v3.26.1
Leases
 9 Months Ended 12 Months Ended
Feb. 28, 2026
May 31, 2025
Applied Digital Cloud Corporation [Member]    
Restructuring Cost and Reserve [Line Items]    
Leases

 

6.Leases

 

From time to time, the Company enters into leases for equipment and office space. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company presents operating and finance lease right of use assets and liabilities separately on the unaudited condensed combined balance sheets as their own captions, with the liabilities split between current and long-term.

 

During the nine months ended February 28, 2026, the Company renegotiated the majority of its finance leases to extend the duration of the lease agreements, thus extending finance lease payments through fiscal year 2028. In accordance with ASC 842, as the modifications were not separate contracts, the Company reassessed the classification of the leases, noting no change in classification. As such, the Company reallocated the remaining consideration in the contract and remeasured the lease liability using a discount rate for each of the leases determined at the effective date of the modification. The Company recognized the amount of the remeasurement of the lease liability for each of the modified leases as an adjustment to the corresponding right-of-use asset.

 

Subsequent to February 28, 2026 and through May 31, 2026, the Company made finance lease payments of approximately $14.6 million and operating lease payments of $5.3 million.

 

 

APPLIED DIGITAL CLOUD CORPORATION AND AFFILIATES

Notes to the Condensed Combined Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2026 and February 28, 2025

 

Components of lease expense were as follows (in thousands):

  

   February 28, 2026   February 28, 2025   February 28, 2026   February 28, 2025 
   Three Months Ended   Nine Months Ended 
   February 28, 2026   February 28, 2025   February 28, 2026   February 28, 2025 
Operating lease cost:                    
Operating lease expense  $6,078   $9,715   $18,234   $27,250 
Short-term lease expense   —    10,129    183    10,129 
Total operating lease cost   6,078    19,844    18,417    37,379 
Finance lease expense:                    
Amortization of right-of-use assets(1)   13,548    13,909    41,945    64,991 
Interest on lease liabilities   2,049    4,514    7,889    12,959 
Total finance lease cost   15,597    18,423    49,834    77,950 
Variable lease cost   520    731    1,953    1,647 
Total net lease cost  $22,195   $38,998   $70,204   $116,976 

 

(1)Amortization of right-of-use assets is included within cost of revenues and selling, general and administrative expense in the unaudited condensed combined statements of operations.

 

The following table represents the Company’s future minimum lease payments as of February 28, 2026:

 

   Operating Leases   Finance Leases   Total 
   Operating Leases   Finance Leases   Total 
FY26  $5,293   $14,583   $19,876 
FY27   21,798    51,055    72,853 
FY28   22,623    10,967    33,590 
FY29   17,152    —    17,152 
FY30   3,536    —    3,536 
Thereafter   —    —    — 
Total lease payments   70,402    76,605    147,007 
Less: imputed interest   (7,811)   (5,330)   (13,141)
Total lease liabilities   62,591    71,275    133,866 
Less: Current portion of lease liability   (17,606)   (50,777)   (68,383)
Long-term portion of lease liability  $44,985   $20,498   $65,483 

 

Supplemental cash flow and other information related to leases is as follows:

 

   Nine Months Ended 
   February 28, 2026   February 28, 2025 
Weighted-average years remaining (in years):          
Operating leases   2.6 years    3.2 years 
Finance leases   2.3 years    3.0 years 
           
Weighted-average discount rate:          
Operating leases   7.6%   7.6%
Finance leases   9.8%   10.0%

 

 

APPLIED DIGITAL CLOUD CORPORATION AND AFFILIATES

Notes to the Condensed Combined Financial Statements (Unaudited)

For the Three and Nine Months Ended February 28, 2026 and February 28, 2025

 

7.Leases

 

The Company enters into leases for equipment and office space. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company presents operating and finance right of use assets and liabilities separately on the balance sheets as their own captions, with the liabilities split between current and long-term, respectively.

 

Components of lease expense were as follows (in thousands):

 

   May 31, 2025   May 31, 2024 
Operating lease cost:          
Operating lease expense  $36,068   $16,132 
Short-term lease expense   122    — 
Total operating lease cost   36,190    16,132 
Finance lease expense:          
Amortization of right-of-use assets(1)   78,724    57,230 
Interest on lease liabilities   16,826    9,457 
Total finance lease cost   95,550    66,687 
Total net lease cost  $131,740   $82,819 

 

(1)Amortization of right-of-use assets is included within cost of revenues and selling, general and administrative expense in the combined statements of operations.

 

The following table represents the Company’s future minimum lease payments as of May 31, 2025 (in thousands):

 

   Operating Leases   Finance Leases   Total 
   Operating Leases   Finance Leases   Total 
FY26  $21,033   $140,296   $161,329 
FY27   21,798    —    21,798 
FY28   22,623    —    22,623 
FY29   17,152    —    17,152 
FY30   3,536    —    3,536 
Thereafter   —    —    — 
Total lease payments   86,142    140,296    226,438 
Less: imputed interest   (11,629)   (6,889)   (18,518)
Total lease liabilities   74,513    133,407    207,920 
Less: Current portion of lease liability   (16,093)   (133,407)   (149,500)
Long-term portion of lease liability  $58,420   $—   $58,420 

 

Supplemental cash flow and other information related to leases is as follows:

 

   Fiscal Year Ended 
   May 31, 2025   May 31, 2024 
Weighted-average years remaining (in years):          
Finance leases   3.0 years    3.9 years 
Operating leases   3.3 years    3.3 years 
           
Weighted-average discount rate:          
Finance leases   10.2%   10.4%
Operating leases   7.6%   8.1%

 

 

APPLIED DIGITAL CLOUD CORPORATION AND AFFILIATES

Notes to the Combined Financial Statements

For the Fiscal Years Ended May 31, 2025 and May 31, 2024