Applied Digital (Nasdaq: APLD) reported fiscal fourth-quarter results Monday at 4:05 p.m. ET, and the headline is the kind that moves a stock. Revenue of $258.7 million, up 407% year over year, against a Wall Street estimate near $94.8 million. Adjusted earnings of $0.04 a share where the consensus modeled a 22-cent loss. Shares rose about 3% after hours, to roughly $27.24.
Then read the segment disclosure. HPC Hosting — the AI data center business the entire equity story rests on — produced $203.0 million in the quarter. Of that, $44.1 million was base rent. Another $6.5 million was tenant recoveries. And $152.4 million was “tenant fit-out services”: the buildout work Applied Digital performs inside the shell for its tenant, and bills straight back.
That is revenue under any accounting standard. It is not much of a business. Services cost of revenues climbed to $193.1 million, and the company attributes $145.6 million of the increase to fit-out expense. Set that against $152.4 million of fit-out revenue and you get a margin of roughly four cents on the dollar. Three-quarters of the segment’s top line, earning almost nothing.
What the recurring business actually is
Base rent was $44.1 million for the quarter and $99.8 million for the full fiscal year — the first year the HPC business operated at all. Annualize the fourth quarter and the recurring, high-margin line is running near $176 million. Net Operating Income, the company’s own measure of base rent less property costs, came in at $39.9 million.
Against that: a GAAP net loss attributable to common stockholders of $110.6 million, more than double last year’s $53.1 million. Roughly $4.2 billion of cash and about $5 billion of total debt — including $2.15 billion of 6.750% notes due 2031 issued at 98 cents on the dollar, plus $1.59 billion of 7.000% notes closed after the quarter ended.
Our take: The bear case on AI infrastructure was never that the contracts are fake. It’s that the cash shows up years after the debt does. Applied Digital just put that interval on an income statement. A 407% growth number that is three-quarters pass-through construction billing isn’t deception — it’s a landlord getting paid to build its own building. But it means the headline growth rate tells you almost nothing about earnings power, it will keep flattering the top line for exactly as long as five campuses are under construction at once, and it evaporates the moment they aren’t.
The $36 billion is real. The timing is the question.
The contracted number is not vapor. Applied Digital has about 1,410 MW under 15-year take-or-pay leases across five campuses — roughly $36 billion of base-term revenue, or $86 billion if every renewal is exercised. Three of those leases went to the same investment-grade hyperscaler back to back: 300 MW at Delta Forge 1, 300 MW at Polaris Forge 3, 210 MW at Delta Forge 2. About $20.2 billion from one customer.
Live capacity is 175 MW. That is the whole gap. Delta Forge 1 and Polaris Forge 3 begin operations in calendar 2027; Delta Forge 2 lands in the first half of 2028. Everything between now and then is construction — financed at 6.75% and 7%, and booked, in part, as revenue. It is the same conversion question we flagged at Bloom Energy, where a $20 billion backlog met $492 million of audited obligations, and the same one sitting under Nvidia’s proposed $250 billion backstop of OpenAI’s Ohio lease.
What to watch
- The fit-out line. It inflates growth while campuses are being built and vanishes when they’re finished. The useful number next quarter is revenue without it.
- Base rent progression. 175 MW live today, 1,410 MW contracted. Watch the $44.1 million quarterly figure climb as new phases energize — that is the only line that compounds.
- Cost of the next dollar. Revenue that starts in 2027 has to clear coupons written in 2026. Each incremental raise reprices the whole thesis.
- Customer concentration. Three consecutive leases and $20.2 billion from a single hyperscaler is validation and exposure in the same sentence. The TeraWulf-Anthropic structure has the identical shape.
Five campuses under construction. One hundred seventy-five megawatts collecting rent. The invoices Applied Digital actually wants you to look at don’t start arriving until 2027.