Core Scientific Q3 2026 Earnings Call Transcript

Core Scientific (NASDAQ:CORZ) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Core Scientific’s GAAP colocation revenue increased nearly 60% sequentially, with adjusted EBITDA rising from $41 million to over $130 million, driven by the execution of colocation agreements with CoreWeave.

The company is advancing its 530 megawatts contracted by AMD, with a total of 1.1 gigawatts contracted between CoreWeave and AMD, contributing to its confidence in scaling operations.

Core Scientific does not expect election results to affect its current operations or delivery timelines, with strong community relationships and regulatory compliance backing its confidence.

The company is winding down its Bitcoin mining operations and will focus on becoming a pure-play high-density colocation provider by 2027.

Management highlighted successful financing efforts, maintaining $1.7 billion in liquidity and progressing through due diligence for potential project bonds to support AMD contract commitments.

Full Transcript

OPERATOR

Greetings, and welcome to the Core Scientific fiscal third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, John Charbonneau, Senior Vice President, Investor Relations. Please go ahead.

John Charbonneau (Senior Vice President, Investor Relations)

Good morning, and welcome to Core Scientific’s third quarter 2026 earnings call. Before we begin, statements made on this call other than historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations. Words such as anticipates, estimates, expects, intends, and believes, and similar expressions identify forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ substantially.

For more information, please review the risk factors discussed in the company’s reports on Forms 10-Q and 8-K filed today with the SEC, along with the press release and slide presentation included in those filings. Our forward-looking statements speak only as of today. We undertake no obligation to update them to reflect subsequent events or circumstances. Today’s presentation is available on our website, investors.corescientific.com. The information on this call is accurate only as of November 5, 2026. Joining me today are Core Scientific’s Chief Executive Officer Adam Sullivan and Chief Financial Officer Jim Nygaard. We will hold a question-and-answer session after management’s remarks. Adam, over to you.

Adam Sullivan (Chief Executive Officer)

Thanks, John, and good morning, everyone. Thank you for joining our Q3 2026 earnings call. Beginning approximately two years ago, we announced a series of colocation agreements with CoreWeave providing for the development, at CoreWeave’s expense, of 590 megawatts. While many questioned the strength of this arrangement and its potential to support our future growth, we executed. Today we have built five data center campuses, and we are billing our customer for a total of 485 megawatts.

The remaining 100 megawatts is currently in commissioning and will begin recognizing additional revenue over the course of the next few months. In addition, these contracts enabled us to raise over $3 billion to fund our next phase of growth and have established a reputation for delivery that helped us win our latest customer contract. At the same time, uncertainty around new data center development in Texas, Georgia, and elsewhere makes our completed operating sites already serving customers, and our sites in advanced development with secured power and near-term capacity, even more valuable.

Our execution has delivered tangible results. GAAP colocation revenue increased nearly 60% sequentially, while adjusted EBITDA reached over $130 million, up from $41 million in the second quarter. We expect further growth as the remaining CoreWeave capacity comes online in the coming months. As we approach completion of that buildout, we are also advancing the initial 530 megawatts contracted by AMD. With over 1.1 gigawatts contracted between CoreWeave and AMD and 1.9 gigawatts under reservation with AMD, we have tremendous confidence in our ability to scale.

Investors have had much to assess in recent months, from risks in Texas to concerns about financing and access to capital across the AI industry. Today I will address those topics directly and explain where Core Scientific stands. I’ll begin with this week’s midterm election results and their implications for Core Scientific, as regulatory developments have understandably been a focus for investors. Our outlook for our currently contracted capacity is unchanged.

We do not expect the election results to affect our existing operations or delivery timelines for capacity under development. Our confidence rests on our execution, development progress, and our community relationships. As we have brought hundreds of megawatts online under our first customer contract, we have worked closely with local officials, utilities, and community stakeholders. Two of the campuses supporting our AMD contract already have operating data center capacity for our other customers, giving us development certainty and affording us the opportunity to build on established operations and relationships.

We have also advanced our projects through the increased permitting and regulatory review introduced this year. Our sites received conditional classifications consistent with our expectations under ERCOT’s Batch 0 process, and we continue to work through the remaining requirements. We are confident that our operating facilities and the remaining capacity left to be delivered within the next few months will continue to operate in this new landscape without interruption.

In Oklahoma and Alabama, we expect continued support for responsible data center investment. In Muskogee, Governor Stitt and Governor-Elect Masie have supported our development and expansion plans, recognizing the jobs, investment, and economic activity these projects bring to their communities. In Alabama, Governor-Elect Tuberville is supportive of data center development, with a focus on protecting prices for local citizens. Core Scientific is fully aligned with their positioning, as we funded more than $12 million in infrastructure investments, including transmission upgrades that provide grid hardening protections for the Auburn region.

In Georgia and Texas, we expect the incoming administrations to emphasize responsible data center development. We have operated in both states for years and have established relationships with local officials and utilities. Our approach remains consistent: address community concerns directly and fully fund the infrastructure our projects require. At Dalton, we have delivered over 70 megawatts of billing capacity to our customer and expect approximately another 100 megawatts to come online in the coming months.

Construction for our first customer is well advanced, and we continue to coordinate closely with the local utilities and community stakeholders as we complete the remaining capacity and begin to build for our second customer. In Texas, Pecos remains on schedule for initial delivery in the first half of 2027. Both Pecos and Hunt have secured their stormwater permits, and we expect their backup generators to qualify for authorization under the applicable Permit by Rule framework.

These milestones support our development schedules as we advance the remaining requirements. At Hunt, our campus has been included in the November Quarterly Stability Assessment, an important and final milestone on its path to energization. Responsible development means making tangible investments in our communities. In Dalton, we have invested more than $700,000 in road improvements, and in Muskogee, contributed $13 million towards the utility-owned substation and switchyard supporting our project. These investments reflect our commitment to funding the infrastructure our developments require and supporting the communities where we operate. Regulatory requirements will continue to evolve, and our experience navigating those requirements together with the progress already made across our campuses gives us confidence in our ability to execute.

Next, let me turn to financing. Sustained demand for AI infrastructure creates both a significant opportunity and an extraordinary need for capital. Facilities require substantial investment before they generate revenue, so access to financing will increasingly shape the pace of development. We believe securing capital on attractive terms will be an important competitive differentiator. Notably, we have already invested from cash on hand all the equity capital required from Core Scientific for the initial 530 megawatts under the AMD contract, and going into early 2027 our focus is on securing the remaining project financing to support delivery of our commitments. We are progressing through due diligence for potential project bonds and working with leading financial institutions to determine the best financing path. While project bonds remain our expected approach, we are also evaluating other debt financing options to balance cost of capital, flexibility, and execution certainty as market conditions continue to evolve.

We believe our execution on the CoreWeave contract has helped establish credibility with potential lenders and financial institutions, positioning us well to compete for capital. Turning to CoreWeave, the increased focus on financing across the AI industry has brought greater scrutiny to CoreWeave and the neo-cloud business model. We remain confident in CoreWeave’s long-term position in the AI ecosystem. For our facilities, CoreWeave has already funded the overwhelming majority of the buildout, which is nearing completion. We are now billing for 485 megawatts of the 590 megawatts contracted across five campuses, up from 120 megawatts at the beginning of the year.

Dalton Phase Two is the only facility still under construction, and we remain on track to deliver the remaining approximately 100 megawatts by early next year. The substantial investment required to build these facilities has therefore already been made. That upfront investment also brought down CoreWeave’s ongoing lease rate, which we believe makes our facilities among the most economically attractive in its portfolio. With its build costs already spent, we believe retaining this capacity allows CoreWeave to preserve favorable economics while continuing to serve end customers whose workloads are already running within our campuses.

In addition to those economic incentives, our agreements include contractual protections at certain campuses. Payments are made through special purpose vehicles supported by end customer commitments, with CoreWeave remaining the ultimate guarantor. We also retain a security interest perfected by UCC filings on our data center infrastructure until ownership of the infrastructure transfers to CoreWeave at the end of the contract. We believe CoreWeave’s scale, expanding customer base, and strategic relationships position it well for the long term.

Our focus remains on delivering and operating the infrastructure that supports its growth. Our execution on the CoreWeave buildouts played a central role in earning AMD’s business and securing the initial 530 megawatts contracted across five campuses. AMD could see the results firsthand: operating facilities across multiple locations and a team that had delivered complex infrastructure at scale. That track record, together with the quality of our power and real estate portfolio, gave AMD confidence in our ability to support its deployment plans.

AMD’s initial commitment builds on our established design, and we continue to work closely with its team on co-design initiatives to support future requirements as its technology roadmap continues to evolve. Though they represent less than half of our total contracted capacity today, the AMD contract, directly or through credit support, represents over half of our contracted stabilized NOI. Delivery of that 530 megawatt commitment remains on track to begin at Pecos in the first half of 2027, with approximately half of the 530 megawatts expected to come online next year and the balance throughout 2028.

Beyond the initial 530 megawatts, AMD holds exclusive reservation rights for approximately 1.9 gigawatts of additional capacity across Muskogee, Hunt, and Pecos. Commitment deadlines generally fall on a quarterly basis, with the overwhelming majority of these advance commitments required to be made in 2027 and the final deadline at the end of 2028. In agreement with AMD, we are not disclosing individual deadlines. For any additional capacity AMD commits to, we expect pricing to reflect the agreed-upon basis of design, prevailing rates, and development costs at that time, with the objective of maintaining substantially similar returns.

We expect to support those commitments through a combination of incremental grid-connected power capacity, progressing through load studies, and behind-the-meter solutions. This includes approximately 385 megawatts of incremental grid-connected power already secured, split equally between Muskogee and Hunt County, expected to be available by mid-2028. Since signing the initial 530 megawatts, we have worked with AMD to conduct due diligence on multiple vendors for behind-the-meter solutions.

In parallel, we have advanced development of a dedicated natural gas pipeline in our connection to Pecos. The proposed 10.6-mile pipeline would connect the site to the existing natural gas transmission infrastructure, supporting potential on-site power generation and unlocking additional capacity for future expansion. This work positions us to move forward as conditions become more certain and our plans align with AMD’s needs. Before I turn the call over to Jim, let me put our growth opportunity in perspective. We have approximately 1.1 GW contracted across CoreWeave and AMD. Once fully delivered and billing, we expect that portfolio alone to generate $1.8 billion in average annual run-rate revenue and $1.6 billion in NOI. Delivering that capacity remains our priority. We are also simplifying the business to focus our resources on more attractive long-term growth opportunities.

We expect to complete our exit from Bitcoin mining by year end. Beyond our existing contracts and AMD’s reservation rights, we continue to evaluate approximately 2 gigawatts of potential capacity at new sites, with power energization expected in 2029 and beyond. The current environment is also creating a broader range of acquisition opportunities. In recent months we have seen more assets offered for sale, from powered land to facilities under construction to projects with customer contracts already in place.

The opportunities right now are abundant. Our operating scale and demonstrated execution give us an advantage in evaluating those opportunities. With a business already generating substantial revenue and adjusted EBITDA, we can assess what an acquisition would add to our portfolio and how effectively we could develop, operate, and finance it. The right opportunity could accelerate delivery, reduce development costs, or add contracted revenue. We intend to be selective, pursuing acquisitions that meet our return requirements while preserving the capital and management attention needed to deliver our existing commitments.

Our immediate focus is on completing the CoreWeave buildout and delivering the AMD program while positioning the business to expand our site portfolio and our customer base. We have substantial growth already under contract through 2028, the capabilities to execute on it, and opportunities to extend it even further. We are excited about where Core Scientific is today and believe the broader market backdrop will open up new opportunities for our business.

With that, I’ll turn the call over to Jim.

Jim Nygaard (Chief Financial Officer)

Thanks, Adam. We continue to execute on our colocation buildouts in the third quarter, bringing another 90 megawatts into billing. Those deliveries, together with a full-quarter contribution from capacity delivered in the second quarter, drove a significant increase in our financial results. GAAP colocation revenue grew nearly 60% sequentially to $215 million, while adjusted EBITDA more than tripled to $134 million from $41 million in the second quarter.

This also drove a meaningful expansion in adjusted EBITDA margin to 57% from 25% last quarter. Looking ahead, we are expecting a double-digit sequential increase in fourth-quarter revenue as we continue to bill for additional megawatts and benefit from a full quarter of revenue from prior deliveries. As a reminder, under GAAP, revenue from the CoreWeave contracts is recognized on a straight-line basis over the 12-year lease terms, effectively pulling forward contractual escalators.

Moving on to our Bitcoin mining business, we continue to wind down operations during the quarter, with nearly 50% fewer miners online at the end of September than at year-end 2025. We expect to complete the wind-down during the fourth quarter and enter 2027 as a pure-play high-density colocation provider. On the expense side, third-quarter cash SG&A was approximately $28 million, slightly below the second quarter, which included one-time professional fees related to our bond issuance. While we are not providing formal SG&A guidance, we continue to view the low $30 million range as a reasonable quarterly baseline, with some variability as we make targeted investments to support growth.

Turning to liquidity and financing, we ended the third quarter with approximately $1.7 billion of liquidity, comprised of approximately $800 million in cash, approximately $840 million in restricted cash and debt service reserves, and $100 million of revolver availability. We included restricted cash in this measure, which consists of funds held in escrow for certain utility and development costs. Liquidity declined approximately $1 billion from the second quarter, reflecting $540 million in capital expenditures, primarily related to AMD sites, and approximately $440 million for the Polaris acquisition.

With our equity contribution to the initial 530 megawatt buildout already invested, our financing efforts are focused on the remaining capital needed to complete these projects. Project bonds remain our expected approach, and we continue to advance that process with our financing partners as we look ahead to 2027. We are also evaluating other debt financing options to secure an attractive cost of capital as market conditions evolve. We do not expect to issue additional equity or equity-linked securities to fund the first phase of the AMD buildout.

We also currently expect approximately $650 million in cash proceeds from the exercise of our Tranche 1 warrants around their January 2027 expiration, further supporting our liquidity. Beyond our existing CoreWeave and AMD commitments, we will maintain a high bar for capital deployment, including new site acquisitions and development of uncontracted capacity. We intend to preserve our financial flexibility to pursue attractive opportunities while prioritizing delivery of the projects already underway. From the $1 billion financing facility announced in March to our $3.3 billion senior secured bond issuance in April, we have consistently demonstrated our ability to secure capital to support our growth.

Our focus today continues to be on execution at every level in our organization to ensure the efficient deployment of that capital for the long term. With that, I’ll hand the call back to the operator for Q&A.

OPERATOR

Thank you. If you’d like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you’d like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of John Todaro with Needham and Company.

Please proceed with your question.

John Todaro (Analyst at Needham & Company)

Hey guys, thanks for taking my question and congrats on all the progress thus far. I guess the first one just following the election and it sounds like there’s a lot of confidence, but if we could drill into it a bit more. Is there any risk to the PUC in December? Any delays to that final baseload review or any expectations there?

Adam Sullivan (Chief Executive Officer)

Yeah, I appreciate the question, John. I think that the differentiating factor for our sites is really a few factors. The first is the status of where those contracts are, where those buildings currently sit, and the status of our development. Pecos, I’m sure you’ve seen the videos. We have a building in place, chiller set. We’re working on the interior there. That’s a site that’s going to come online in early 2027. And as a reminder, that was a bitcoin mining site, so a site that had already been energized — an extraordinarily low-risk proposition.

In Pecos and Hunt, we feel very similar. A site that was approved for power back in 2024, looking at what’s coming up in November related to the upcoming study that ERCOT will be performing — that’s really the final stages. It generally happens one to two quarters before energization. So we have a lot of confidence in the delivery of that site as well, also making tremendous progress on the construction side. So we view our two sites that are in Texas today that are under development as very low risk.

John Todaro (Analyst at Needham & Company)

Great. Exactly what I was hoping to hear. And then second question, just on the debt financing you guys talked about for the A and D leases, is there any gating items to maybe calling out to getting that done?

Jim Nygaard (Chief Financial Officer)

So we’re in the process, as we’ve mentioned in prior comments, of optimizing the package of financing that we are intending to bring to market. Keep in mind that we have five different locations that we’re building at. There are technically five separate leases. So we do have some options as to how we package and sequence, and that’s what we’re trying to do as we speak. As you can imagine, we’ve been working with our financing partners and the rating agencies, and the liquidity that we’ve been able to establish on our balance sheet has afforded us the flexibility to do that in a very disciplined manner.

John Todaro (Analyst at Needham & Company)

Great, understood. Thank you, gentlemen. Appreciate it.

Adam Sullivan (Chief Executive Officer)

Thanks, John.

OPERATOR

Thank you. Our next question comes from line of Darren Avtahi with Lucid Capital Markets. Please proceed with your question.

Darren Avtahi (Analyst at Lucid Capital Markets)

Yeah, good morning. Thanks for taking the question. On AMD and the reservation rights, if, you know, politically the wind blows a different way, are there adjustments on those commitment deadlines in 2027 and 2028? And then I guess just back to Texas with your two sites — and I appreciate all the color — if the governor was to put in legislation after the fact when she takes office, is there anything that could be sort of clawed back that would delay the process? And I guess when we were at your site visit, you had your lobbyist there. Any kind of real-time thoughts on what the political landscape in Texas might mean in a more draconian scenario? Thanks.

Adam Sullivan (Chief Executive Officer)

Yeah, no, thanks, Darren. Appreciate the questions. As it relates to the reservation rights, I think from our expectation, based on the pathway over the course of 2027, there are some chunkier deadlines over the course of 2027 that we expect to see AMD exercising for additional capacity. And from the standpoint of any potential delays as it relates to potential political headwinds, obviously we’re in daily dialogue with the AMD team, so we’re working hand in hand across any headwinds that we’re facing anywhere across our portfolio.

In Texas, I think the great part for us is things are never done retroactively. It’s a business-friendly state, and given where we stand with our permits and where we are with construction and energization, we have very strong confidence in our ability to deliver those sites on time based on our existing schedules.

Darren Avtahi (Analyst at Lucid Capital Markets)

Appreciate it. Thanks.

Adam Sullivan (Chief Executive Officer)

Thanks, Darren.

OPERATOR

Thank you. Our next question comes from line Brett Knobloch with Cantor Fitzgerald. Please proceed with your question.

Brett Knobloch (Analyst at Cantor Fitzgerald)

Hi guys, thank you for taking my question. On the AMD expansion, obviously there’s a lot of power and a lot of that’s expected to come from behind the meter. Have you filed for the necessary permits for the behind-the-meter generation yet? And is that something that you think you can do once maybe the permit freeze ends post-completion of the audit? And then as a follow-up question to get it out of the way here: the warrants that exercise in January — what is the current game plan for the cash influx you’re about to receive there? Would you consider repurchasing shares so it’s net dilutive, or do you use that as an equity investment for additional data center expansion? Thank you.

Adam Sullivan (Chief Executive Officer)

Yeah, thanks, Brett. I’ll take the first one and then hand it over to Jim for your question related to the warrants. As we are going through this process behind the meter, there are a few necessary steps. We obviously talked about bringing the lateral pipe to our site — the 10.6-mile pipe to allow for the opportunity to build a power plant on site. Part two of that, which is related to your question on air permits: we have not filed for the air permits.

That’s going to be done in conjunction with the IPP that we ultimately choose. We have a narrowed list of IPPs that we’re considering here as part of the ongoing process, not only selecting IPPs but also selecting the generation units that we’ll be using on their side. Both of those are important, necessary next steps, and we’re working hand in hand with AMD today to choose who the right partner is and the right equipment that will be used at that site. As it relates to the warrants, Jim, I’ll let you take that question. We do have liquidity coming in from the exercise of

Jim Nygaard (Chief Financial Officer)

the cash-only warrants in January. It is our expectation that we will prioritize that capital, as we discussed in prior public comments, that it’s primarily going to be diverted to our proactive builds going forward. We expect the reservations will be exercised over time and we’re going to need that capital to effectively deploy as equity in those sites. So that’s going to continue to be the priority as to how we think about capital allocation.

Brett Knobloch (Analyst at Cantor Fitzgerald)

Perfect. Thank you, guys.

Adam Sullivan (Chief Executive Officer)

Thanks, Brett.

OPERATOR

Thank you. Our next question comes from the line of Don Peterson with Jefferies. Please proceed with your question.

Don Peterson (Analyst at Jefferies)

Oh, great. Thanks. Curious if we could maybe, Jim, get a little more color on what you’re seeing in the project financing market to finance some of the AMD builds. What sort of changed in terms of covenants that they’re looking at, kind of loan-to-cost levels that lenders are willing to lend on today? Are you seeing any of that change, or does it just kind of feel paused until next year and maybe interest rates settle down?

Jim Nygaard (Chief Financial Officer)

The first thing I would say to address your question is that the project bond market is absolutely open. I would tell you, just in general, as the market has continued to evolve, the amount of diligence and questions that are asked have, I think, become a bit more comprehensive. So there’s a strong desire to really nail down a lot of the details that are behind these builds. As everyone knows, these are complicated projects, and from the investor standpoint, all of the constituents involved in that process want to make sure that there’s clear line of sight on the variables that matter.

From that standpoint, there really has not been any change that we’ve seen by way of terms or covenants. And at the end of the day, what we’re really excited about is aligning with AMD. That was one of the key decision-making criteria that we focused on when deciding to go with AMD earlier in late this summer — the strength of their credit profile that they bring to this exercise. They’re very early in their capex deployment cycle. There’s not a lot of AMD paper out there for what we’re about to do, and the market has a strong appetite for it.

So we’re very confident in what we’re about to bring to market here.

Don Peterson (Analyst at Jefferies)

Okay, that’s great. And it’s great to see the recurring revenue line move up and the adjusted EBITDA margins also trend higher. As we think over the next few years, as you start to stabilize all these projects, where should we think about EBITDA at the corporate level — margins trending toward?

Jim Nygaard (Chief Financial Officer)

Yeah, we have not provided specific EBITDA-level guidance at this stage. As we continue to start ’27 with a very clean P&L, we’re very excited about that because we will not have mining in our numbers anymore, and I think it’s going to be a great fresh start for investors to understand what a true colocation P&L will look like. What we have guided to is directionally on the revenue and NOI potential that are behind the contracts. And we’ve also indicated a rough corporate SG&A cash spend that’s in that $30-ish million range per quarter. So when you do the math on both of those, you can start to coalesce around what EBITDA would look like for the organization on a consolidated basis.

Don Peterson (Analyst at Jefferies)

Great. Thank you, guys. Appreciate it.

OPERATOR

Thank you. Our next question comes from line of Nick Giles with B. Riley Securities. Please proceed with your question.

Nick Giles (Analyst at B. Riley Securities)

Yeah, thanks, operator. Good morning, guys. One of your peers yesterday announced a deal with one of the frontier labs using kind of tenant-brought modules, and I was just curious if this is a structure that you’ve explored or what shifts you’re seeing more broadly in design from a tenant perspective. Thanks.

Adam Sullivan (Chief Executive Officer)

Yeah, I’ll answer the first part of the question, then I have Matt Brown, our Chief Operating Officer, here with me. The first thing I just want to say before handing it over is just that was an incredible deal that Riot announced yesterday. We’re incredibly excited about what they’re building out in Corsicana, and I think it sets a pretty big new high watermark for the industry. But Matt, I’ll let you talk about the tenant-brought modules.

Matt Brown (Chief Operating Officer)

Yeah, I think from what you can expect from our standpoint is we’re working really closely with AMD on future designs, and you should expect that some of those same customers are going to be tenants in those facilities and also at the table working through our design program collaboratively. So in terms of how we view our program as it relates to tenant-brought modules, it’s not something that we’ve explored a lot. We have a lot of experience in this type of infrastructure as a bitcoin miner — that was a pretty prevalent infrastructure architecture during that period of the company’s — but we’ll continue to just work through with AMD and our customers. And if a customer comes to the table that wants a really purpose-built design that gets to lowest cost per token, it’ll be something that we entertain and we’ll just continue to work through that with them.

Nick Giles (Analyst at B. Riley Securities)

Makes sense. Thanks, guys.

Adam Sullivan (Chief Executive Officer)

Thanks, Nick.

OPERATOR

Thank you. Our next question comes from the line of Ben Somers with US Bancorp BTIG. Please proceed with your question.

Adam Sullivan (Chief Executive Officer)

No, the conversations have not changed over the past few months. Both of those sites have hurdles for us to overcome to build data center capacity there. So we’re still working through some of those hurdles as we look to bring new sites to market. But I think both of those sites are interesting. Our site in Kentucky in particular, with a large power allocation from TVA, that’s very rare, and that availability is rare in the market. So we have a lot of confidence that when we’re able to bring those sites to market, they’ll be attractive, Yeah, I appreciate the question. I think the overarching theme right now in the market is capital is the throttle on all new development. Capital will be the throttle to bring any compute online, and the precursor to that is building new data center infrastructure. What we’re seeing in the market today are not only one-off data center developers, but also some private equity-backed data center companies who are just running out of capital. And I think this is what we’ve talked about before.

Organic growth is always going to be priority number one until you get into a market where you’re facing headwinds. That headwind today is capital availability, and that’s the reason why we’re seeing powered land sites, as well as even sites with customer contracts, going up for sale today. It’s really just the amount of headwinds as it relates to getting financing in-house and where your scale currently stands. And you know, we’re in a great position — significant amount of NOI generation on a quarterly basis, continuing to scale our platform — and there might be opportunities for us to execute on that will be accretive to our business.

Thank you.

OPERATOR

Thank you. Our next question comes from the line of George Sutton with Craig-Hallum Capital Group. Please proceed with your question.

George Sutton (Analyst at Craig-Hallum Capital Group)

Thank you. Just further to the question on the value of powered land. I mean, the generic thought process is this is going to make powered land more valuable, but obviously the financing constraints kind of are a big offset to that. So as we think about valuation opportunities out there, what would you anticipate?

Adam Sullivan (Chief Executive Officer)

Yeah, it’s an interesting situation. You know, the demand is incredibly high for these sites, but it’s also limited by capital and the companies that have available capital at any given point in time. So for us right now, it’s actually the valuations that we’re looking at on powered land especially are actually generally still in line with where they were over the course of the past 12 months. It’s just demand is getting higher, but the amount of bidders on those projects is getting smaller.

So it’s an interesting dynamic that we’re going through right now. But I think for us, the way we’re thinking about it is, given market headwinds, how can we position ourselves better? This team was built to ride through difficult times, and I think some of that we’re seeing as it relates to capital availability for other companies. So we feel good about our opportunity to capitalize on what’s in front of us today.

George Sutton (Analyst at Craig-Hallum Capital Group)

So you’ve obviously got incredible growth opportunity in the short to midterm. But as we think about the longer term pipeline, how much does the election and some of the challenges out there change your thought process relative to breadth of things you’re looking at, or does it become more focused? Just curious there.

Adam Sullivan (Chief Executive Officer)

Yeah, it’s a great question, George. I mean, how we’re thinking about our long-term development is still along the same lines as it was three days ago prior to the election. We have opportunities to build in front of us. We have locations that we are specifically choosing based on political landscape, local community relationships. And really we have a lot of experience in this compared to other traditional data center developers. At one point, we were the largest publicly traded bitcoin mining company.

We were in a lot of locations, a lot more locations than other folks in the industry. And we had to deal with the headwinds of being what I’ll call the black sheep coming into a local community. We did a fantastic job at engaging with the local community, building relationships and building, frankly, in new locations that we were less familiar with. So we feel very good about the long-term prospects. As we look at the sites that we have under exclusivity, how we’re going to be executing on those going forward, we know that step one going into any, any new location — strong engagement at the local level is priority number one.

Working with state officials as well, and then making sure that we’re hiring local and building a true base in that community. So we’ve run this playbook before, we feel great about where we stand, and we look forward to building new locations in our portfolio.

George Sutton (Analyst at Craig-Hallum Capital Group)

Great. Thank you.

OPERATOR

Thank you. Our next question comes from the line of Michael Donovan with Compass Point. Please proceed with your question.

Michael Donovan (Analyst at Compass Point)

Hi guys, thanks for taking my question and congrats on the progress. So if we can hone in a little bit more on behind-the-meter. In terms of actual tech solutions that you’re using, are you looking more towards recips or batteries, and really how should we think about utilizing one or the other, and is there a difference in yield on cost that we should expect if one or the other is used? Thanks.

Matt Brown (Chief Operating Officer)

Yeah, I can take the technology aspect of the question here. You know, every site and portfolio will sort of dictate the project, and the location of the project sort of dictates what the solution ends up being. So whether it’s fuel cells or recips or linear generators or combined cycle, every project will have its own nuances that drive to the solution. Some of those are going to be related to emissions and what we could get permitted to do. Some of that’s going to be related to other environmental aspects of the site that drive to that.

So we want to select the right technology for the right location and the right project — that’s our approach to it. You can expect that we’ve engaged with all that, we’ve evaluated all the technologies overlaid against all of our existing programs, and that we understand which ones are optimal for which use cases, including, you know, supply chain timing, et cetera. So I think we have a pretty good grasp of what directions we would go for each of our sites. And all the solutions — all the behind-the-meter solutions — are using some sort of BESS-type battery.

It doesn’t matter if it’s recips or what; the BESS and the inverters that go with the BESS solution are really required for some of the load smoothing to handle some of the variabilities in IT workloads. So you should expect there’s going to be a battery component to anything we would deploy.

Michael Donovan (Analyst at Compass Point)

Great. Appreciate that. That’s helpful moving forward.

OPERATOR

Thank you. Our next question comes from the line of Stephen Glagola with KBW. Please proceed with your question.

Stephen Glagola (Analyst at KBW)

Hi. Thanks for the question. I had a TCEQ follow up from an earlier question. Adam, I guess, what TCEQ permits do you have outstanding for Hunt and Pecos? And then assuming the Batch 0 data center audits are completed on schedule, you know, in December, like while Abbott’s still in office, how do you expect the remaining TCEQ permitting process for Pecos and Hunt to proceed in that month or so period before — I think it’s like the January 19th transition to the governor-elect.

Thank you.

Adam Sullivan (Chief Executive Officer)

I appreciate the question, Stephen. We’re currently working through the air permits at both Pecos and Hunt with TCEQ. Our expectation is that we’ll be going through a permit by rule, which is the ability to get a permit essentially by law in the state of Texas for those air permits if we meet certain qualifications. Obviously, if there’s any significant headwinds, there’s always the availability to do design changes as it relates to your backup generators, which is the only thing that that air permit is for.

And so there’s always ways for us to potentially mitigate any potential headwinds as it relates to that.

OPERATOR

Thank you. Thank you. Our next question comes from line of Kevin Dede with JonesTrading. Please proceed with your question.

Kevin Dede (Analyst at JonesTrading)

Hey, Adam, thanks for having me on. Nice to talk to you again. Can you just sort of frame up your perspective on load studies across Oklahoma and Pecos? Two hundred megawatts — I know you said that it’s a little risk there, but it’s a study load, it’s not base load — and frame that up against your, or the expectations that AMD has in the timeline.

Adam Sullivan (Chief Executive Officer)

Yeah, absolutely, and appreciate the question, Kevin. You know, I would label Pecos as load or new supply that, you know, we look forward to having a few years from now. Our plans have included really the next two to three buildings in Pecos to be behind-the-meter developments. So we’ve been progressing that. Obviously we’re building out the lateral. You know, one of the things as we work through on the Muskogee side is that we do have an expectation — you know, right now we have additional power on-grid for us to sell to AMD.

We have additional power that’s working its way through load study. You know, we’re working very closely with OGE on getting additional power at that location, and we feel very good about that opportunity. So we’re looking forward to building the next few buildings in Muskogee on-grid. And as we continue through that development, based on the sizing and the timelines that AMD is looking to develop, we might be putting a behind-the-meter building in between potentially power that we already have versus load-study power.

But that’s really yet to be known based on, you know, us receiving feedback on that next load study for 600 megawatts total, which would be 400 megawatts of critical.

Kevin Dede (Analyst at JonesTrading)

How easily would behind-the-meter combustion be feasible in Muskogee? I mean, I know you mentioned almost 11-mile pipe that you need in Pecos. What sort of considerations do you have to work around to manage the same opportunity in Oklahoma?

Adam Sullivan (Chief Executive Officer)

Yeah, I think, you know, from the perspective of Oklahoma, the state and local government both have been extraordinarily supportive. When we announced our Muskogee project and the acquisition of Polaris earlier this year, Governor Stitt had a quote in our press release as it related to looking forward to us not only continuing to build out in the state of Oklahoma, but also building out behind-the-meter generation on a go-forward basis. You know, it’s been part of Governor Stitt’s plan to bring more generation to the state of Oklahoma.

We look forward to Governor-elect Masi continuing on with that promise, to being incredibly supportive of behind-the-meter generation. From a technical standpoint, there is more distance that we have to travel a lateral pipe. You know, the great part is there is plenty of natural gas in the state of Oklahoma. So we have a great opportunity to grow and expand that site. We have plenty of land to grow it well beyond what our current plans are if the opportunity arises to grow to that level. So from the state of Oklahoma, we feel great about doing behind-the-meter there. And from a complication standpoint, it’s not higher risk than what we have out in Pecos, Texas today.

Kevin Dede (Analyst at JonesTrading)

Yeah, I’d probably assume that even less risk given, I guess less demand for space and combustion there. But thanks, Adam.

Adam Sullivan (Chief Executive Officer)

Of course. Thank you, Kevin.

OPERATOR

Thank you. Our next question comes from the line of Ryan Gravett with UBS. Please proceed with your question.

Ryan Gravett (Analyst at UBS)

Great, thank you. Just any updates in terms of build cost expectations for the current AMD leases, including how much is locked in at this point. And then separate topic, but just on the 2 gigawatts of new site opportunities that you’re diligencing. Anything you can share at this point in terms of geographic mix or if there’s any portion of that pipeline that you feel is particularly well positioned in light of the election outcomes? Thanks.

Adam Sullivan (Chief Executive Officer)

Yeah, I appreciate the question, Ryan. You know, on a cost per megawatt basis, we’re still holding true at the 11 to 12 million a megawatt. So there’s no change there. I think the great part for us is prior to signing the AMD contract, we were out in market making commitments and spending capital to secure the OFCI. And part of that was really to make sure that we were locking in as much of that build cost as we possibly could ahead of signing a customer contract and really de-risk the entire program.

So from that perspective, we feel great about our existing cost per megawatt. As it relates to the pipeline, we have a strong geographic mix in that pipeline. We were looking at not only developing in some of the existing states where we currently reside, but also adding some new states to our map. You know, I think that’s going to be part of how we’re thinking about our new developments: continue to diversify on utilities, continue to diversify on states. And really, diversifying that mix across all of these different variables is important to building a diversified portfolio.

So, you know, we’re excited about what’s in our pipeline. We think they’re very saleable assets once we’re able to bring them to market. And we look forward to updating folks in 2027 as it’s related to that.

Ryan Gravett (Analyst at UBS)

Great. Thank you.

OPERATOR

Thank you. Our final question this morning comes from the line of Brian Dodson with Clerestreet. Please proceed with your question.

Brian Dodson (Analyst at Clerestreet)

Hey, good morning. Thanks very much. You know, as you’re engaging existing and potential clients, I guess, what is their reaction to rising building costs and rising borrowing costs? Do you think that, you know, general terms on contracts in terms of like a yield on NOI will remain consistent or, I guess, what’s your viewpoint there for the next 12 months?

Adam Sullivan (Chief Executive Officer)

I appreciate the question. I think with respect to prospective builds going forward and the cost dynamics that are currently present in the market, I mean, certainly customers understand that we are in an evolving market. You know, financing has become more expensive. I also think there’s a fundamental question around basis of design. I think you always have to start with that question when we start talking about the cost to deploy. Unfortunately, in our industry, there’s a lot of apples and oranges and grapefruits.

When we’re talking about a build, you’ve got to be mindful of the geographic region that you’re building in and then, fundamentally, what exactly are you building for? And they can have dramatically different impacts on that equation. So, look, I think we’re going to continue to see openness on the customer front to find ways to cut costs out of builds, and if that means changing the specifications of what we’re delivering with fewer nines of performance because we can tolerate less uptime, that trade-off for cost of deployment might make sense in certain circumstances depending on how those workloads are allocated. So it’s a great question. It’s going to certainly vary as you go from customer to customer and the technology that they’re wanting to deploy at that location.

So, unfortunately, it doesn’t have a generalized answer other than when costs are going up, customers are inherently going to look for better ways to put that dollar to work of compute to get to the most efficient outcome for their needs.

Brian Dodson (Analyst at Clerestreet)

Great, thanks. I appreciate the color.

OPERATOR

Thank you. Ladies and gentlemen, this concludes our question and answer session and will conclude our call today. We thank you for your interest and participation. You may now disconnect your line.

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