Earnings Call Transcript - APLD Q2 2026

Operator, Operator

Good afternoon, and welcome to Applied Digital's Fiscal Second Quarter 2026 Conference Call. My name is Konstantin, and I will be your operator for today. Before this call, Applied Digital issued its financial results for the fiscal second quarter ended November 30, 2025, in a press release, a copy of which has been furnished in a report on a Form 8-K filed with the Securities and Exchange Commission, or SEC, and will be available in the Investor Relations section of the company's website. Joining us on today's call are Applied Digital's Chairman and CEO, Wes Cummins, and CFO, Saidal Mohmand. Following the remarks, we will open the call for questions. Before we begin, Matt Glover from Gateway Group will make a brief introductory statement. Mr. Glover, you may begin.

Matt Glover, Gateway Group

Thank you, operator. Hello, everyone, and welcome to Applied Digital's Fiscal Second Quarter 2026 Conference Call. Before management begins formal remarks, we'd like to remind everyone that some statements we're making today may be considered forward-looking statements under securities laws and involve a number of risks and uncertainties. As a result, we caution you that there are a number of factors, many of which are beyond our control, which could cause actual results and events to differ materially from those described in the forward-looking statements. More detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and public filings made with the SEC. We disclaim any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. We also discuss non-GAAP financial metrics and encourage you to read our disclosures and the reconciliation tables to the applicable GAAP measures in our earnings release carefully as you consider these metrics. We refer you to our filings with the SEC for detailed disclosures and descriptions of our business as well as uncertainties and other variable circumstances, including, but not limited to, risks and uncertainties identified under the caption, Risk Factors in our annual report on Form 10-K and our quarterly reports on Form 10-Q. You may access Applied Digital's SEC filings for free by visiting the SEC website at www.sec.gov. I'd like to remind everyone that this call is being recorded and will be made available for replay via a link available in the Investor Relations section of Applied Digital's website. Now I'd like to turn the call over to Applied Digital's Chairman and CEO, Wes Cummins. Wes?

Wesley Cummins, CEO

Thanks, Matt, and good afternoon, everyone. Thank you for joining our Fiscal Second Quarter 2026 Conference Call. I'd like to begin by thanking our employees for their dedication to delivering high-performance, sustainably engineered infrastructure for AI, cloud, and blockchain workloads. Their execution and commitment continue to be foundational to our success. This quarter marked several important milestones across our HPC data center and hosting business. Polaris Forge 1 reached ready-for-service, energizing 100 megawatts on schedule and completing the first of 3 contracted buildings. The remainder of this AI factory campus is expected to be completed by the end of 2027 and will host 400 megawatts for CoreWeave, representing approximately $11 billion in prospective lease revenue over approximately 15 years. We also announced a roughly $5 billion 15-year lease with a U.S.-based investment-grade hyperscaler for 200 megawatts at Polaris Forge 2. This is a $3 billion project near Harwood, North Dakota that is advancing on schedule with initial capacity expected in 2026 and full build-out in 2027. Together, these agreements represent 600 megawatts of lease capacity and approximately $16 billion in prospective lease revenue across our North Dakota campuses. Having secured two hyperscale leases in the region, inbound demand has increased meaningfully. As a result, we are in advanced discussions with another investment-grade hyperscaler across multiple regions, including additional locations in the Dakotas and select Southern U.S. markets. While there can be no assurance of future contracts, we believe we are well positioned to begin construction of additional campuses in the near term. Hyperscalers are competing aggressively to secure sites that can support massive AI demand, responding to data highlighting significant shortfalls in global power capacity. Many are being asked to commit capital to 30-year power plant developments, meaning energy may take years to come online; it could cost more than anticipated. Beyond the immediate rush, AI infrastructure is ultimately a cost of capital business where every input matters. In this context, we chose the Dakotas because we believe they provide a durable competitive advantage with low cost of abundant energy, favorable climate, ample land for expansion of existing sites, and potential for future large-scale super sites that could align with regional energy developments, making Applied Digital sites not only immediately valuable, but we believe also more efficient and cost-effective over the long term compared with other regions in the U.S. and globally. Building on this advantage, we have significantly evolved our construction and design capabilities. Our current data center designs are modular and highly efficient, allowing us to run numerous concrete plants simultaneously and leverage prefabricated components delivered by 18-wheelers. The approach reduces construction timelines and lowers overall cost. We've expanded the footprint and flexibility of our buildings designed to allow for different GPU and ASIC chip architectures and networking infrastructure to support multipurpose AI use cases and traditional cloud workloads. While AI is driving significant demand, cloud computing continues to grow and increasingly competes for data center capacity. Our facilities are purpose-built to support training, inference, and traditional cloud workloads intended to give hyperscalers maximum flexibility over the life of the asset. Looking ahead, we expect to maintain a meaningful competitive advantage in the Dakotas and intend to announce additional locations in other advantaged regions. With that, I'll turn the call over to our CFO, Saidal Mohmand, for a detailed review of our financials. Saidal?

Mohammad Saidal Mohmand, CFO

Thanks, Wes, and good afternoon, everyone. This quarter represents a major inflection point for Applied Digital. After two years of construction and over $1 billion invested in our first 100-megawatt data center, we have now begun to generate lease revenues. We expect lease revenues to ramp over the next quarter, and it's important to note that we currently have two different campuses under construction simultaneously representing 600 megawatts. These buildings are expected to come online over the course of calendar 2026 and 2027, where we anticipate meaningful revenue growth over the coming 18 to 24 months. This does not include any additional campuses currently under advanced discussions with customers, which would be layered into these numbers according to their respective design and build timelines. From a high-level finance perspective, we have agreements in place with top-tier financial institutions that allow us to execute this repeatable and capital-efficient framework. The first step of this process is to draw on our development loan facility with Macquarie Equipment Capital, which allows us to fund pre-leased construction for new sites. Subsequent to the second first quarter end, we made our first draw under this $100 million facility. The second step, following a mutually agreed upon executed lease with an investment-grade hyperscaler, is to access the Macquarie Asset Management's $5 billion preferred equity facility. To date, we have drawn $900 million from this facility to support our Polaris Forge 1 and 2 campuses. We expect a similar financial structure will be used going forward for future development projects. This multilayered financing framework allows Applied Digital to leverage third-party capital for a majority of the upfront investment while retaining majority ownership of each site, providing financial flexibility and reducing reliance on public capital markets. On the debt front this quarter, we completed a $2.35 billion private offering of our 9.25% senior secured notes due 2030 to finance two of the three buildings at our Polaris Forge 1 site, supporting the core releases, allowing us to refinance existing debt. Note, project-level debt typically carries higher interest rates initially as it finances the riskier portion of development. But once the buildings are operational, our goal is to refinance at lower rates. Additionally, our team is actively exploring and working on options to reduce the cost of debt for the third building, ensuring we continue to optimize our capital structure. Now let's turn to the quarter. Revenues for the fiscal second quarter of fiscal '26 were $126.6 million, up 250% from $36.2 million in the prior year. The increase is primarily due to $73 million of revenue generated from tenant fit-out services associated with our HPC Hosting Business, along with $12 million of recognized revenue in connection with the commencement of the first CoreWeave lease at Polaris Forge 1, reflecting partial quarter lease revenue. On a cash basis for the leases, revenues were approximately $8 million. The difference between cash received and the revenue recognized reflects ASC 842 lease accounting, which requires lease revenue to be recognized on a straight-line basis over 15 years. We will aim to provide clarity on this difference on an annual basis going forward. Applied Digital's Data Center Hosting segment, which operates 286 megawatts of customer ASICs across two North Dakota facilities, had an exceptionally strong quarter, contributing $41.6 million of revenue, up 15% compared to the prior year. This growth was primarily driven by increased capacity online across the company's hosting facilities. We are very pleased with this business, which generated roughly $16 million in segment operating profit in just one quarter on a $131 million asset base. Cost of revenues in total were $100.6 million compared to $22.7 million in the prior quarter. Approximately $69.5 million of the increase in the cost of revenue was associated with the tenant fit-out services for our HPC Hosting Business, while the remaining increase was associated with our Data Center Hosting business and other expenses directly attributable to generating revenue. SG&A was $57 million compared to $26 million. This increase was due to an increase of $23.8 million in stock-based compensation due to accelerated vesting of certain employee stock awards, $4.7 million in professional service expenses primarily related to an increase in legal services, and $1.2 million in personnel expense for employee costs and other costs attributable to supporting the growth of the business. Interest expenses were $11.5 million compared to $2.9 million, while net loss was $31.2 million or $0.11 per share. On an adjusted basis, adjusted net income was a positive $100,000 or $0.00 per share. Adjusted EBITDA for the quarter totaled $20.2 million. From a balance sheet perspective, Applied Digital is exceptionally well positioned. We ended the second fiscal quarter with $2.3 billion in cash, cash equivalents, and restricted cash versus $2.6 billion in debt, most of which does not mature until 2030, and approximately $2.1 billion in total equity. Note, these figures do not include the $382.5 million in proceeds from financings completed subsequent to the quarter end. Our goal is to maintain one of the strongest balance sheets in the industry throughout the majority of the construction phases, intentionally holding a robust liquidity position to preserve a strong credit profile while enabling additional investments in equipment and new sites, then reassessing as buildings come online as our cash flow increases. With that, I'll turn over the call to Wes for closing remarks. Thank you.

Wesley Cummins, CEO

Thank you, Saidal. Applied Digital is executing in a market defined by extraordinary hyperscaler investment now exceeding $400 billion annually. With our first two hyperscalers under contract for 600 megawatts in additional sites in advanced discussions, we are well positioned to scale rapidly. We now expect to surpass our long-term goal of $1 billion in NOI within five years. The Dakota campuses are expected to provide a durable strategic advantage through low-cost energy, natural cooling, and a supportive regulatory environment. We remain committed to responsible development, strong community partnerships, and environmental stewardship. We continue to invest ahead of the curve. This quarter, we led and invested $15 million in a $25 million funding round for Corintis, supporting advanced liquid cooling solutions for high-density AI workloads. We are also working with utilities and strategic partners, including Babcock & Wilcox Enterprises to explore ways to add power to the grid without increasing costs to our customers. These initiatives reinforce our leadership in next-generation data center design, responsible grid management, and long-term shareholder value creation. We plan to continue advancing our thought leadership at the forefront of data center technology and deepening our influence across the broader ecosystem. I'm also proud to announce the launch of Applied Digital Cares, a community initiative funding brands that support education, health, innovation, and local development in the regions where we operate. Through this initiative, we aim to improve the standard of living in these focused communities because our success depends on theirs. Finally, as noted earlier, I want to expand on the Board's decision to spin out Applied Digital Cloud. We've entered a non-binding Letter of Intent to combine Applied Digital Cloud with EKSO Bionics to form ChronoScale, a dedicated GPU accelerated-compute platform for demanding AI workloads. This transition separates our cloud platform from our data center business intended to allow each to scale independently with greater strategic and capital flexibility. ChronoScale is set up to leverage the proven Applied Digital Cloud platform among the first to deploy NVIDIA H100 GPUs at scale. On an anticipated closing in the first half of 2026, Applied Digital is expected to own over 80% of ChronoScale. Today, the cloud business generates over $60 million in trailing 12-month revenue with $313 million in assets. We believe spinning off our cloud business best positions us to serve the accelerating AI market while enhancing long-term shareholder value. With that, operator, we'll open the call for questions.

Operator, Operator

Your first question comes from the line of Nick Giles from B. Riley Securities.

Nick Giles, Analyst

My first question is about your growth strategy in the cloud business. It's great to see the announcement for ChronoScale. Should we anticipate the Applied platform being a host for future GPU purchases? Additionally, how can Applied help attract more customers for ChronoScale?

Wesley Cummins, CEO

Thanks, Nick. We've had a lot of discussions around that. So I think one of the key advantages that ChronoScale will have is the relationship with Applied Digital and access to large-scale data center facilities. Deploying the accelerated compute, whether it be GPUs or TPUs or LPUs, is part of the equation, but having access to large-scale data center facilities to actually make those deployments is a bigger part of the equation right now. And I think that's going to give that platform an advantage having the relationship with Applied Digital. We've had some of those discussions. We don't really want to get into how that will work in the future, but I do think that's a big advantage for the cloud business as it spins out.

Nick Giles, Analyst

Got it. I appreciate that, Wes. My second one was just you signed an agreement for a limited notice to proceed with Babcock & Wilcox, and I was just wondering if you could touch on the opportunity there. What kind of optionality does this really give you going forward? And what should we be looking for in the upcoming contract release?

Wesley Cummins, CEO

The BW solution is a unique and exciting offering in the market because it utilizes older technology that has been proven for over a century. It uses steam turbines similar to those found in coal plant boilers, but operates on natural gas. The company has successfully made many transitions from coal to natural gas over the past ten years. This technology allows us to enter the market sooner. If we ordered traditional natural gas turbines today, we likely wouldn’t receive them until 2031 or 2032. However, we need power sooner than that. We are currently collaborating with our utility partners, particularly in the Dakotas, and anticipate expanding to other states as well. The initial feedback from those utilities has been overwhelmingly positive, and they are very interested in our solution. Any utility in the country is familiar with BW, which has a long-standing presence and strong reputation. The ability to introduce a product 3 to 4 years earlier to generate power is a significant advantage for both the utilities and us. We expect to share more details in the first quarter as we finalize a site and schedule for constructing the equipment. This presents a solid opportunity for Applied Digital to accelerate the expansion of its current and future campuses.

Operator, Operator

Next question comes from the line of Darren Aftahi from ROTH Capital.

Darren Aftahi, Analyst

Congrats on the progress. Two, if I may. Wes, can you just talk generally about the landscape for leases and how pricing may have changed over the last 6 months? Like is it improving, staying the same, going down? And then second question, can you just talk a little bit about the pre-lease financing? I appreciate what it's actually doing. But like what does that say about your confidence when you're progressing on sites where you don't have signed leases? Just any kind of commentary and context would be great.

Wesley Cummins, CEO

Sure. I'll start with pricing and focus specifically on our situation. Overall, pricing has remained stable or has slightly improved over the last six months. The demand has also been exceptionally strong during this period. I want to expand a bit on the contracting side. There's the headline price visible in contracts and a calculated yield based on an estimated cost to build. However, what's equally or more important is that we are securing more favorable terms in other areas of the contracts, particularly regarding cancellation and transferability. These factors make our contracts much more reliable over a 15-year term. For instance, our current contracts are essentially non-cancelable for 15 years. If a customer opts to cancel for convenience, they still owe us payments for the entire 15 years, which is referred to as a make-whole provision. We've succeeded in securing a 100% make-whole transferability, ensuring that they cannot transfer to a lower credit rating than ours. Many elements contribute to the contracting process, but generally, the contracting environment has improved over the past six months. Regarding the Macquarie equipment facility announcement, you can compare it to what we did for our Harwood facility in North Dakota. We followed a similar approach. I mentioned before that we would commence groundwork and progress the project when we felt confident about securing a lease at a new campus or campuses. We have made the facility at Evergreen, allowing us to continue drawing and repaying funds. In Harwood, we repaid our draw from Macquarie Asset Management, and we've drawn down again for purchasing land and equipment. We plan to start construction on at least one new campus by the end of January because we are quite confident about signing a lease with a new customer, which is different this time. Our focus is on achieving investment-grade hyperscalers. We have a lot of momentum and have qualified with most investment-grade hyperscalers who prioritize fixed commitments. We aim to add new locations and customers and anticipate significant success in 2026. Based on our current efforts, we expect this to happen very early in 2026.

Operator, Operator

Your next question comes from the line of Rob Brown from Lake Street Capital Markets.

Robert Brown, Analyst

Congratulations on all the progress. Regarding the ChronoScale spinout, you mentioned closing around midyear. Can you outline the steps that need to be completed between now and then to finalize the agreement and achieve closing? What needs to take place?

Wesley Cummins, CEO

Sure. It will technically be a merger. We expect to have a definitive agreement later this month or early in February. After that, there will be a process for a shareholder vote to finalize the merger. We anticipate this happening in the first half of '26. If I had to guess, it could be as early as March, but I would expect it to be more around April or May as we move forward with the process.

Robert Brown, Analyst

Okay. Great. As you consider the business and its potential growth, I believe you mentioned a trailing figure of $60 million or a projected $75 million. What do you see as the growth opportunity? Is there more capacity that can be leased out as a separate business? I assume you also anticipate some growth in capacity, but could you share your perspective on the growth potential?

Wesley Cummins, CEO

Yes. Just for context on this, Rob, when we announced back in April, we were seeking strategic alternatives. We evaluated a lot of alternatives. But while we were evaluating those alternatives, I think that market changed pretty significantly. What we're seeing is a big opportunity in the compute side of the market, obviously, the data center side as well, but the compute side of the market, you're seeing a lot of deals happen over the past 3 or 4 months in that part of the market. We're involved in a lot of those counterparties and discussions, and we think there's a really large opportunity for our cloud business as we spin it out into ChronoScale to get some of those types of contracts. We think there's a really unique relationship there where we can get data center capacity to deploy significant scale for those style of contracts with those customers. We think this is the absolute best path for value creation for our shareholders to let this company spin out, capture that opportunity and raise its own capital, and get on its own growth trajectory, which we just haven't focused on for the past 8 months. We think there's a huge opportunity there, and you can see the stuff that's going on in the market, and we're really well positioned to capture some of those opportunities.

Operator, Operator

Next question comes from the line of Mike Grondahl from Northland Securities.

Mike Grondahl, Analyst

You've mentioned a couple of times advanced discussions. Can you talk a little bit about how many sites you're having advanced discussions about like how many megawatts just so we can get a feel kind of a sense of the breadth that you're talking about?

Wesley Cummins, CEO

Sure. I think we've talked about 2 or 3 sites. We're in advanced discussions on 3 sites in 900 megawatts.

Mike Grondahl, Analyst

Great. 3 sites in 900 megawatts. And then, Wes, how are you thinking about the pipeline today? How would you characterize that pipeline?

Wesley Cummins, CEO

The pipeline remains robust. I will say, Mike, when I think about the business, and it's been like this for the past few months, I'm thinking less about the demand side of the equation. I talked about this a lot on the last call, which is our ability to scale, our ability to scale across multiple sites then do construction across multiple sites, and how many sites can we do construction across. The team spent a lot of time in 2025, and we'll continue in '26, working on our ability to scale and execute these projects at the size that we're doing across multiple sites. So it's less on the demand side because that's not been really the issue for us or really, I think, the issue for the industry. We'll focus more on how much can we do and how much can we build from a supply chain perspective, from a personnel perspective, on an annualized basis. I don't think demand is going to be the limiter for us, but we always want to make sure that we're delivering on time and on budget for our customers. I don't want to go too far out. We haven't hit that limit yet but it's the piece that I think about a lot, and we internally think about a lot is what is the limit for us on an annual basis. It's a large number but that's really more of the limiting factor for us and not what the demand picture looks like.

Operator, Operator

Next question comes from the line of George Sutton from Craig-Hallum.

George Sutton, Analyst

Wes, you mentioned having been qualified by a few of the investment-grade hyperscalers, can you just talk about what that means when we talk about being in advanced discussions? I mean, how much more simplicity of getting something across the finish line is there once you've gone through that process versus hypothetically someone new in the market?

Wesley Cummins, CEO

What I would say generally, and I'm only able to reference our experience. Getting onboarded, getting to the point where you signed a master agreement that governs typically work orders or service orders you'll sign underneath of that can be anywhere from, on the low end, 3 months to, on the high end, 9 months to a year. We've been through the process there for most of these hyperscalers. Out of those, we’re through that process with five of those. I think we're in a really good position. If we've already been through that process, doing a new building, even if it's a new building on the same campus or expansion in the current building or doing a new campus if you're through that with one of those hyperscalers, is a much shortened time frame to get to that actual contract versus starting from scratch.

George Sutton, Analyst

Got you. So I want to put a couple of things together, and if you can help me. You were on CNBC the other day, mentioned, by the way, movie star quality experience, frankly. You mentioned you had done $16 billion of deals in '25, and that you would anticipate doing that or potentially better in '26. I want to dovetail that with what you just said on we're late stage with 3 sites in 900 megawatts. Am I kind of putting these things all together correctly?

Wesley Cummins, CEO

Yes, I think that's correct. What I would just add to that on the 900 megawatts, I don't want to set the expectation that all of that is done at the same time. That could be one at a time. It could be none. We've been through enough of this. George, you've been through this with us as we've gone through the last few years. Nothing is done until it's done. That's just what we're working through right now. But those two going together, I think, you're reading that correctly.

Operator, Operator

Next question comes from the line of John Todaro from Needham & Company.

John Todaro, Analyst

Wes, you spent a good amount of time talking about how, I guess, supply and execution is a little bit more of the difficult part than demand. I think you ultimately ended ahead of schedule in that first build for CoreWeave. Can you just walk us through maybe what you learned from that execution and give us confidence in how you'd be able to continue to execute on those builds on the development side? And then I have a follow-up.

Wesley Cummins, CEO

We learned a lot from the process of building our first facility, which has led to many refinements. As I've mentioned before, one of our key differentiators in the market is that we began this journey back in 2022. We encountered several challenges along the way, but fortunately, most of these experiences were on a smaller scale. The lessons we learned from that initial building are evident in our design and construction changes, as well as in how we manage our supply chain by standardizing the number of SKUs and suppliers. This streamlining aids in our construction processes. We believe we have a solid grasp on our construction timelines, though factors like weather can pose challenges. We've built in North Dakota in the winter for four consecutive years, so we are quite used to that environment. We secured our supply chain over 18 months ago and are optimistic about our capacity for 600 to 700 megawatts of MEP annually. However, we see the need to expand this further. We are confident in our processes and the growth of our construction and development team compared to our first project. I am proud that we completed that project on schedule and within budget for our client, and we must continue this trend. We are optimistic about the CoreWeave building, which we expect to deliver in the middle of this year, as well as the Harwood building shortly thereafter. The upcoming buildings in Ellendale and Harwood also look promising in terms of our progress. The advancements in our fourth-generation design have played a significant role in simplifying our processes and ensuring timely delivery.

John Todaro, Analyst

That's great. And then just a quick follow-up. I think you've mentioned in the past getting calls from entities with stranded power. It sounded like there might be a little bit more pockets of available power out there than some of us in the industry had initially thought. Could you just maybe frame that up? Is there still additional kind of pockets to acquire more fairly near-term power? And maybe talk to your color on that?

Wesley Cummins, CEO

Yes. We keep finding more opportunities, and we continue to see opportunities. Everything we're in process with right now is organic. We have a large amount in-flight that is organic, but we continue to look at third-party opportunities. Some of those, really, for us, it could be in a different geographic market for us, that is a really attractive market. We continue to evaluate those opportunities. I would say, typically, multiple times a week.

Operator, Operator

Your last question comes from the line of Michael Donovan from Compass Point.

Michael Donovan, Analyst

Congrats on the quarter. Following up on Mike's pipeline question, can you touch upon expansion opportunities at PF-1 and PF-2? Do you still have confidence in those reaching 1.4 gigawatts and 1 gigawatt, respectively? And I have a follow-up.

Wesley Cummins, CEO

Yes. Every one of our campuses has the potential to go to at least a gigawatt. Some significantly beyond a gigawatt. We have two campuses now that can each go to 2 gigawatts or more. We have that pipeline in the future for ourselves. We're working on three additional campuses. We're working on a lot more than that. But we do have a clear path to whether it's by 2030 or 2031 or 2032 to growing our capacity to 5 gigawatts if we don't add another campus after that. We expect that we would, but it puts a really good growth path out for us just having these campuses in place. Just getting to 2 gigawatts if we were talking about this a year ago would be monumental for us. But if we can expand to 5 campuses and have a clear path to 5 gigawatts plus of capacity over the next 5 years, that's a really great position for us. Every one of those campuses has that expansion potential.

Michael Donovan, Analyst

Great. I appreciate that. And with the discussions around NVIDIA this week with liquid cooling, can you discuss a bit on what makes Corintis a competitive solution?

Wesley Cummins, CEO

Corintis is quite fascinating. Their technology has recently been featured in a positive announcement with Microsoft. What stands out to us is their cold plate technology, which is reminiscent of semiconductors and modules, as many semiconductors are integrated into modules. They have developed a specialized patterned cold plate tailored to each chip type individually, such as B200, B300, or Rubin. They customize the cold plate according to the heat points of the chip, incorporating numerous microchannels. Currently, this technology is placed on top, but it is intended to be integrated into semiconductor packaging and eventually into the manufacturing process of semiconductors. The key advantage of this technology, which has shown promising results for them, is its ability to maintain cooling efficiency even when chip power requirements increase significantly. For instance, if one chip uses 1 kilowatt and the next generation requires 3 or 5 kilowatts, this technology can continue to use the same amount of liquid to cool the chips as their power requirements rise. There is a limit where more liquid will be necessary, but from the perspective of a data center operator, having this efficiency is beneficial for our clients. Being able to supply the same liquid amount for chips with three times the power density helps us secure the longevity of our infrastructure. We are genuinely excited about this technology.

Operator, Operator

There are no further questions at this time. I'd like to turn the call back to Wes Cummins for closing comments. Sir, please go ahead.

Wesley Cummins, CEO

Thanks, everyone, for joining us for our Q2 earnings call. I appreciate all of the support and look forward to speaking to you in April. Thanks.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.