Applied Digital CEO Says Local Data Center Bans Make Built Campuses Worth More, Sees Lease Rates Up 'North Of 15%'
Wes Cummins said new restrictions elsewhere make powered campuses harder to copy, and described how expansion leases will price.
Applied Digital Chairman and CEO Wes Cummins said in his closing remarks on the company's fiscal first-quarter earnings call that local moratoriums on data centers raise the value of campuses already built and powered. He said "every new restriction elsewhere means what we already own harder to replicate and more valuable," and the company reported quarterly results the same day.
The argument: scarcity as an advantage
Cummins said moratoriums, tighter zoning, longer permitting and community resistance are all rising. He argued these create barriers to entry, which in his view support higher terminal values and stronger economics on expansions and renewals.
He pointed to what he described as community benefits at Ellendale and Harwood: about $45 million in savings for MDU customers since Ellendale began, over $100 million the company paid for Harwood substation and grid upgrades, and local tax revenue rising from roughly $400,000 to nearly $4 million.
He also said a tenant running tens of thousands of GPUs in a powered, liquid-cooled campus must either renew or find comparable power and approvals elsewhere. That, he said, makes renewals more likely.
What "premium pricing" means
In the prepared remarks, Cummins said the company expects about 250 megawatts of expansion leases to be signed by calendar year end at "materially higher pricing compared to prior leases." He said the campuses hold "significant and underappreciated embedded value."
An analyst asked how the company defines premium pricing. Cummins said to think "north of 15% plus increases on the lease rate," possibly with longer terms.
He also said the company could grow its operating portfolio to 3.5 to 4 gigawatts by the end of calendar 2030 if demand holds. That implies delivering about one gigawatt a year in 2029 and 2030, he said.
Execution backdrop from the call
Cummins said Applied Digital has about $36 billion in contracted revenue across five campuses and expects to put over 600 megawatts into service in the next 12 months, versus 250 megawatts in the past 12.
CFO Saidal Mohmand said the company closed a $1.59 billion offering of 7% senior secured notes due 2031 at par, versus a nine and a quarter coupon on its first Polaris Forge 1 notes last year.
The test is whether the roughly 250 megawatts of expansion leases Cummins expects by calendar year end are signed at the higher pricing he described.
Sources
- Applied Digital Reports Wider 1Q Loss as Revenue Soars — MarketWatch
- Applied Digital Delivers Q1 Double Beat, Shares Rise — benzinga.com
- Applied Digital’s Earnings Show Its Data Center Bet Is Starting to Pay Off — Barron's
- Applied Digital Corporation (APLD) Reports Q1 Loss, Tops Revenue Estimates — Yahoo Finance
- Applied Digital Q1 Adj. EPS $(0.01) Beats $(0... — benzinga.com
