Digi Power X Inc. (DGXX) Earnings

Management highlights

### Strategic Transition and Financial Position - The company is undergoing a full transition from legacy operations to AI-focused GPU as a service (GPUaaS), bare metal rental, and AI colocation, with Q2 2026 marking the first quarter of recognized AI revenue, a substantial turning point for the firm. - As of June 30, 2026, the company holds $142.4 million in cash and cash equivalents, with an updated cash position of approximately $150 million as of the call date; the company has no long-term debt, and total assets increased from $37 million year-over-year to $279 million. - Year-to-date capital expenditures of ~$110 million have been deployed toward GPU equipment and the Columbiana, Alabama AI campus buildout; net fixed assets and equipment deposits for the project reached $127.5 million, a 447% year-over-year increase. ### Construction and Operational Progress - Phase 1 of the Columbiana AI campus (15 MW for Cerebras) is ahead of schedule: all long-lead equipment has been ordered and began receiving in the month of the call, with commercial launch still on target for December 2026. - All long-lead equipment for Phase 2 (25 MW) has also been secured, with completion targeted for the end of Q1 2027 (March 2027). - Initial GPU bare metal operations have achieved 100% uptime to date; a small engineering team is being established in Silicon Valley (near key industry partners Cerebras and NVIDIA) to develop proprietary software layers for GPUaaS to enable vertical integration. ### Long-Term Site Pipeline - The company's existing Buffalo, New York sites are grandfathered under the state's data center moratorium and have enough allocated power to meet 2027 targets of 10 MW for NeoCloud GPUaaS and 40-50 MW of additional colocation, with no expansion of power footprint required. - DigiPowerX controls a 1.3 GW power infrastructure access opportunity at the Pleasance Power Station in West Virginia via a letter of intent, with development targeted for late 2027 through 2030; the company plans to avoid assuming liabilities related to the power plant itself, only leveraging existing land and transmission infrastructure. - The company owns 40 acres of adjacent land in North Carolina, currently undergoing permitting and load studies for a 150-200 MW data center, with development planned for 2029-2030. - U.S. Data Centers Inc., a 48% owned subsidiary focused on manufacturing prefabricated modular data centers, is raising separate capital to avoid draining cash from DigiPowerX's core buildout, with a current pre-revenue valuation of $125 million and first shipments targeted for 2027. ### Dilution Mitigation Strategy - As the company's largest shareholder (who has never sold any shares after an initial $8 million personal investment), CEO Michel prioritizes minimizing shareholder dilution. The prior at-the-market (ATM) equity offering was a necessary step to build a strong balance sheet and become eligible for debt financing, with most shares sold in early Q2 at average prices significantly above the current stock price (last draws at $7.25-$7.50 per share); no further ATM draws have been done below that price.

Guidance

- The Columbiana AI campus Phase 1 remains on track to be ready for service in December 2026, and Phase 2 remains on track for completion at the end of Q1 2027; both phases are currently ahead of their original construction schedules. - Q3 2026 total revenue is expected to increase by more than 100% compared to Q2 2026, driven by a full quarter of GPU revenue from the initial fleet and growing AI segment contributions. - The company targets 10 MW of operational NeoCloud GPU as a service and 40-50 MW of additional colocation capacity at the Buffalo, New York sites by the end of 2027, which is achievable under the existing grandfathered power allocation. - Long-term growth targets across all sites range from 100 MW (West Virginia initial) up to 1.3 GW (West Virginia full buildout) and 150-200 MW (North Carolina), with development phased through 2030-2031.

Segment performance

Total GAAP revenue for Q2 2026 was $6.6 million, reflecting the ongoing planned wind-down of the company's legacy operations as it transitions to AI, compute, and colocation offerings. The new GPU bare metal rental segment generated $1.1 million in recognized revenue from five weeks of operation (mid-May to end of June 2026) from the initial B200/B300 GPU fleet deployed at the Columbiana, Alabama facility, representing ~16.7% of total Q2 2026 revenue. The remaining ~83.3% of revenue comes from the legacy colocation and energy sales segments, which are being wound down as the company pivots. Adjusted EBITDA for the quarter was a positive $3.3 million, a $3.2 million increase year-over-year from Q2 2025. GAAP net loss for the quarter was $14.4 million after accounting for depreciation and non-cash items.

Risks & headwinds

- The company's transition from legacy operations to a new AI-focused business model is capital-intensive, and relies on successfully securing third-party debt financing to fund further growth without excessive shareholder dilution. - Long lead times for GPU and data center equipment could potentially impact construction and launch timelines, though the company has already secured all required equipment for Phases 1 and 2 in Columbiana. - The New York data center moratorium prevents expansion of the company's existing power footprint at Buffalo sites, limiting growth at that location to conversion of existing allocated capacity. - The Pleasance Power Station project in West Virginia is progressing slowly due to negotiations to avoid assuming legacy power plant liabilities, which could delay the start of development at that site.

Analyst Q&A

• Q: What remaining work is needed to deliver the first 15 MW to Cerebras for Phase 1 of the Columbiana campus, and is the timeline still on track?

  A: All long-lead equipment for the first 15 MW has already been purchased, and deliveries began in the month of the call. The project is actually a few weeks ahead of the original schedule, so management remains fully confident that Phase 1 will be ready for service by December 2026 as planned.

• Q: What obstacles does DigiPowerX face for the 10 MW NeoCloud GPU as a service target, and how will the company fund GPU capital expenditures?

  A: There are no obstacles related to power or permitting, as the company already has sufficient allocated power available. GPUs are capital-intensive, but a new industry fund backed by major financial firms (including BlackRock and Goldman Sachs) has established clear residual values for GPUs, making asset-based debt financing for GPU fleets much easier to secure separately from data center construction financing, which will accelerate the GPU bare metal growth program.

• Q: Does New York's data center moratorium impact the company's 2027 growth targets for Buffalo?

  A: DigiPowerX's existing Buffalo sites have operated fully permitted since well before the moratorium, so the company is grandfathered. It is not allowed to expand its total power footprint, but the company only needs to convert existing already-allocated power to hit its 2027 targets of 10 MW for NeoCloud and 40-50 MW of additional colocation, so the moratorium has no impact on these targets.

• Q: How does DigiPowerX plan to mitigate shareholder dilution, and what is the update on debt financing?

  A: The ATM offering was a necessary step to build a strong cash balance to qualify for debt financing last year, when the company only had $1.7 million in cash. Most ATM shares were sold at prices higher than the current stock price, and the company has now accumulated enough cash to self-fund the Alabama buildout. Management has engaged Goldman Sachs to syndicate debt financing for the Alabama project, which will return capital to the balance sheet and support future growth without additional significant equity dilution, aligned with the CEO's position as the company's largest shareholder.