Applied Digital disclosed that it has signed take-or-pay leases covering about 1,410 megawatts of critical IT load across five data center campuses, a deal package valued at roughly $36 billion over 15-year base terms. Even with the large contracted “lease book,” the company’s revenue recognition lags construction, and only a portion of contracted capacity has been brought online—focusing investor attention on project delivery timing and financing costs.
Key takeaways
- Lease scale is large: Applied Digital signed take-or-pay leases for about 1,410 MW across five campuses, representing about $36 billion over initial 15-year base terms.
- Catalyst: The disclosure centers on contracted capacity and the staged process for delivering buildings so tenant rent can begin.
- Near-term revenue visibility is limited: Rent begins only when properties are ready and tenants take possession; less than $2 billion of minimum lease payments is scheduled through fiscal 2028–2029, based on the company’s own payment schedule.
- Execution and financing are central: Construction spending and high-cost capital structures precede cash rents, leaving funding and delivery milestones as key risk factors.
What Applied Digital signed—and what it means
Applied Digital’s five leased data center campuses include three sites in North Dakota and two in South. The leases are with CoreWeave and two investment-grade hyperscalers, and each contract runs 15 years on a take-or-pay basis, meaning the tenant owes rent whether or not it uses the space.
While take-or-pay terms reduce demand risk once buildings are operating, the economics still depend on when facilities are completed and turned over to tenants. According to the company, rent recognition begins only when a property is ready for its intended use and the tenant takes possession—so signed leases on unfinished buildings do not generate rental revenue.
Why the revenue picture lags the “lease book”
In fiscal 2026, Applied Digital reported $611.3 million of revenue for the year ended May 31, along with a net loss attributable to common shareholders of $249.2 million. However, the company said only $99.8 million of that revenue came from base rent from its AI campuses. The remainder included revenue streams such as crypto mining hosting and reimbursed work tied to tenant fit-outs.
Capacity is also a key factor in investor interpretation. The company stated that as of its late-July update, only 175 MW of contracted capacity was live. Management emphasized delivery performance, saying in its fiscal fourth-quarter update that it brought Polaris Forge 1’s first 100 MW online on schedule and scaled total live capacity at the campus to 175 MW.
When minimum payments arrive under the contracts
Applied Digital’s schedule of minimum lease payments illustrates how gradually rent is expected to start and scale as construction deliveries progress. The company’s minimum lease payment figures show $451 million in fiscal 2027, $1.45 billion in fiscal 2028, and $2.25 billion in fiscal 2029. Taken together, less than $2 billion of minimum contracted lease revenue is scheduled before fiscal 2029, based on the figures provided.
The staged ramp reflects phased deliveries tied to Polaris Forge 2, with the company stating that deliveries are expected to begin from Polaris Forge 2’s first buildings in calendar 2026 and extend through the second half of calendar 2028. Once all campuses are delivered, the company indicated the leases call for roughly $2.3 billion of rent per year.
The central implication for investors is timing risk: even with take-or-pay commitments, cash rent arrives only as buildings are completed, commissioned, and accepted by tenants. Applied Digital’s annual report also warns that significant construction delays can, in certain circumstances, give tenants the right to terminate.
Financing costs come before rent—and can shape outcomes
Alongside the lease announcements, investors focus on the capital required to build the portfolio. Applied Digital reported capital expenditures of $2.87 billion in fiscal 2026, up from about $680 million the prior year. At the end of fiscal 2026, the company reported $5.0 billion of debt against $4.2 billion of cash, much of it restricted. It also described senior secured notes with interest rates ranging from 6.75% to 9.25%.
Data center construction has also been supported by preferred capital arrangements. Macquarie Asset Management, according to the disclosure, funded $1.8 billion of perpetual preferred equity, with the right to invest up to $4.9 billion more for the North Dakota campuses. Preferred capital adds a layer of cost and priority in the capital structure because preferred holders are paid ahead of common shareholders.
With the market valuing Applied Digital at about $7.7 billion, investors are effectively pricing in the ability to deliver projects on schedule and scale rental revenue as buildings come online. The company’s disclosed take-or-pay economics can support demand assurance, but lenders and preferred investors still get paid before common shareholders—making construction execution and financing terms critical to equity outcomes.
Bigger picture: what to watch next
For investors, the next milestones are less about the total lease book and more about delivery cadence: whether Applied Digital continues to expand live capacity beyond the 175 MW cited in its late-July update, and how quickly lease payments begin to accelerate as facilities reach tenants. Upcoming updates on construction progress for Polaris Forge 2—beginning in calendar 2026—and subsequent financial reporting around revenue mix and cash burn will likely determine whether the valuation gap between contracted capacity and recognized rent narrows.
