On June 8, an unnamed investment-grade hyperscaler signed its third long-term take-or-pay lease with Applied Digital, committing to 210 MW of dedicated AI compute capacity at the company's new Delta Forge 2 campus for 15 years. The contract locks in $5.2 billion in base-term revenue, or $12.7 billion if all renewal options are exercised over three decades. That number alone signals a structural shift: a major cloud operator is not building its own AI factories. It is paying someone else to build them, operate them, and guarantee their availability at scale.
Applied Digital's CEO Wes Cummins calls this the 'franchise model', a core design, construction, and operations playbook replicated across every campus in every market. The same customer has now proven the model works twice before; this third lease is institutional confidence, not experimentation. With 70 percent of Applied Digital's contracted revenue now backed by U.S. investment-grade hyperscalers, the company has moved beyond pitch and into territory where the customer base polices the business case. The math is real: 1.4 GW of total contracted critical IT load, $36 billion in base-term revenue across five campuses, and a single customer accounting for roughly $20.2B of that base revenue alone, or about 56 percent of the total portfolio, concentrated enough to matter operationally but diversified enough to weather the loss of one tenant.
The speed of execution tells the story. Within 24 hours of announcing the Delta Forge 2 lease on June 8, Applied Digital priced a $1.59 billion senior secured notes offering to fund the fourth building at Polaris Forge 1, its flagship campus. This is not raising equity at inflated multiples; this is debt capital formation backed by contracted revenue. The bond market has a way of assessing customer quality and contract durability. Investment-grade hyperscalers have public disclosures, credit ratings, and quarterly call obligations. A $5.2 billion, 15-year commitment from one of them carries weight that a startup customer or a middling regional operator cannot match. Delta Forge 2 construction is targeted to begin operations in Q1 2028, roughly 18 months out, a timeline that assumes financing is locked and permits are either in hand or imminent.
This deal directly contradicts the conventional wisdom of the last two years: that hyperscalers would vertically integrate all AI infrastructure to avoid middleman margin and ensure supply security. Instead, at least one of them, likely AWS, Google, or Microsoft, has concluded that outsourcing to a dedicated operator who assumes the capital cost, the permitting risk, and the operational liability is cheaper and faster than managing construction themselves. That customer is willing to pay a premium for certainty: a contracted, dedicated, U.S.-based facility with proprietary waterless cooling and high-density power, already replicated at four other locations. Replication cuts both ways: the customer gets confidence that Applied Digital knows how to build and operate this thing; Applied Digital gets repeatable unit economics across five markets instead of one-off engineering projects.
The immediate winners are clear. Applied Digital has just secured enough committed revenue to self-fund expansion without issuing equity, a structural advantage over CoreWeave, which has relied on customer prepayments and equity raises to fund its portfolio. Equinix and other traditional colocation players are now competing against operators who own the entire stack: site selection, power engineering, thermal design, customer SLA, and long-term take-or-pay contracts. The hyperscaler in question, still unnamed in SEC filings, but statistically AWS, Google, or Microsoft, has bought certainty at the cost of margin: they are paying Applied Digital to build and operate capacity they could theoretically build themselves, but have decided not to. That is a rational bet when construction timelines and permitting uncertainty are the binding constraint on AI infrastructure scaling. The stock moved up more than 10 percent on the news.
What to watch: whether the other two major hyperscalers move to replicate this model with their own third-party infrastructure partners, whether Applied Digital announces the customer within the next two earnings calls (competitive intelligence on which hyperscaler is outsourcing), and whether the Q1 2028 operational milestone at Delta Forge 2 hits on schedule, a miss would signal that the permitting or power procurement assumptions that underlay the $5.2B valuation are softer than the deal structure implies.