Applied Digital Corporation Reports 66% Revenue Growth but $138.7 Million Net Loss in Latest Quarter

Applied Digital Corporation reported significant financial developments in its latest 10-Q filing for the quarter ending November 30, 2024. The company achieved total revenue of $63.9 million for the three months ended November 30, 2024, a 66% increase from $38.6 million in the same period last year. For the six months, revenue rose to $124.6 million, up 73% from $70.7 million. The growth was primarily driven by the expansion of the Cloud Services Business, which generated $27.7 million in revenue during the quarter, compared to $4.5 million a year earlier.

Despite the revenue increase, Applied Digital reported a net loss of $138.7 million for the quarter, compared to a loss of $10.5 million in the prior year. The loss was attributed to several factors, including a $25.4 million loss on the conversion of debt and an $87.2 million loss on the change in the fair value of debt. The company's operating loss for the quarter was $18.6 million, up from $7.9 million a year ago, reflecting increased costs associated with revenue growth, including higher depreciation and personnel expenses.

In terms of strategic developments, Applied Digital has made significant moves in its capital structure. The company completed a private offering of $450 million in Senior Unsecured Convertible Notes, which will mature in June 2030. The proceeds from this offering were used for share repurchases and general corporate purposes. Additionally, the company entered into a $150 million promissory note with Macquarie Equipment Capital, which was utilized to repay previous debt obligations, enhancing its financial flexibility.

Operationally, Applied Digital has expanded its infrastructure, with its data center hosting facilities in Jamestown and Ellendale, North Dakota, operating at full capacity. The company is also in advanced discussions with hyperscalers for a 400 MW capacity lease at its Ellendale campus. As of November 30, 2024, the company reported total assets of $1.54 billion, a substantial increase from $762.9 million at the end of the previous fiscal period, driven by investments in property and equipment.

Looking ahead, Applied Digital anticipates continued growth in its Cloud Services and HPC Hosting segments, supported by ongoing investments in infrastructure and technology. However, the company also noted a working capital deficit of $96 million, raising concerns about its ability to sustain operations without additional financing. Management expressed confidence in its liquidity position, citing cash reserves and access to capital markets, but acknowledged the need for careful monitoring of market conditions and operational performance.