On Thursday, H.C. Wainwright adjusted its outlook on Applied Blockchain Inc (NASDAQ:APLD), raising the price target to $12 from the previous $10 while maintaining a Buy rating on the company's stock.
The adjustment followed Applied Blockchain's announcement of its fiscal second quarter 2025 results on January 14, and the revelation of a significant financing agreement with Macquarie Asset Management (MAM).
The company reported an increase in consolidated revenues, reaching $63.9M for the quarter, up from $60.7M in the first quarter of fiscal 2025. The rise was primarily attributed to the growth in cloud services, which generated $27.7M in revenue, an increase from $25.9M in the prior quarter.
This sector is supported by six GPU clusters, each equipped with 1,024 GPUs. Although once intended to become a primary focus for Applied, the cloud services segment has taken a secondary role as the company has concentrated efforts on expanding its high-performance computing (HPC) hosting business.
The analysts noted that " Its crypto hosting segment contributed $36.2M, up from $32.9M, leveraging 286MW across two North Dakota facilities running at full capacity, as bitcoin™s climb to $100,000 probably eliminated economic curtailing."
The most notable development, however, was the announcement of a $5 billion perpetual preferred equity financing facility with Macquarie. Through this deal, Macquarie acquires a 15% stake in Applied's HPC business via preferred and common units issued by APLDH, a subsidiary exclusively managing the HPC operations.
Macquarie also secures two board seats out of five at the subsidiary. An initial investment of $225M will fund the first 100MW project at Ellendale, with each preferred unit priced at $1,000, carrying a 12.75% annual dividend, and guaranteeing a 1.8x minimum return on invested capital.
Furthermore, Macquarie has the option to invest an additional $675M for the development of the remaining 300MW at Ellendale within 15 months, contingent on Applied obtaining hyperscaler lease agreements.
This strategic financing partnership not only mitigates the capital burden that large-scale data center builds typically impose but also lowers Applied's equity requirement per MW to $750,000 from $1M.
Additionally, it releases $300M from the existing $700M allocated for the Ellendale project. Over the next 30 months, Macquarie has the right to invest up to $4.1B across Applied's broader HPC pipeline as part of the $5B agreement.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.