Applied Digital Corp. (NASDAQ: APLD) is advancing its strategic objectives in artificial intelligence infrastructure by initiating construction of a substantial new AI Factory campus in the southern United States. This development, named Delta Forge 1, represents a key step as the company expands its capacity to deliver high-performance data center services tailored to AI, cloud computing, networking, and blockchain applications.
Situated in a strategically selected market in the southern region, Delta Forge 1 is designed to provide an initial supply of 430 megawatts of total utility power, with the capability to support up to 300 megawatts dedicated to critical IT load. The campus covers more than 500 acres and includes plans for two facilities, each rated at 150 megawatts, in its first phase. Significantly, the infrastructure offers substantial potential for expansion commencing in 2028 to accommodate future demand.
The campus infrastructure is engineered to transform the region's abundant large-scale power availability into a functional, high-density AI processing environment suitable for hyperscale clients. Facilities are purpose-built to handle complex power integration, implement advanced cooling solutions, and meet operational requirements inherent to large-scale AI computing workloads.
Once fully operational, Delta Forge 1 is expected to offer employment for more than 200 full-time staff members, supplemented by a number of long-term contractors. This presence is projected to generate ongoing economic activity and contribute to long-term investment within the region.
Repeatable AI Factory Model Supports Hyperscale Growth
As adoption of AI accelerates across industries, the primary limiting factor identified by Applied Digital is the speed and consistency with which available power can be converted into operational AI capacity at scale. To address this, the company has focused on developing AI factories that can be replicated efficiently across multiple campuses, leveraging a standardized design philosophy.
Delta Forge 1 leverages the proprietary AI Factory blueprint pioneered through Applied Digital's Polaris Forge campuses in North Dakota. This construction model emphasizes scalability and operational consistency, enabling efficient capacity expansions without sacrificing reliability or responsible development practices.
Reflecting robust market interest, Applied Digital is actively engaged in negotiations with an additional prospective investment-grade hyperscale customer, aiming to secure further commitments that align with their infrastructure capabilities. Initial operations at Delta Forge 1 are anticipated to commence by mid-2027.
Quarterly Earnings Performance Underpins Expansion Strategy
Applied Digital's infrastructure growth initiative is supported by its strong financial results reported in the second quarter, where the company surpassed consensus expectations on both earnings and revenue. The company reported break-even earnings per share, amounting to zero cents, outperforming analyst predictions which had anticipated a loss.
Revenue achieved $126.6 million during the quarter, significantly exceeding Wall Street forecasts and demonstrating meaningful growth compared to the same period in the previous year. This financial outcome primarily stemmed from the company's high-performance computing hosting segment, which contributed $85 million in quarterly revenue. Additionally, the data center hosting segment recorded revenues of $41.6 million, marking a 15% increase year over year.
Management commentary highlighted ongoing robust demand from hyperscale customers, attributing the company's early positioning in regions with abundant energy resources, such as the Dakotas, as a competitive advantage. The firm emphasized its proven capability to execute complex data center projects as a key factor underpinning this demand.
Applied Digital also disclosed securing two hyperscale clients within the region and maintaining advanced discussions with another investment-grade hyperscale customer, spanning multiple U.S. markets. The company’s stock performance has reflected this growth trajectory, with shares appreciating approximately 268% over the past twelve months. This appreciation is linked to the company’s extensive growth pipeline, significant order backlog, and the increasing demand for AI infrastructure solutions.
Stock Performance and Market Reaction
Despite these positive developments, Applied Digital's shares experienced a slight decline of 2.68%, trading at $34.11 at the time of reporting on Thursday. This subtle pullback comes in the context of strong overall momentum and reflects typical market fluctuations.
Key Points
- Applied Digital has commenced construction of Delta Forge 1, a large-scale AI Factory campus in a strategic southern U.S. market planned to initially deliver 430 megawatts of utility power and 300 megawatts of critical IT capacity.
- The AI Factory model emphasizes a repeatable, standardized campus blueprint designed for scalable, efficient expansion to meet increasing hyperscale AI workload demand.
- Second-quarter results exceeded expectations with break-even earnings and $126.6 million in revenue, supported by strong contributions from high-performance computing and data center hosting segments.
- Applied Digital maintains firm client relationships, including two secured hyperscale customers and ongoing advanced talks with another investment-grade hyperscale entity, reinforcing the growth outlook.
Risks and Uncertainties
- The timing and success of initial operations at Delta Forge 1, slated for mid-2027, remain subject to construction schedules and potential operational challenges inherent in large-scale data center developments.
- Securing additional hyperscale customers is critical to fully utilize campus capacity, and ongoing discussions do not guarantee finalized contracts or revenue contributions.
- Market fluctuations and competitive dynamics may impact the company’s stock price and ability to maintain revenue growth momentum.
- Rapid technological changes in AI infrastructure may require continuous investment and adaptation in the company's development strategies to ensure relevance and competitiveness.
Applied Digital’s strategic expansion into AI-focused data center infrastructure backed by solid quarterly earnings highlights the company’s commitment to capturing growing demand for hyperscale AI capacity. However, operational execution and market factors will remain pivotal in determining its long-term success in this evolving market segment.