Applied Digital signs $5.2B lease, raises $1.59B notes
Applied Digital signed a $5.2 billion lease for its fifth AI Factory campus, bringing total contracted revenue to $36 billion. The company also announced a $1.59 billion notes offering to fund construction in North Dakota.
*this image is generated using AI for illustrative purposes only.
Applied Digital has entered into a new long-term lease agreement at Delta Forge 2, a purpose-built AI Factory campus located in a southern state, representing approximately $5.2 billion in base-term contracted revenue. The lease is with a U.S. based high investment-grade hyperscaler, marking the company's fifth AI Factory campus overall and its third agreement with this specific customer. This agreement covers 210 MW of critical IT load under a 15-year take-or-pay structure with renewal options, representing approximately $12.7 billion if all renewal options are exercised over a 30-year total term. Initial operations at Delta Forge 2 are anticipated to commence in Q1 2028.
Applied Digital also announced a proposed offering of $1.59 billion in senior secured notes due 2031 through its subsidiary APLD ComputeCo 3 LLC. The proceeds will be used primarily to fund construction of 150 MW of critical IT load at the fourth building at Polaris Forge 1 in Ellendale, North Dakota, as well as to repay an existing Goldman Sachs bridge loan and cover transaction expenses. The offering is subject to market conditions and is being made in a private placement to qualified institutional buyers.
With the Delta Forge 2 agreement, Applied Digital's contracted portfolio spans five AI Factory campuses, representing 1.4 GW of critical IT load, approximately 2.15 GW of grid-connected utility power, and approximately $36 billion in total contracted base-term lease revenue, or $86 billion if all renewal options are exercised. Approximately 70% of contracted revenue is now backed by U.S. based investment-grade hyperscalers. The company's franchise model is now active across northern and southern geographies, integrating proprietary waterless cooling technology and high-power density infrastructure.
Contracted Portfolio Overview
| Metric | Value |
|---|---|
| Total Contracted Critical IT Load | 1.4 GW |
| Gross Grid-Connected Utility Power | Approximately 2.15 GW |
| Total Contracted Base-Term Lease Revenue | Approximately $36 billion |
| Total Contracted Revenue with Renewals | $86 billion |
| Revenue Backed by Investment-Grade Hyperscalers | Approximately 70% |
Recent Performance
The announcement comes after a remarkable stretch of deal activity, including a $7.5 billion lease signed at Polaris Forge 3 late last month. Shares of Applied Digital have surged over 180% in the past 12 months. Following the news, shares were trading 10.98% higher at $45.44. "Two years ago, we made a deliberate decision to build a company that scales, not just builds data centers," said Wes Cummins, chairman and CEO of Applied Digital.
How will the capital raised from the $1.59 billion senior secured notes offering impact Applied Digital's leverage ratios and overall cost of capital?
What are the specific risks associated with the long-term construction timeline for Delta Forge 2, given that initial operations are not expected until Q1 2028?
Will the company pursue similar financing strategies for future campuses, or does this private placement represent a shift in their capital structure strategy?
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