Fermi Inc. Common Stock (FRMI) Earnings

Management highlights

- 90-Day Plan Delivery: All five targeted commitments from the prior quarter's 90-day plan were completed as scheduled: - Secured a binding customer agreement for up to 650 megawatts of power with TensorFlow, a strategic AI infrastructure player that connects Fermi to multiple layers of the AI ecosystem including chip developers, hyperscalers, and enterprise end users - Appointed Lee McIntyre, a former board member with deep large-scale project delivery experience from firms including Bechtel and TerraPower, as permanent CEO effective the Tuesday following the call - Completed strategic EPC partnerships with Primorus for Phase 1 balance of plant and TSK for early Phase 2 engineering; entered into a strategic alliance with Hillcore Energy Partners to add 2.6 gigawatts of incremental power, doubling Project Matador's total capacity to 4.8 gigawatts within three years with no upfront capital outlay from Fermi - Upsized a $431 million convertible senior notes offering at a 5% coupon with a capped call structure to protect shareholders from dilution, delivering ~$382 million in net proceeds and significantly strengthening balance sheet liquidity - Delivered key on-site project milestones: three Siemens Energy F-Class turbines arrived at the Port of Houston and cleared customs, with site development advancing on schedule - Commercial Highlights: - The binding TensorFlow agreement is structured in three phases, with an initial 15-year commitment for 222 megawatts of power via a turnkey data center solution, representing ~$6.5 billion in total revenue over the initial term; the backstop agreement for the lease is expected to be finalized in the coming days - Fermi is actively engaged in substantive discussions with roughly a dozen prospective customers, including both neocloud providers and major hyperscalers, with multiple opportunities at advanced stages of negotiation - Operational Highlights: - Fermi remains on track to deliver 640 megawatts of nameplate capacity by Q4 2027, with the first 210 megawatts available by July 1, 2027 - The Hillcore alliance operates under a build-own-operate-transfer structure, where Hillcore provides all capital, equipment, and construction for the incremental 2.6 gigawatts; Fermi earns base rent from the arrangement with no upfront capital expenditure, retains an option to acquire the facility after 10 years, and matches power blocks to signed tenant demand to eliminate stranded capacity risk

Guidance

- First power delivery guidance is maintained: the first 210 megawatts of capacity is still targeted for July 1, 2027, with 640 megawatts of nameplate capacity online by the fourth quarter of 2027 - The incremental 2.6 gigawatts from the Hillcore alliance is targeted to come online within 3 years, with first power from Hillcore's capacity available within 24 months of notice to proceed, bringing total campus capacity to 4.8 gigawatts faster than Fermi could deliver via self-build - Revenue commencement for the first phase of the TensorFlow agreement is expected to begin phased rollout between late Q3 and early Q4 of 2027 - Management maintains that additional customer deals are expected to be announced in the coming months based on the advanced stage of current discussions

Segment performance

Fermi America is a single-segment company focused on developing large-scale power infrastructure for AI and data center customers at the Project Matador campus. No separate product or business segment financial performance was reported in this quarter's earnings call. The only segment-level revenue figure disclosed is the expected ~$6.5 billion in total revenue over the 15-year initial term of the first phase of the TensorFlow agreement for 222 megawatts of power.

Risks & headwinds

- External industry risks: Global AI data center projects face widespread delays from grid interconnection queues, permitting delays, and critical equipment shortages, which increase demand for Fermi's pre-permitted, equipment-secured site but also expose Fermi to broader supply chain and regulatory uncertainty - Execution risk: Delivering turnkey data center solutions (the model used for the first anchor customer) requires coordination with third-party contractors, though Fermi has mitigated this by partnering with experienced, industry-leading data center and EPC partners - Commodity price risk: Fermi eliminates natural gas and power price risk by passing all variable energy costs directly through to customers, so Fermi holds no commodity exposure that would impact margins - Timeline risk: The current market environment creates pressure to deliver power faster than originally planned, though Fermi's existing pre-development work and the Hillcore alliance mitigate this risk by accelerating total capacity delivery - Regulatory risk: Recent Texas regulatory actions targeting new grid-dependent data center demand do not impact Fermi, as Fermi's behind-the-meter, islanded solution does not rely on public ERCOT grid capacity for customer load, strengthening rather than harming Fermi's competitive position

Analyst Q&A

• Q: How does the power pass-through structure work for the TensorFlow deal, and will Fermi hedge fuel costs for the private grid? /

  A: The deal structure separates pricing into base rent, a fixed power charge, and a variable energy charge. All variable energy costs are fully passed through directly to the customer, and this structure will be used for all future Fermi deals. Since the full commodity risk is passed through, Fermi has no need to hedge fuel costs and does not take on commodity exposure as part of its business model.

• Q: What is the expected capital expenditure for the first phase of the TensorFlow contract, and how will spending be paced? /

  A: Market comps put power-side capex at $3-$4 million per megawatt, and turnkey data center capex at $10-$12 million per megawatt, and the TensorFlow project falls within these ranges. Fermi will match capital deployment to signed commercial progress, only spending on specific project phases once contracts are locked in, and will use multiple standard funding sources to support construction. Fermi already completed early site development that gives it a speed-to-power advantage, so no additional pre-emptive spending is required.

• Q: How unusual is the Hillcore alliance structure, and can this model be repeated for future capacity expansion? /

  A: This is a one-of-a-kind structure that allows Fermi to add incremental power faster than it could via self-build, leveraging Hillcore's capital, equipment, and construction team while Fermi contributes land, permits, and interconnection access. It accelerates revenue growth by bringing power online sooner to meet existing strong customer demand. The model is repeatable, and Fermi will continue to explore similar partnership structures given its 17 gigawatt total development runway at the site.

• Q: Does the recent Texas governor's data center audit create regulatory hurdles for Fermi's grid connection? /

  A: Fermi's grid connection with Excel is not impacted by the new directive, as Fermi operates a behind-the-meter islanded solution that does not draw public grid capacity for customer load. The announcement actually validates Fermi's original business thesis, and increased customer outreach after the announcement as customers look for non-grid-dependent sites that can be delivered on schedule, strengthening Fermi's competitive position.