Applied Digital posts smaller-than-expected loss on demand for cloud services

(Reuters) - Data center operator Applied Digital on Tuesday posted a smaller-than-expected loss for the second quarter, helped by increased demand for high-performance data center infrastructure and cloud services business.

The company's stock closed nearly 10% higher on Tuesday after Australia's Macquarie announced it would invest up to $5 billion in Applied Digital's AI data centers and take a 15% stake in the company's high-performance computing business.

The funding deal with Macquarie will help Applied Digital repay debt incurred to build its data centers in North Dakota and further allow the company to recover over $300 million of its equity investment in the facilities.

Applied Digital posted an adjusted net loss of 6 cents per share for the quarter ended Nov. 30, compared with a loss of 15 cents per share expected by analysts, according to data compiled by LSEG.

Applied Digital's shares have more than tripled in the past two years as investors bet on strong growth at AI firms and data center providers thanks to the booming AI landscape.

Dallas, Texas-based Applied Digital posted second-quarter revenue of $63.9 million, up 51% from last year and largely in line with analysts' estimates.

Applied Digital, which operates data centers catering to high-performance computing required for technologies including crypto mining and AI, has also seen a significant contribution from its cloud services business, while being dominated by data center hosting segment.

Constructing and maintaining data center facilities to swiftly meet demand is a lengthy and capital-intensive process, meaning companies like Applied Digital require substantial investments over time.

(Reporting by Kritika Lamba and Harshita Mary Varghese in Bengaluru; Editing by Shailesh Kuber)

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