Digital infrastructure firm Applied Digital has announced that it is set to sell its cloud services business.
Announced as part of its earnings report this week, the company said the decision was the result of both internal and external pressures, and appears to pave the way for a potential pivot to becoming a real-estate investment trust (REIT) in the near future.
Despite making up 33 percent of Applied Digital’s revenue for the year ending February 2025, the presence of the cloud services business appeared to cause friction with the firm’s potential data center customers, who viewed it as a competitor.
“After careful consideration, our board of directors has determined that reviewing strategic options for this business is in the best interest of the shareholders,” said Applied Digital CEO Wes Cummins, in an earnings call earlier this month.
"This decision is based on several factors. First, our discussions with potential customers regarding leasing our data center business [makes] it clear that our cloud business is typically viewed as a competitor."
The firm also noted external market pressures in their decision to sell, citing the upcoming IPO’s of competitor cloud GPU businesses in the near future.
Further transformations could be on the way for Applied Digital, after the company noted that the sale of the cloud services business would ease any potential future transition to becoming a data center REIT.
“We also believe that if we were to transition to a data center REIT in the future this would lower our cost of capital as investors typically assign higher multiples to data center business due to their stability and long-term growth potential,” Cummins added.
Real estate investment trusts (REITs) are companies that own and generate most of their income from real estate. Data center REITs are investment trusts where all or the majority of the trust's revenues come from leasing data centers.
Many of the largest players in the data center industry are classed as REITs, including Digital Realty, CyrusOne, Equinix, Iron Mountain, Coresite, Quality Technology Services (aka QTS), and Keppel DC REIT in Singapore.
Applied Digital’s Q3 2025 earnings revealed the company’s revenues increased 22 percent in the past year, from $40.3 million to $52.9m. The company said its growth was “primarily driven by the continued expansion of the company’s Cloud Services Business.”
Applied Digital (formerly Applied Blockchain) has more than 100MW of capacity under construction for its HPC business in North Dakota and a planned pipeline of more than 1GW.
While it does not mine its own Bitcoin, the company has traditionally hosted hardware on behalf of other cryptomining firms. As with many other cryptomine firms, the company is pivoting a portion of its footprint to host HPC and AI hardware amid massive demand for available capacity.
It has more than 280MW of cryptomining capacity in operation across two sites in North Dakota, and more than 1,000 GPUs deployed in four third-party data centers for its AI cloud business.
