the unaudited condensed consolidated balance sheets for the periods presented (in thousands): August 31, 2026 May 31, 2026 Assets: Cash and cash equivalents $ 2 $ 2 Accounts receivable 3,090 3,914 Prepaid expenses and other current assets 5,659 5,604 Property and equipment, net 1,069 1,084 Operating lease right of use asset, net 284 284 Intangible assets 10,950 10,950 Other assets 425 368 Less: Impairment on assets held for sale $ ( 16,491 ) $ ( 2,365 ) Total current assets held for sale $ 4,988 $ 19,841 Liabilities: Accounts payable $ 360 $ 263 Accrued liabilities 1,859 4,205 Current portion of operating lease liability 191 290 Deferred revenue 2,493 2,563 Long-term portion of operating lease liability 86 105 Total current liabilities held for sale $ 4,988 $ 7,426 Loss on Impairment of Net Assets Held for Sale In connection with the classification of the Ekso business as held for sale and discontinued operations, the Company evaluated the Ekso business for impairment as of August 31, 2026, in accordance with ASC 360-10, Impairment and Disposal of Long-Lived Assets. The Ekso business was measured at the lower of its carrying amount and fair value less cost to sell. During the first and second quarters of fiscal year 2027, the Company continued to market the Ekso business and advance negotiations with prospective buyers. The disposal of the Ekso business was completed on September 30, 2026. As of August 31, 2026, the Ekso business consisted of approximately $ 21.5 million of assets and $ 5.0 million of liabilities, resulting in net assets of $ 16.5 million. The Company estimated the fair value of the Ekso business to be $ 1.5 million. After deducting $ 2.6 million of estimated incremental costs to sell the Ekso business, the Company determined that the fair value less costs to sell resulted in a negative value of $ 1.1 million. The fair value less costs to sell used for measuring the Ekso business under ASC 360-10 is floored at $ 0 , and as a result, the remaining $ 1.1 million of estimated costs to sell Ekso is not included in this initial impairment calculation and will be recognized as period expenses when incurred. As the Ekso business’s carrying amount of $ 16.5 million exceeded its estimated fair value less costs to sell, the Company recognized an impairment loss of $ 14.1 million as of August 31, 2026. The impairment loss was recognized through a valuation allowance and was not allocated to the individual classes of assets held for sale. The impairment loss is included in net loss from discontinued operations in the unaudited condensed consolidated statement of operations for the three months ended August 31, 2026. The related valuation allowance is presented as valuation allowance for impairment loss on the unaudited condensed consolidated balance sheet as of August 31, 2026. 16 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 Following the closing of the sale of the Ekso business, the Company does not expect further material impairment losses related to the Ekso business as of the date of this Quarterly Report on Form 10-Q. The Company determined that no impairment of goodwill, which was assigned to ChronoScale as discussed in Note 3 - Business Combination , existed for the three months ended August 31, 2026. The following table summarizes the net cash flows from discontinued operations of Ekso for the three months ended August 31, 2026 (in thousands): Three Months Ended August 31, 2026 Net cash used in operating activities - discontinued operations $ ( 1,257 ) Net cash used in investing activities - discontinued operations $ 15 7. Related Party Transactions Base Electron In the prior year, the Company and Base Electron Corporation (“Base Electron”) entered into the Intercompany Administrative Services Agreement (the "Intercompany Agreement"). The amount of services provided during the three months ended August 31, 2026 were approximately $ 0.1 million. In the prior fiscal year, Base Electron issued to the Company approximately 10 % of Base Electron’s outstanding equity. The investment in Base Electron is 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 three months ended August 31, 2026. As of August 31, 2026, the Company determined the fair value of the investment was $ 2.0 million, which is recorded as an Other asset on the unaudited condensed consolidated balance sheets. Base Electron Demand Grid Promissory Note In the prior fiscal year, Base Electron entered into a promissory note with the Company (“Demand Grid Promissory Note”) for up to $ 100.0 million which is payable on-demand. As of August 31, 2026, the principal balance of the Demand Grid Promissory Note was $ 58.5 million, which was recorded as a related party loan receivable and presented within Prepaid expense and other current assets on the unaudited condensed consolidated balance sheets. During the three months ended August 31, 2026, approximately $ 0.7 million of interest income was recognized. Further, no allowance for credit loss and no credit loss expense have been recognized for the three months ended August 31, 2026, and receivables are presented at their gross amount, which approximates the net amount expected to be collected. 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 $ 49.7 thousand and $ 74.3 thousand during the three months ended August 31, 2026 and 2025, respectively, which were incurred with a company whose chairman is also a member of the Company’s Board of Directors. 17 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 8. Fair Value Measurements There have been no significant changes to the Company’s valuation techniques or fair value measurement policies from those disclosed in the Company’s Annual Report on Form 10-K for the year ended May 31, 2026. The carrying amounts of cash and cash equivalents including notice deposits and certificate of deposits, restricted cash, accounts receivable, accounts payable, accrued liabilities, customer deposits, amounts due to customers and other short-term financial instruments approximate their fair values principally due to their short-term maturities. The following table presents the Company’s financial assets, presented in the unaudited condensed consolidated balance sheets within Other assets, measured at fair value on a recurring basis (in thousands): August 31, 2026 May 31, 2026 Assets: Fair Value Hierarchy Fair Value Fair Value Equity investments Level 1 $ 7,846 $ 19,198 Derivative instruments: Derivative associated with Redeemable preferred shares Level 3 169,837 163,283 B&W warrants Level 3 34,727 90,793 Total assets measured at fair value $ 212,410 $ 273,274 Our investments in equity securities with readily determinable fair values are measured at fair value using quoted market prices and, therefore, are classified within Level 1 of the fair value hierarchy. Our investments in equity securities without readily determinable fair values are accounted for at cost under ASC 321 and are evaluated quarterly for impairment indicators. There were no impairment indicators during the quarter for these investments. Refer to Note 11 - Derivative Assets for a discussion of the valuation assumptions and inputs used in measuring the Company’s derivative instruments and Note 9 - Debt for a discussion of the fair value measurement of the Company’s debt. 9. Debt The Company’s outstanding debt consisted of the following components (in thousands): Interest Rate Maturity Date August 31, 2026 May 31, 2026 2030 9.250 % Senior Secured Notes (1) 9.25 % December 2030 $ 2,350,000 $ 2,350,000 2031 6.750 % Senior Secured Notes (2) 6.75 % March 2031 2,150,000 2,150,000 2031 7.000 % Senior Secured Notes 7.00 % June 2031 1,590,000 — Convertible Notes, senior unsecured (3) 2.75 % June 2030 450,000 450,000 Bridge Facility (4) See below April 2027 — 300,000 2026 Revolving Credit Facility (5) See below See below 82,390 — Other debt (6) 99,215 56,680 Deferred financing costs, net of amortization ( 345,013 ) ( 330,742 ) Less: Current portion of debt ( 112,645 ) ( 16,422 ) Long-term debt, net $ 6,263,947 $ 4,959,516 (1) The 2030 9.250 % Senior Secured Notes are guaranteed by APLD ELN-02 HoldCo LLC, APLD ELN-03 HoldCo LLC, APLD ELN-02 LLC, APLD ELN-03 LLC, APLD ELN-02 LandCo LLC and APLD ELN-03 LandCo LLC, each a majority-owned subsidiary of the Company, and are secured by the equity interests of the issuer and guarantors, the Project Accounts (as defined in the 2030 Notes Indenture), and substantially all of the assets of the issuer and guarantors. (2) The 6.750 % 2031 Senior Secured Notes are guaranteed by APLD FAR-01 HoldCo LLC, APLD FAR-02 HoldCo LLC, APLD FAR-01 LLC, APLD FAR-02 LLC, APLD FAR-01 LandCo LLC and APLD FAR-02 LandCo LLC, each majority-owned subsidiaries of the Company, and are secured by the equity interests of the issuer and guarantors, the 18 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 Project Accounts (as defined in the 2031 6.750 % Notes Indenture), and substantially all of the assets of the issuer and guarantors. (3) The net carrying amount of the Convertible Notes was $ 276.6 million and $ 276.0 million and the remaining unamortized deferred financing costs related to the issuance was $ 173.4 million and $ 174.0 million, each as of August 31, 2026 and May 31, 2026, respectively. (4) The Bridge Facility is guaranteed by the wholly owned subsidiaries of APLD ComputeCo 3 LLC and by the Company and is secured by substantially all assets of APLD ComputeCo 3 LLC and the subsidiary guarantors, as well as a pledge of the equity interests of APLD ComputeCo 3 LLC by APLD HPC Holdings 2 LLC. The Bridge Facility bears interest at a rate equal to either Daily SOFR plus 2.75 % per annum or the Base Rate plus 1.75 % per annum, depending on the type of loans under any Borrowing. (5) The 2026 Revolving Credit Facility is guaranteed by the Company, APLD Intermediate HoldCo LLC (as the borrower), Applied Talent Resources LLC, James River Housing LLC, APLD Holdings 1 LLC, APLD Holdings 2 LLC, APLD HPC TopCo LLC, and APLD HPC Holdings LLC and is secured by substantially all assets of the loan parties, subject to certain exclusions. The 2026 Revolving Credit Facility bears interest at a rate per annum equal to, at the borrower’s election, either Term SOFR plus 2.25 % or the Alternate Base Rate plus 1.25 %. Additionally, there is an unused commitment fee of 0.25 % per annum based on the daily unused amount, payable quarterly in arrears at the end of each quarter. The 2026 Revolving Credit Facility matures on the earlier of (i) May 29, 2029 and (ii) the date that is ninety-one ( 91 ) days prior to a specified date under the Preferred Equity Purchase Agreement. (6) Other debt as of August 31, 2026 includes three secured terms loans totaling $ 19.2 million (previously disclosed in our Annual Report on Form 10-K for the year ended May 31, 2026), as well as two promissory notes the Company entered into during the second fiscal quarter of 2026 for a total of approximately $ 18.5 million and the Texas Capital Note entered into during the current quarter for $ 58.5 million (as defined and discussed below). As of May 31, 2026, the balance includes the three secured term loans and two promissory notes referenced above, as well as $ 12.0 million of proceeds from the issuance of two SAFE agreements, classified as liabilities, which were repaid during the three months ended August 31, 2026 (as discussed below). Below is the weighted-average interest rate for the Company's term loans: August 31, 2026 August 31, 2025 Weighted-average interest rate 7.3 % 7.1 % Remaining Principal Payments Below is a summary of the remaining principal payments due over the life of the term loans as of August 31, 2026 (in thousands): FY27 $ 108,739 FY28 221,545 FY29 341,453 FY30 354,294 FY31 4,256,666 Thereafter 1,438,908 Total $ 6,721,605 Debt Fair Value Measurements The carrying value of the Company's variable rate borrowings approximate fair value at August 31, 2026 and May 31, 2026, as applicable, each balance sheet date due to the variable nature of the interest rates and the short period between interest rate resets. Further, the Company determined that the estimated fair values of the Promissory Note approximated their respective carrying amounts based on the relatively short period of time since the business combination acquisition date, the continued accretion of acquisition-date fair value adjustments through the effective interest method, and the 19 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 absence of significant changes in the underlying economics, contractual terms, or assumptions that would materially impact the estimated fair values of the instruments since the acquisition date. The Company has determined the fair value of its 2030 Senior Secured Notes, 2031 Senior Secured Notes and 2031 7 % Senior Secured Notes to be approximately $ 2.5 billion, $ 2.0 billion and $ 1.5 billion, respectively, as of August 31, 2026 using level 2 inputs. The Company has determined the fair value of its 2030 Senior Secured Notes and the 2031 Senior Secured Notes to be approximately $ 2.5 billion and $ 2.2 billion, respectively, as of May 31, 2026 using level 2 inputs. The Company has determined the fair value of its fixed rate term loans to be $ 18.4 million and $ 22.4 million, in aggregate, as of August 31, 2026 and May 31, 2026, respectively, based on discounted cash flow analysis, which uses Level 3 inputs. The Company has determined the fair value of its Convertible Notes, senior unsecured to be $ 399.1 million and $ 392.9 million as of August 31, 2026 and May 31, 2026, respectively, based on discounted cash flow analysis, which uses Level 3 inputs. Cloud SAFE Payoff During the fiscal year ended May 31, 2025, the Company entered into two Simple Agreements for Future Equity (“SAFEs”) with an investor for equity in Applied Digital Cloud Corporation, which was, at that time, a wholly-owned subsidiary, for aggregate proceeds of $ 12.0 million. On June 2, 2026, following an agreement reached with the investor, the Company paid off all amounts outstanding under the SAFEs, totaling $ 13.3 million. During the three months ended August 31, 2026, the Company recorded a loss of $ 1.3 million, which is included within other expense, net within the unaudited condensed consolidated statement of operations. 7.000 % Senior Secured Notes due 2031 On June 16, 2026, the Company’s subsidiary APLD ComputeCo 3 LLC (“APLD ComputeCo 3”) completed a private offering of 7.000 % Senior Secured Notes due 2031 (the “2031 7.000 % Notes”). The 2031 7.000 % Notes were sold pursuant to the terms of a purchase agreement, dated as of June 9, 2026, entered into by and among APLD ComputeCo 3, the subsidiary guarantors thereto and Goldman Sachs & Co. LLC, as 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 $ 1.59 billion. The 2031 7.000 % Notes were issued at a price equal to 100 % of their aggregate principal amount. APLD ComputeCo 3 used or intends to use the net proceeds from the offering to fund the construction and associated expenses of its ELN-04 data center project, repay in full the outstanding borrowings and related amounts under its then existing bridge facility, fund debt service reserves and interest during construction, and pay transaction and operating expenses. Also on June 16, 2026, APLD ComputeCo 3, its direct parent and the subsidiary guarantors entered into an indenture for the 2031 7.000 % Notes (the “2031 7.000 % Notes Indenture”) with Wilmington Trust, National Association, as trustee (the “Trustee”) and collateral agent (the “Collateral Agent”), governing the 2031 7.000 % Notes. The 2031 7.000 % Notes are senior secured obligations of APLD ComputeCo 3 and bear interest at a rate of 7.000 % per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2026. The 2031 7.000 % Notes will mature on June 15, 2031, unless earlier redeemed or repurchased in accordance with their terms. The principal amount of the 2031 7.000 % Notes will amortize on a semi-annual basis beginning after the final commencement date of the applicable data center leases in effect on the issue date. The initial annual amortization amount will equal 2.70 % of the original aggregate principal amount of the 2031 7.000 % Notes and will increase by 0.50 % per annum on each anniversary of the issue date commencing after the first installment is due, subject to adjustment as set forth in the 2031 7.000 % Notes Indenture. On or after June 15, 2028, APLD ComputeCo 3 may redeem the 2031 7.000 % Notes at its option, in whole at any time or in part from time to time, at the redemption prices set forth in the 2031 7.000 % Notes Indenture. Prior to June 15, 2028, APLD ComputeCo 3 may redeem the 2031 7.000 % 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 redeemed, plus an applicable “make-whole” premium and accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, prior to June 15, 2028, APLD ComputeCo 3 may redeem up to 40 % of the aggregate principal amount of the 2031 7.000 % Notes with the proceeds of 20 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 certain equity offerings at the redemption price set forth in the 2031 7.000 % Notes Indenture, plus accrued and unpaid interest, , to, but excluding, the redemption date, subject to the conditions set forth in the 2031 7.000 % Notes Indenture. Prior to June 15, 2028, APLD ComputeCo 3 may also redeem up to 10 % of the original aggregate principal amount of the 2031 7.000 % Notes during each calendar year at the redemption price set forth in the 2031 7.000 % Notes Indenture, plus accrued and unpaid interest, to, but excluding, the redemption date. The 2031 7.000 % Notes Indenture limits the ability of APLD ComputeCo 3 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 leaseback transactions; (vii) conduct certain operations or hold certain assets outside their permitted businesses; (viii) engage in certain transactions with affiliates; and (ix) merge, consolidate or transfer or sell all or substantially all of their assets. These covenants are subject to a number of important qualifications and exceptions as set forth in the 2031 7.000 % Notes Indenture. Additionally, upon the occurrence of specified change of control events, APLD ComputeCo 3 must offer to repurchase the 2031 7.000 % Notes at 101 % of the aggregate principal amount, plus accrued and unpaid interest, if any, to, but excluding, the purchase date. Upon receipt of certain termination fees under an applicable data center lease, APLD ComputeCo 3 generally will be required to apply the proceeds to redeem the 2031 7.000 % Notes at 100 % of the principal amount, plus accrued and unpaid interest, to, but excluding, the redemption date, subject to the permitted deferral and replacement tenant provisions set forth in the 2031 7.000 % Notes Indenture. The 2031 7.000 % Notes Indenture also provides for customary events of default. The 2031 7.000 % Notes are fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by APLD ComputeCo 3’s subsidiaries, including APLD ELN-04 HoldCo LLC, APLD ELN-04 LLC and APLD ELN-04 LandCo LLC. The 2031 7.000 % Notes and the related guarantees are secured, subject to permitted liens and certain exclusions, by first-priority liens on substantially all of the assets of APLD ComputeCo 3 and the subsidiary guarantors, including the applicable project accounts, and by a pledge of the equity interests of APLD ComputeCo 3 held by its direct parent. In connection with the 2031 7.000 % Notes, the Company provides a customary completion guarantee with respect to the construction and completion of the ELN-04 data center project. Other than the completion guarantee, the Company is not a guarantor of any obligations under the 2031 7.000 % Notes. As of August 31, 2026, the remaining unamortized debt issuance costs were approximately $ 28.7 million. The debt issuance costs are presented as a direct deduction from the outstanding principal balance of the 2031 7.000 % Notes and are amortized to interest expense using the effective interest method. Satisfaction of Escrow Release Condition for 6.750 % Senior Secured Notes due 2031 On June 18, 2026, APLD ComputeCo 2 LLC satisfied the escrow release condition under the escrow agreement for the 6.750 % Senior Secured Notes due 2031 (the “2031 6.750 % Notes”) and executed and delivered to the escrow agent an escrow release certificate directing the escrow agent to release the funds in the escrow account to APLD ComputeCo 2 and apply such funds in accordance with the escrow agreement and the Indenture for the 2031 6.750 % Notes. Upsize 2026 Revolving Credit Facility On June 26, 2026, the commitments under the 2026 Revolving Credit Facility were increased by $ 80.0 million, from $ 350.0 million to $ 430.0 million. Following the increase, the remaining accordion capacity under the facility was $ 120.0 million. The additional commitments are subject to the existing terms and conditions of the 2026 Revolving Credit Facility. As of August 31, 2026, approximately $ 82.4 million was drawn under the 2026 Revolving Credit Facility and approximately $ 241.0 million of standby letters of credit were outstanding under the 2026 Revolving Credit Facility. 21 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 Loan and Security Agreement On June 30, 2026, the Company entered into a Loan and Security Agreement (the “Texas Capital Loan Agreement”) with Texas Capital Bank (“Texas Capital”) and issued a related promissory note in the stated principal amount of $ 58.5 million (the “Texas Capital Note”). The Texas Capital Note bears interest at a rate per annum equal to one-month Term SOFR plus 2.75 % and matures on June 30, 2031. The Texas Capital Note is secured by certain corporate assets. The Texas Capital Loan Agreement requires the Company to maintain a specified level of liquidity based, in part, on the Company’s market capitalization and requires the Company’s market capitalization to remain above $ 2.0 billion as of the close of any trading day. The Texas Capital Loan Agreement also contains customary affirmative and negative covenants, cross-default provisions, and events of default. The Company was in compliance with the applicable financial covenants under all outstanding debt arrangements as of August 31, 2026. 10. Balance Sheet Components Certain balance sheet components are as follows (in thousands): August 31, 2026 May 31, 2026 Prepaid expenses and other current assets Short term equipment and utility deposit $ 560,523 $ 500,290 Deferred issuance costs 2,966 3,397 Short term lease incentive 8,543 6,231 Related party receivable (1) 59,334 58,632 Prepaid expenses 29,641 24,471 Other current assets 24,631 20,671 Total Prepaid expenses and other current assets $ 685,638 $ 613,692 (1) Balance as of August 31, 2026 consists of the $ 59.2 million promissory note and $ 0.1 million of deferred construction costs with Base Electron. See Note 7 - Related Party Transactions for further discussion. August 31, 2026 May 31, 2026 Other assets Long term lease incentive $ 196,223 $ 199,391 Restricted cash 414,649 180,415 Deposits on assets & construction 170,978 47,719 Goodwill (1) 54,387 54,513 Lease receivables 34,141 21,026 Deferred lease costs — 10,729 Derivative assets (2) 169,837 163,283 Investments in other companies (3) 64,092 123,329 Investment in related party (4) 2,000 2,000 Other 5,913 28,221 Total Other assets $ 1,112,220 $ 830,710 (1) Balance as of August 31, 2026 consists of goodwill held at ChronoScale. 22 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 (2) Balance as of August 31, 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 8 - Fair Value Measurements , Note 16 - Temporary Equity, and Note 11 - Derivative Assets for further discussion. (3) Includes $ 34.7 million of warrants, which are accounted for as derivatives, and $ 7.8 million of common shares, which are recorded at fair value, issued by B&W to the Company in association with the Company’s investment in B&W. See Note 11 - Derivative Assets for further discussion. The balance also includes a $ 10.0 million investment by the Company in Corintis SA (“Corintis”) in exchange for Series A1 preferred shares, approximating 4 % of Corintis’s outstanding equity. The Series A1 preferred shares are convertible preferred shares with no redemption rights. The investment in Corintis is accounted for at cost under ASC 321. During the quarter ended August 31, 2026, the Company invested in three private companies for a total of $ 8.2 million, which are included within this balance. These investments are accounted for at cost under ASC 321. See Note 8 - Fair Value Measurements for further discussion on fair value measurements for equity investments and derivative assets. (4) Includes a $ 2.0 million investment in Base Electron. See further discussion of the transaction in Note 7 - Related Party Transactions . August 31, 2026 May 31, 2026 Accrued liabilities Accrued construction payables $ 563,897 $ 307,812 Accrued expenses 135,587 81,311 Accrued interest 142,042 151,215 Other accrued liabilities 8,829 8,155 Total Accrued liabilities $ 850,355 $ 548,493 August 31, 2026 May 31, 2026 Other current liabilities Construction retainer $ 154,749 $ 95,848 Other 3,524 1,641 Total Other current liabilities $ 158,273 $ 97,489 23 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 11. Derivative Assets APLD HPC TopCo 2’s Redeemable Noncontrolling Interest The preferred units and corresponding common units associated with APLD HPC TopCo 2’s redeemable 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: As of As of August 31, 2026 May 31, 2026 Expected maturity date October 6, 2032 October 6, 2032 Credit spread (annual) 8.29 % 9.00 % Yield volatility 42.5 % 40.0 % Put right/trigger event de minimis de minimis Risk-free rate USD Yield Curve USD Yield Curve Number of time-steps 100 100 During the three months ended August 31, 2026, the Company recorded a gain on change in fair value of derivatives of $ 6.6 million, which is included within the loss on change in fair value of derivatives assets within the unaudited condensed consolidated statement of operations. B&W Warrants During the fiscal year ended May 31, 2026, the Company entered into agreements which resulted in the Company acquiring 500,000 shares of Babcock & Wilcox (“B&W”) common stock as well as two warrants to purchase 2,600,000 shares and 2,630,000 shares, respectively, of B&W common stock with an exercise price of $ 4.11 for a period of seven years . 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 as of August 31, 2026 and May 31, 2026: 24 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 As of As of August 31, 2026 May 31, 2026 Time to expiry 6.18 years 6.43 years Stock price $ 7.54 $ 18.45 Volatility 105.0 % 110.0 % Risk-free rate 4.52 % 4.19 % Dividend yield — % — % During the three months ended August 31, 2026, the Company recorded a loss of $ 56.1 million, which is included within the loss on change in fair value of derivatives assets within the unaudited condensed consolidated statement of operations. 12. Variable Interest Entities Based upon the criteria set forth in ASC 810, Consolidation , the Company consolidates 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. Consolidated VIE The Company has determined that it is 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. During the fiscal year ended May 31, 2026, TopCo 2 completed four closings under its Amended and Restated Unit Purchase Agreement (“A&R UPA”), issuing 1,825,000 preferred units and 144,593 corresponding common units for proceeds of approximately $ 1.8 billion to MIP HPC Holdings, LLC. The issuance of the preferred units at closing resulted in a redeemable noncontrolling interest - see Note 16 - Temporary Equity for further discussion. In addition, pursuant to the A&R UPA, on October 6, 2025, the Company issued warrants to purchase an aggregate of 2.4 million shares of the Company’s common stock as described in Note 14 - Warrants . 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 TopCo 2 have recourse to the Company’s general 25 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 credit. The following table presents the assets and liabilities held by TopCo 2 as of August 31, 2026, which are included in the unaudited condensed consolidated balance sheets (in thousands): August 31, 2026 Assets: Cash and cash equivalents $ 2,909,372 Restricted cash 510,963 Accounts receivable 44,925 Prepaid expenses and other current assets 573,876 Property and equipment, net 5,803,969 Other assets 440,148 Total assets $ 10,283,253 Liabilities: Accounts payable $ 221,607 Accrued liabilities 745,548 Current deferred revenue 39,669 Other current liabilities 147,070 Long-term debt 5,918,619 Total liabilities $ 7,072,513 Third-party equity ownership interests in TopCo 2 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. Unconsolidated VIE As discussed in Note 7 - Related Party Transactions , Base Electron is a related party formed to develop power generation and infrastructure projects supporting the broader AI industry. The Company has determined that Base Electron is a VIE because it does not have sufficient equity at risk to finance its activities without additional subordinated financial support. The Company's variable interests in Base Electron consist of its equity investment and related party promissory note. Additionally, the Company has determined that it is not the primary beneficiary of Base Electron because it does not have the power to direct the activities that most significantly impact Base Electron's economic performance. Accordingly, the Company does not consolidate Base Electron because ASC 810 requires both power and economics for consolidation. As of August 31, 2026, the carrying value of the Company's investment in Base Electron was $ 2.0 million and the outstanding balance of the related party promissory note was $ 59.3 million, which together reflect the Company's maximum exposure to loss. The Company is not contractually required to provide financial support to Base Electron and did not provide material non-contractual financial support during the three months ended August 31, 2026. 13. Income Taxes The Company’s tax provision or benefit from income taxes for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that are considered in the relevant period. The Company has an effective tax rate of approximately ( 1 )% and 0 % for the three months ended August 31, 2026, and August 31, 2025, respectively, primarily due to the recording of a valuation allowance against its deferred tax assets, as well as the mix of earnings across its separate operational components within the Company. 26 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 ASC 740, Income Taxes (“ASC 740”), requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of available evidence, it is more likely than not that some or a portion or all the deferred tax assets will not be realized. As of August 31, 2026 and May 31, 2026, the Company estimated a portion of its deferred tax assets will be utilized to offset the Company’s deferred tax liabilities. Based upon the level of historical losses and future projections over the period in which the net deferred tax assets are deductible, at this time, management believes it is more likely than not that the Company will not realize the benefits of the remaining deductible temporary differences, and as a result the Company has recorded a valuation allowance as of August 31, 2026 and May 31, 2026 for the amount of deferred tax assets that will not be realized. There were no material changes to the unrecognized tax benefits for the three months ended August 31, 2026. 14. Warrants A summary of warrant activity for the three months ended August 31, 2026 is presented below: Warrants Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life (Years) Outstanding at May 31, 2026 28,091,029 $ 8.61 7.86 Granted — — — Forfeited — — — Exercised — — — Outstanding at August 31, 2026 28,091,029 $ 8.61 7.60 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 August 31, 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 August 31, 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 August 31, 2026, 200,000 of the STB Warrants remain outstanding. CoreWeave Warrants In connection with certain data center leases with CoreWeave, the Company issued warrants to CoreWeave to purchase up to 13,062,521 and 8,393,611 shares of the Company’s common stock on May 28, 2025 and August 28, 2025, respectively, at an exercise price of $ 7.19 and $ 10.75 per share, respectively (the “CoreWeave Warrants”). The CoreWeave Warrants are exercisable upon issuance, upon payment of the applicable exercise price in cash or through cashless exercise for a period of 10 years each from the respective issuance date of such warrants. As of August 31, 2026, 21,455,832 warrant shares remain outstanding. 27 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 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 have a five and one-half-year term. As of August 31, 2026, the MAM Warrants have not been exercised and remain outstanding. 15. 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 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 August 31, 2026, the Company had issued awards of approximately 23.2 million shares of common stock of the Company under the 2022 Plans, 20.4 million under the 2024 Plan, and 600,000 shares of common stock outside of either plan, related to an employment inducement award. As of August 31, 2026, there are approximately 7.6 million shares of common stock available for issuance under the 2024 Plan. The Company capitalizes a portion of stock-based compensation costs for employees who work directly on construction and development of the Company's data centers. The Company recognized stock-based compensation associated with the 2022 and 2024 Plans as follows (in thousands): Three Months Ended August 31, 2026 August 31, 2025 Services and other cost of revenue $ 746 $ 773 Data center rental and other cost of revenue 270 8 Selling, general, and administrative 65,483 13,755 Capitalized (1) 2,665 929 Total stock-based compensation $ 69,164 $ 15,465 (1) Capitalized to Construction in progress 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 three months ended August 31, 2026: 28 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 Number of Shares Weighted Average Grant Date Fair Value Per Share Outstanding as of May 31, 2026 35,722 $ 3.73 Granted — — Vested — — Forfeited — — Outstanding as of August 31, 2026 35,722 $ 3.73 As of August 31, 2026, total remaining expense to be recognized related to these awards was $ 0.1 million and the weighted average remaining recognition period for the unvested awards was 0.6 years. Restricted Stock Units The following is a summary of the activity and balances for unvested restricted stock units granted during the three months ended August 31, 2026: Number of Shares Weighted Average Grant Date Fair Value Per Share Outstanding as of May 31, 2026 7,965,833 $ 20.87 Granted 696,797 32.41 Vested ( 856,409 ) 10.44 Forfeited ( 38,553 ) 14.20 Outstanding as of August 31, 2026 7,767,668 $ 23.08 As of August 31, 2026, total remaining expense to be recognized related to these awards was $ 150.6 million and the weighted average remaining recognition period for the unvested awards was 2.6 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. In the prior fiscal year, 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). 29 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 The following is a summary of the activity and balances for unvested performance stock units granted during the three months ended August 31, 2026: Number of Shares Weighted Average Grant Date Fair Value Per Share Outstanding as of May 31, 2026 14,386,250 $ 18.45 Granted — — Vested ( 6,911,250 ) 10.14 Forfeited — — Outstanding as of August 31, 2026 7,475,000 $ 26.14 As of August 31, 2026, total remaining expense to be recognized related to these awards was $ 90.8 million and the weighted average remaining recognition period for the unvested awards was 3.5 years. 16. Temporary Equity Preferred Stock The following is a summary of the activity and balances for preferred stock during the three months ended August 31, 2025 (in thousands, other than share data): Series E Redeemable Preferred Stock Series E-1 Redeemable Preferred Stock Series G Convertible Preferred Stock Shares Amount Shares Amount Shares Amount Outstanding as of June 1, 2025 301,673 $ 6,932 62,485 $ 57,011 78,000 $ 72,094 Issuances, net of costs — — — 10 180,000 170,386 Conversions — — — — ( 258,000 ) ( 242,480 ) Redemptions — — ( 225 ) ( 225 ) — — Outstanding as of August 31, 2025 301,673 $ 6,932 62,260 $ 56,796 — $ — The following is a summary of the activity and balances for preferred stock during the three months ended August 31, 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 June 1, 2026 276,673 $ 6,306 61,909 $ 56,460 — $ — Issuances, net of costs — — — — 283,250 274,850 Conversions — — — — ( 154,500 ) ( 149,921 ) Redemptions ( 276,673 ) ( 6,306 ) ( 78 ) ( 87 ) — — Outstanding as of August 31, 2026 — $ — 61,831 $ 56,373 128,750 $ 124,929 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. 30 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 There were no material changes to the terms of the Series E Preferred Stock during the three months ended August 31, 2026. During the three months ended August 31, 2026 and August 31, 2025, the Company declared and paid approximately $ 163,000 and $ 170,000 , respectively, of dividends related to Series E Preferred Stock as presented on the unaudited condensed consolidated statement of operations. During the three months ended August 31, 2026, all 276,673 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. There were no material changes to the terms of the Series E-1 Preferred Stock during the three months ended August 31, 2026. During the three months ended August 31, 2026 and August 31, 2025, the Company declared and paid approximately $ 1.4 million and $ 1.4 million, respectively, of dividends related to the Series E-1 Preferred Stock as presented on the unaudited condensed consolidated statements of operations. During the three months ended August 31, 2026, 78 shares of Series E-1 Preferred Stock were redeemed. Series G Convertible Preferred Stock On June 26, 2026, the Company entered into the sixth amendment (the “Sixth Amendment”) to the PEPA to increase the aggregate commitment amount under the PEPA for the issuance of shares of Series G Preferred Stock from $ 1,590,000,000 to $ 2,000,000,000 . There were no other material changes to the terms of the Series G Preferred Stock during the three months ended August 31, 2026. As Series G Preferred Stock may be reissued, during the three months ended August 31, 2026, the Company issued and sold 283,250 shares of Series G Preferred Stock for gross proceeds of $ 275.0 million. During the three months ended August 31, 2026, 154,500 shares of Series G Preferred Stock were converted into 4.5 million shares of the Company’s common stock. As of August 31, 2026, 128,750 shares of Series G Preferred Stock were issued and outstanding. Redeemable Noncontrolling Interest APLD HPC TopCo 2 LLC As discussed within Note 12 - Variable Interest Entities above, APLD HPC TopCo 2 LLC (“TopCo 2”) completed four closings under its A&R UPA during the fiscal year ended May 31, 2026, issuing 1,825,000 preferred units and 144,593 corresponding common units for proceeds of approximately $ 1.8 billion to MIP HPC Holdings, LLC, which resulted in a redeemable noncontrolling interest. There were no material changes to the terms of the redeemable noncontrolling interest during the three months ended August 31, 2026. 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 redeemable noncontrolling interest. Additionally, the Company presents the proportionate share that is attributable to the redeemable noncontrolling interest as temporary equity within the unaudited condensed consolidated balance sheets. This temporary equity presentation is the result of the redeemable 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. See Note 11 - Derivative Assets for 31 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 further details. The Company will adjust redeemable 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 $ 66.9 million for the three months ended August 31, 2026. 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 redeemable noncontrolling interest was $ 2.0 billion and $ 2.0 billion as of August 31, 2026 and May 31, 2026, respectively. The change in redeemable noncontrolling interest consists of $ 60.1 million of preferred stock dividends paid in-kind, $ 1.3 million of contributions from noncontrolling interest, net of costs and $ 6.8 million in current year net loss attributable to non-controlling interest. 17. Leases Lessor Accounting On June 5, 2026, the Company entered into an approximately 15-year lease (with three five-year renewal options) with a high investment-grade hyperscaler at its Delta Forge 2 210 MW critical IT load campus located in its southern region, comprising a single building under construction. The lease is for the full 210 MW of critical IT load, representing approximately $ 5.2 billion of contracted revenue over the base term, with expected delivery in the first half of calendar year 2028. Following the signing of this lease, our aggregate contracted critical IT load is 1,410 MW. 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 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 FY27 $ 467,961 FY28 1,579,517 FY29 2,360,558 FY30 2,371,420 FY31 2,371,420 Thereafter 26,580,159 Total $ 35,731,035 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. 32 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 Components of lease expense were as follows (in thousands): Three Months Ended August 31, 2026 August 31, 2025 Operating lease cost: Operating lease expense $ 6,517 $ 6,252 Short-term lease expense 106 697 Total operating lease cost 6,623 6,949 Finance lease expense: Amortization of right-of-use assets (1) 14,999 15,334 Interest on lease liabilities 1,523 3,530 Total finance lease cost 16,522 18,864 Variable lease cost 599 749 Total net lease cost $ 23,744 $ 26,562 (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. The following table represents the Company’s future minimum lease payments as of August 31, 2026: Operating Leases Finance Leases Total FY27 $ 16,036 $ 37,374 $ 53,410 FY28 23,967 10,968 34,935 FY29 18,391 — 18,391 FY30 4,812 — 4,812 FY31 1,315 — 1,315 Thereafter 4,553 — 4,553 Total lease payments 69,074 48,342 117,416 Less: imputed interest ( 8,205 ) ( 2,395 ) ( 10,600 ) Total lease liabilities 60,869 45,947 106,816 Less: Current portion of lease liability ( 19,199 ) ( 43,490 ) ( 62,689 ) Long-term portion of lease liability $ 41,670 $ 2,457 $ 44,127 Supplemental cash flow and other information related to leases is as follows: Three Months Ended August 31, 2026 August 31, 2025 Weighted-average years remaining (in years): Operating leases 3.2 years 3.7 years Finance leases 0.9 years 1.1 years Weighted-average discount rate: Operating leases 7.5 % 7.4 % Finance leases 9.9 % 9.9 % 33 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 18. Commitments and Contingencies Commitments Energy Contracts As of August 31, 2026, the Company had a minimum commitment of approximately $ 12.1 million related to the energy services agreement for its Jamestown, North Dakota co-hosting facility payable over, approximately, the next 0.4 years. Construction Contracts The Company routinely engages with construction vendors for the construction of our facilities. These engagements are governed by contracts containing standard terms and conditions, including certain milestones that obligate the Company to pay as work is completed. In the event of termination of any of these contracts by the Company, the Company would be liable for all work that has been completed or in process, plus any applicable fees. The Company generally has the right to cancel these open purchase orders prior to delivery or terminate the contracts without cause. Claims and Litigation From time to time, the Company may be involved in litigation relating to claims arising out of operations in the ordinary course of business. 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 20, 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, 34 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 including the Company, on the grounds that the plaintiff failed to plead (1) demand futility as to each of plaintiff’s claims or (2) a claim for breach of fiduciary duty. The order dismissed all claims against all defendants, including the Company. The plaintiff can seek leave to file an amended complaint but to date has not done so. The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in this action. If an unfavorable action were to occur, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable. As of August 31, 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. 19. Business Segments As discussed above, prior to the Business Combination, the Cloud Services Business was identified as a reportable segment. Following the consummation of the Business Combination in May 2026, which resulted in the formation of ChronoScale, the Cloud Services Business is no longer a reportable segment because its activities are not regularly reviewed by the CODM, which is the Company’s Chief Executive Officer, for purposes of resource allocation and performance assessment. As such, the results of ChronoScale, inclusive of the Cloud Services Business, which is now part of ChronoScale, are included in Other and are not separately presented as a segment for all periods presented. The Company's business is made up of two operating segments: the Data Center Hosting Business and the HPC Hosting Business. These segments represent management's view of the business for which separate financial information is available and evaluated regularly by the CODM. 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, loss on classification of held for sale and loss on abandonment of assets. The Company derives the segment results from its internal management reporting system. The accounting policies the Company uses to derive reportable segment results are the same as those used for external reporting purposes. Segment revenues and segment profit are regularly reviewed by the CODM and compared against historical results, forecast and budget information in order to make decisions about how to allocate capital and other resources to each segment. The Company does not allocate interest expense, interest income, loss on change in fair value of derivatives, loss on change in fair value of investment, other expense, net 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. 35 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 The following tables present segment information, including revenue by segment and segment profit (loss) for the three months ended August 31, 2026 and August 31, 2025 (in thousands): Three Months Ended August 31, 2026 Data Center Hosting Business HPC Hosting Business Revenue: Services and other revenue $ 37,755 $ 183,518 Data center rental and other revenue — 79,120 Total segment revenue 37,755 262,638 Costs and expenses: Services and other cost of revenue 23,978 176,100 Data center rental and other cost of revenue — 43,861 Selling, general and administrative (1) 450 9,246 Total costs and expenses 24,428 229,207 Segment profit $ 13,327 $ 33,431 (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. Three Months Ended August 31, 2025 Data Center Hosting Business HPC Hosting Business Revenue: Services and other revenue $ 37,921 $ 26,296 Data center rental and other revenue — — Total segment revenue 37,921 26,296 Costs and expenses: Services and other cost of revenue 30,409 25,044 Data center rental and other cost of revenue — 140 Selling, general and administrative (1) 965 1,894 Loss on abandonment of assets 512 1,240 Total costs and expenses 31,886 28,318 Segment profit (loss) $ 6,035 $ ( 2,022 ) (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. 36 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 The following tables present the reconciliation to net loss before income tax expense (in thousands): Three Months Ended August 31, 2026 August 31, 2025 Segment profit Data Center Hosting Business $ 13,327 $ 6,035 HPC Hosting Business 33,431 ( 2,022 ) Total segment profit 46,758 4,013 Other (1) ( 109,137 ) ( 13,775 ) Operating loss ( 62,379 ) ( 9,762 ) Interest expense 77,383 8,013 Interest income ( 35,821 ) ( 857 ) Loss on change in fair value of derivatives 49,511 — Loss on change in fair value of investment 11,352 — Other expense, net 1,311 — Net loss before income tax expense $ ( 166,115 ) $ ( 16,918 ) (1) Other includes corporate related items not allocated to reportable segments and ChronoScale. We also provide the following additional segment disclosures (in thousands): Three Months Ended August 31, 2026 August 31, 2025 Depreciation and amortization: Data Center Hosting Business $ 2,386 $ 3,391 HPC Hosting Business 22,900 698 Other (1) 16,626 63 Total depreciation and amortization (2) $ 41,912 $ 4,152 (1) Other includes corporate related items not allocated to reportable segments and ChronoScale. (2) Includes amortization of the finance lease right-of-use assets. Information on segment assets and a reconciliation to consolidated assets are as follows (in thousands): August 31, 2026 May 31, 2026 Data Center Hosting Business $ 111,850 $ 113,788 HPC Hosting Business 10,805,831 8,999,081 Total segment assets 10,917,681 9,112,869 Other (1) 789,495 816,443 Total assets $ 11,707,176 $ 9,929,312 (1) Other includes corporate related items not allocated to reportable segments and ChronoScale. 20. 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. 37 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 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 August 31, 2026 August 31, 2025 Net loss $ ( 184,055 ) $ ( 16,926 ) Net loss attributable to noncontrolling interest and redeemable noncontrolling interest ( 51,484 ) — Preferred dividends ( 1,543 ) ( 1,576 ) Net loss attributable to common stockholders $ ( 237,082 ) $ ( 18,502 ) Net loss attributable to common stockholders: Continuing operations $ ( 221,028 ) $ ( 18,502 ) Discontinued operations ( 16,054 ) — Net loss $ ( 237,082 ) $ ( 18,502 ) Basic and diluted net loss per share attributable to common stockholders: Continuing operations $ ( 0.76 ) $ ( 0.07 ) Discontinued operations ( 0.06 ) — Basic and diluted net loss per share $ ( 0.82 ) $ ( 0.07 ) Basic and diluted weighted average number of shares outstanding 291,557,618 255,892,902 As of August 31, 2026 and August 31, 2025, the Company had approximately 15.2 million and 14.4 million shares, respectively, of granted but unvested performance stock units and restricted stock units that would have a potentially dilutive effect on earnings per share. As of August 31, 2026 and August 31, 2025, the Company had approximately 7.5 million and 4.4 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 25.5 million warrants outstanding as of August 31, 2026 and August 31, 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 August 31, 2026, approximately 46.1 million shares were excluded from the calculations of earnings per share because the effect of those shares would be antidilutive. 21. Subsequent Events Series G Subsequent to the quarter, 128,750 shares of Series G Preferred Stock were converted into an aggregate of 5.2 million shares of the Company’s common stock. Sale of Legacy Ekso Business On September 30, 2026, ChronoScale, through its wholly-owned subsidiary ChronoScale Intermediate LLC, completed the sale of its legacy Ekso business through two related transactions: Ekso and its wholly-owned German subsidiary sold substantially all of the assets of Ekso’s “EksoWorks” industrial exoskeleton business, including the EVO product line, to DynaWear Tech, Inc. under an asset purchase agreement, and immediately thereafter, ChronoScale Intermediate LLC sold all of the outstanding capital stock of Ekso, which held the remaining neuro-rehabilitation business, to WanderEkso Inc., a subsidiary of Wandercraft SAS, under a stock purchase agreement. 38 Table of Content s APPLIED DIGITAL CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited) For the Three Months Ended August 31, 2026 Base Electron Power Purchase Agreement On October 4, 2026, the Company entered into a Power Purchase Agreement with Base Electron, for the purchase of capacity and energy from an approximately 1,200 MW natural gas-fired generation facility to be developed by Base Electron in North Dakota, which is intended to provide dedicated generation for the Company’s Polaris Forge 3 campus expansion. 39 Table of Contents