Applied Digital reported third-quarter revenue below Wall Street estimates on Monday, as clients delayed renewing their data center leases, sending shares of the company down 11 per cent in extended trading.
The data center operator said its board has approved plans for a potential sale of the cloud services business segment, as it looks to transition into a data center real estate investment trust.
The company reported third-quarter revenue of $52.9 million, below analysts’ estimates of $63.4 million, according to data compiled by LSEG.
Applied Digital’s data center hosting business, which provides energized space to cryptocurrency mining customers, reported a 7 per cent decline in revenue to $35.2 million.
The company said it experienced margin compression in the data center hosting business due to expected seasonal fluctuations in power costs.
Its cloud service business generated $17.8 million in revenue.
The company is negotiating with cloud service providers to lease out its Ellendale data center campus, aiming for maximum utilization of the facility.
New tariffs introduced by the Trump administration could increase costs for imported tech components, potentially impacting firms like Applied Digital, reliant on these for their data centers.
“The timely completion of our HPC (high-performance computing) and AI projects may be delayed and our ability to collect any potential revenue from the HPC Hosting Business segment in the future may be compromised,” the company said in a regulatory filing on Monday.
For the third quarter ended February 28, Applied Digital reported an adjusted loss per share of 8 cents, smaller than the 11-cent loss expected by analysts.
