WhiteFiber, Inc. Ordinary Shares (WYFI) Q2 2026 Earnings Report, Transcript and Summary

Hello, and welcome to the White Fiber Second Quarter 2026 Earnings Conference Call. Good morning, and thank you for joining us. We will begin with prepared remarks from manage. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the call over to your host, Cameron Schnier, Senior Vice President of Capital Markets and Corporate Strategy at White Fiber. Cameron, please go ahead.

Thank you, and welcome to the White Fiber Second Quarter 2026 Earnings Call. Joining me today are Samir Tabar, our Chief Executive Officer; and Justin Zhu, our Chief Financial Officer. Before we begin, I'd like to remind everyone that some of the statements we make on this call are forward-looking in nature and subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include, but are not limited to, those factors described in today's earnings press release, our Form 10-Q for the quarter ended June 30, 2026, filed today as well as other filings we may make with the SEC from time to time. Our remarks today may also include non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in our Form 10-Q and in the earnings press release posted on our website. Following our prepared remarks, we will open the line for questions. With that, I'll turn the call over to Sam to discuss our performance. Sam?

Thank you, Cam, and thank you, everyone, for joining us. Last week marked the first anniversary of White Fiber's initial public offering. Over the past year, we've made substantial progress towards the company we set out to build. Most notably, we signed a transformational 10-year agreement, representing approximately $865 million of contracted revenue for 40 megawatts of IT workload at NC1. We've since advanced the project through construction and now into active customer deployment. We've also started operations and turned on revenue at our Montreal 3 location under our Cerebras agreement, expanded our development pipeline, strengthened our capital base and repositioned our cloud services business around larger, longer duration opportunities. We are proud of what we've accomplished in our first year, but we aren't satisfied. We remain in the early stages of what -- we remain in the early stages of what White Fiber can become. Our first -- our most significant accomplishments remain ahead of us. As we enter this next phase, I'd also like to welcome Justin Zhu as White Fiber's Chief Financial Officer. Justin previously served as Senior Vice President of Finance and Chief Accounting Officer. He has been with White Fiber since its formation. He has a deep understanding of our business, financial operations and growth strategy. Eric is stepping away from his executive role at White Fiber to focus fully on Bit Digital. We thank Eric for his important contributions to White Fiber's development. Eric will continue to support White Fiber as a senior adviser and nonvoting observer to our Board. He will provide additional continuity through the transition. We believe this structure provides each company with increasingly dedicated financial leadership as both businesses continue to grow. Turning to our operating update. I'll begin with NC1, which remains our most important near-term operating and financial priority. NC1 has moved into active customer deployment. As of today, approximately 20 megawatts of IT capacity is available to support the installation and testing activities of Nscale and its investment-grade offtaker. Initial billing to our customer has now commenced for the initial tranches of capacity. Remaining equipment start-ups and testing are progressing very well. We expect the remaining capacity to be turned over progressively through August. By the end of this month, the full 40 megawatts of contracted IT load will reach a full run rate billing. As we discussed last quarter, the pace of the ramp was affected by delivering and commissioning issues involving certain switchgear equipment. Those issues have since been resolved. Final deployment also requires tight coordination between the commissioning of our infrastructure and the installation and testing of customer equipment. We worked closely with Nscale on a phased turnover schedule that sequences the work being completed by both parties. While the ramp has taken a touch longer than we originally anticipated, the contracted economics of the agreement remain unchanged. The results speak for themselves. It took disciplined coordination across our team, our customer, the utility, our equipment vendors and our construction partners, all amid persistent supply chain constraints. We believe NC1 shows what White Fiber can do. It demonstrates our ability to execute complex large-scale AI projects. Just as importantly, we have expanded an experienced operating team on the ground. The team spans facility operations, engineering and customer support. This is not simply a development project or a piece of powered real estate to us. It is a mission-critical facility built to operate continuously and support customers over long-term contracts. The people, systems and operating capabilities now in place reduce execution risk as NC1 moves towards full contracted operations. We established a foundation for continued expansion of the campus. We also established a long-term and positive presence with the local community. Ultimately, we're building a durable operating business in North Carolina. The initial 40-megawatt deployment is only the first stage at NC1. We expect Duke Energy to provide a delivery schedule for the next 45 megawatts of gross capacity in the near term. At that point, Nscale will receive priority notification of the available capacity in accordance with our existing agreement. We also received extremely strong inbound interest for this new upcoming tranche. We'll evaluate the path forward based on what we believe will deliver the best outcome for White Fiber. Beyond this, we are working with Duke Energy in further evaluating the potential delivery of an additional 200 megawatts of incremental power to the site. Together with the initial phases, that would bring NC1 to approximately 300 gross megawatts. This is a longer-term opportunity and remains subject to the utility process. We believe it shows how NC1 could scale over time. It also shows why securing the site early was strategically important. NC1 is our flagship facility. It validates White Fiber's ability to acquire, develop and operate large-scale AI infrastructure. We intend to repeat that capability across our pipeline. Turning to our Canadian portfolio. The most significant update is at NTL2. We had paused development while we evaluated the best use of that site. We've now decided to move forward. We plan to develop approximately 5 megawatts of gross capacity targeting completion around year-end. This decision is supported by active discussions with certain prospective customers. We're evaluating 2 deployment paths. The first is traditional colocation. The second is a vertically integrated deployment combining our data center infrastructure and our cloud services capabilities. We'll provide more details soon as customer discussions and the commercial structure progress. Moving on to our other sites. MTL1 continues to perform steadily. Recent customer renewals support a stable outlook, and we're evaluating a modest expansion of that particular facility. At MTL 3, the Cerebras deployment continues to perform well. We're also pursuing additional utility capacity for that site that could support a meaningful expansion over time. The approval process remains ongoing. Beyond our existing portfolio, demand for power-ready, high-density AI infrastructure remains very strong. Demand is particularly acute for 2027 deployments. This reinforces our view that capacity able to reach the market within the next 12 to 18 months will remain extremely scarce. This is where our retrofit-first approach has a clear advantage. We prioritize sites with existing infrastructure and a credible path to power. That allows us to bring capacity to market faster than in traditional greenfield development. Speed to market is a key competitive advantage for White Fiber. We've built a substantial development pipeline. We're concentrating on the opportunities we can advance towards definitive commitments. We remain disciplined with capital. We prioritize sites with clear current and future power visibility, strong customer alignment, attractive return potential and a path towards project level financing. We're also deliberate about sequencing our investments. As permanent financing for NC1 progresses, we expect greater flexibility to advance the next opportunities in our pipeline. We remain focused on moving forward on the right terms and in a way that supports disciplined, repeatable growth. Turning to cloud services. We made substantial progress in transforming the business around larger, longer duration customer engagements and a more capital-efficient operating model. We streamlined the organization and concentrated our resources on the areas where White Fiber provides the greatest value, that being sourcing next-generation hardware, deploying complex clusters and operating infrastructure over the life of a customer engagement. We're encouraged by early results. Our commercial pipeline has expanded considerably. We are increasing converting that pipeline into larger scale multiyear contracts. These agreements are supported by firm customer commitments. Customer prepayments and third-party equipment financing significantly reduced the equity capital required from White Fiber's balance sheet. We're also seeing an important shift in how customers select infrastructure partners. Larger buyers are consolidating their deployments among a smaller group of providers capable of supporting them at scale. While pricing remains important, customers are increasingly prioritizing engineering credibility, deployment execution and reliable ongoing operations. We believe these are the areas White Fiber is particularly well positioned. Since our last earnings call, we've entered into new multiyear cloud services agreements representing more than $540 million in aggregate contract value over their initial terms. Based on contracts signed to date, our cloud services portfolio is expected to generate more than $200 million of annualized revenue once fully deployed. One of the new agreement is with Base 10, an AI infrastructure platform focused on production inference workloads. Under the 3-year agreement, we will deploy 1,392 NVIDIA B300 GPUs at a third-party data center in Ontario. The agreement represents approximately $165 million of contract value over its initial term with service targeted to commence in November of this year. Phase 1 also has the option to extend the deployment for up to 2 additional years, creating potential of upside beyond this committed initial term. Separately, we entered into a 3-year agreement with Prime Intellect, an AI-focused platform on large scale -- focused on large-scale model training and distributed compute. Under the agreement, we'll deploy 576 NVIDIA Ver Rubin 200 GPUs in Canada, marking White Fiber's first Ver Rubin deployment. The agreement represents approximately $108 million of contract value with service targeted to commence in the second quarter of 2027. This Ver Rubin deployment demonstrates the technical depth and expertise of our engineering team. It also aligns to our strategy of focusing on current and next-generation GPUs. Both of these deals expand existing customer relationships, and that illustrates our customers' confidence in White Fiber's engineering and operational capabilities. We also continue to advance our previously announced 5-year deployment in the Paris region, which represents over $160 million of contract value. Following the completion of procurement and site level arrangements, we're targeting an end of September ready for service date. Additionally, we entered into a 5-year agreement with an existing customer supporting the deployment of 576 NVIDIA V300 GPUs in Iceland. The agreement represents approximately $87.5 million of contract value over its initial term with additional potential upside through revenue sharing. We expect deployment to commence later this year. Beyond these dedicated infrastructure deployments, we're seeing meaningful demand for our managed services offering. Under this model, customers fund the underlying hardware and data center capacity, while White Fiber applies its technical and operating capabilities to deploy and operate the infrastructure on their behalf. Managed services would allow us to generate revenue without funding the underlying equipment, creating a hyper capital-efficient path to growth. This model will also leverage systems and personnel and expertise that are pretty much already in place. This creates the potential for attractive incremental margins with limited additional direct operating expense. We're in active discussions regarding several potential managed services engagements, including larger scale opportunities. We believe managed services can become an increasingly important capital-light extension of our business. To support cloud growth in 2027 and beyond, we've entered into an agreement with data center developer and operator, Krambu. The agreement provides White Fiber with exclusive access to 100 megawatts of liquid cooled colocation capacity beginning in 2027 with the potential to expand over time. Access to deployable power remains a key constraint across the industry. This agreement provides an important pathway to additional capacity for our cloud services business. Taken together, these developments demonstrate the progress we're making toward a scalable cloud services model. We can secure access to deployable capacity. We can provide dedicated infrastructure through long-term customer commitments. We can access third-party equipment financing, and we can apply our technical expertise to customer-funded infrastructure through managed services engagements. These models allow us to pursue longer duration revenue while maintaining discipline around WhiteFiber's capital investment. Finally, we continue to advance our cross data center networking initiatives. During the quarter, we successfully demonstrated 111.2 terabits per second of bandwidth with guaranteed sub-millisecond latency across 83 kilometers. We believe our patent-pending technology has the potential to create significant platform value for White Fiber. By enabling certain AI workloads to operate across geographically separated facilities, it could allow us to aggregate smaller blocks of power and compute into a single integrated environment, thereby creating a virtual super cluster under one logical system. This could expand the commercial utility of capacity that might otherwise be difficult to monetize independently. This would also increase the value of WhiteFiber's broader site portfolio. We're now validating specific customer cases for this technology. We're targeting an initial commercial launch of this new technology by this September. Given the proprietary nature of the architecture and the early stage of commercialization, we're not disclosing all aspects of the technology and commercial mode for now. Over time, we believe this opportunity could extend beyond WhiteFiber's own infrastructure through licensing and other commercial structures involving third-party facilities. Across both colocation and cloud services, the demand backdrop remains extraordinary. We're being deliberate about how we grow. Our priority is to pursue the right sites, customers and deployments. We will scale at a pace that allows us to execute consistently, maintain a high standard of service and continue building White Fiber's reputation as a trusted infrastructure partner. I'll now turn the call over to our Chief Financial Officer, Justin, to discuss our financial results. Go ahead, Justin.

Thanks, Sam. Second quarter revenue was $28.8 million, an increase of 54% from $18.7 million in the second quarter of 2025. Cloud services revenue was $23.8 million compared with $16.6 million in the prior year period. Revenue for the quarter included approximately $12.3 million associated with the previous disclosed customer termination. The termination also result in approximately $4 million of related expenses payable to the GPU lease provider, which was recorded in cost of revenue. Underlying cloud services results also reflected temporary downturn between the termination of prior contract and the commencement of the newly signed replacement contract. Colocation revenue was $4.7 million compared with $1.7 million in the prior year period. The increase primarily reflects the contribution from MTL 3, which commenced operation under our agreement with Cerebras in fourth quarter 2025. Gross profit, excluding depreciation and amortization was $17.1 million, representing a gross margin of approximately 59% and this compared with gross profit of $11.5 million and gross margin of approximately 61% in the prior year period. G&A expense was about $14.8 million, down from the $17.8 million in the first quarter. The sequential decline primarily reflected lower professional and consulting expenses and lower share-based compensation expense. G&A for the quarter also included approximately $2.2 million of bad debt expense associated with the previous disclosed customer termination. Adjusted EBITDA was about $5.5 million compared with $3.3 million in the prior year period. A reconciliation of adjusted EBITDA to net loss is included in our earnings release and Form 10-Q. Net loss was $15 million or $0.39 loss per diluted share. The net loss reflects a higher depreciation and interest expense associated with the expansion of our infrastructure and related financing activities. We ended the quarter with $56.1 million of cash and cash equivalents. Deferred revenue was approximately $143 million and primarily reflecting customer prepayment associated with our NC-1 site and cloud services deployments. During the quarter, we added approximately $83.2 million of project level equipment and bridge financing to support the continued development of our colocation and cloud services infrastructure. As Sam mentioned discussed earlier, completing the permanent financing for NT1 will further strengthen our financial capacity and allow us to recycle capital into future development. Overall, the quarter reflected continued positive adjusted EBITDA and substantial investment in infrastructure supporting our contracted growth. We remain focused on converting the investment into recurring revenue and cash flow while maintaining discipline around capital deployment. I will now turn the call back to Sam.

Thank you, Justin. Before we open the call for questions, I want to leave you with a few thoughts. Last quarter, we said the pieces of our development model were beginning to come together. They are. Since then, NC1 has moved into active customer deployment and toward full contracted operations. We've also focused our pipeline on the opportunities best positioned to move forward. Importantly, we have recently entered into exclusivity with a consortium of well-known lenders for the proposed secured financing for NC1. The parties have commenced diligence, are negotiating definitive documentation and are working toward closing subject to customary approvals and conditions. This financing process has taken longer than we initially anticipated. But finally, reaching exclusivity and negotiating definitive documentation represent meaningful progress. If completed, the financing would return a significant portion of the capital invested in NC [Audio Gap] it would also allow us to advance the next site in our pipeline. But as my lawyers have advised me to say, there could be no assurance that the financing will be completed on favorable terms or at all. This financing would also complete the first turn of the development flywheel we've described. We acquire Power Advantage infrastructure, we secure long-term customer commitments. We develop and stabilize the asset. We then access institutional capital and recycle our equity into the next project. Completing that first turn would represent an important inflection point for our colocation business. We believe our next opportunity is also becoming increasingly tangible. Several sites have advanced significantly through our diligence process. Among the most actionable is a site that could support approximately 60 megawatts in 2027 and scale to more than 250 megawatts over time. The site has passed substantial diligence. We are now actively negotiating a purchase agreement as we complete the final stages of our evaluation. Power available at this scale in 2027 is scarce. Our retrofit-first approach can bring capacity to market faster than traditional greenfield development, creating a meaningful speed-to-market advantage in a supply-constrained environment. We believe this combination of scarcity and speed to market should support premium economics. Across our pipeline, we're increasingly prioritizing opportunities with investment-grade credit support. We believe this will enhance project finance ability and execution certainty. This reflects the same disciplined sourcing approach that produce attractive economics at NC1, advantage power, speed to market and strong customer demand. We're not pursuing growth for its own sake. We're focused on opportunities that combine advantaged power, credible customer demand and financeable contract structure. Completing the NC1 financing would strengthen our ability to act on opportunities that meet those standards. In cloud services, we're also converting strategy into signed contracts. The multiyear agreements we've signed since our last earnings call meaningfully expand our contracted revenue base and improve revenue visibility. These deployments are structured around firm customer commitments and are designed to be funded through customer prepayments and third-party equipment financing. This limits the capital required from white fiber while allowing us to retain attractive economics. For the most part -- excuse me, for most of the past year, we've been building the individual pieces of this strategy. We're now beginning to demonstrate how they all work together. In colocation, we're moving towards a repeatable model for developing and financing long-term contracted infrastructure. In cloud services, we're pursuing longer duration customer engagements designed to generate attractive returns with limited white fiber capital. This is still -- there is still important execution to be done ahead of NC1 and on the financing, but completing this first turn of the flywheel would position us to enter 2027 with greater financial capacity, a larger contracted revenue base and a more actionable development pipeline. We remain focused on execution, capital discipline and building durable value for our shareholders. With that, we're ready to take your questions. Joining us today for Q&A are White Fiber President, Billy Krassakopoulos; Chief Financial Officer, Justin Zhu; Eric Lang, an adviser to White Fiber and our former -- and of course, our former Chief Financial Officer; and Michael Francisco, Vice President of Cloud Services. Operator, please open the line.

[Operator Instructions] While we'll take our first question from Nick Giles with B. Riley Securities.

It sounds like demand is really strong for the remaining available capacity at NC10. Just hoping you could speak to that commercial process and kind of when you would ultimately cut it off or if you would be willing to kind of entertain other potential counterparties at this point?

Billy, would you like to take that? Sure. Thanks, Sam. Nick, we're still in the early phases of that. It's still a little early to comment on timing of when we would be able to set that up for any clients right now.

Fair enough, Bill.

It is -- I was going to add to that, but go ahead, Billy.

It is imminent. I mean we're fully focused on, like Sam said, completing that first turn of the flywheel and Phase 1 of North Carolina. But the next step is marketing and putting together a full project plan for Phase 2.

Yes. It's just worth mentioning and reiterating to Billy's point that these are -- we have wonderful champagne problems for Tranche 2. We have overwhelming demand for that. We do have a notification. We have our -- we have a legal obligation for Nscale to have to just notify them on the second tranche. But every counterparty is certainly looking at that. second tranche, and they've seen what we've been able to do already with the first tranche, and we've proven ourselves over and over again on how to get things done on time and within budget. So we're -- we'll be playing catch on the demand. We'll make sure that the economics are as premium as they can be for white fiber.

Great. I appreciate that. And then maybe just on the new site side, I was curious when you eventually acquire the site, kind of where it stands today, what type of development work you would be willing to complete before any commercial signing just to ensure that '27 delivery.

Bill, do you want to take that again?

Sure. We're looking at similar situations to North Carolina One, buildings that we can go into quickly, retrofit them. And I mean, our key advantage here is speed for ourselves and for our clients as well. The quickly we develop -- the more quickly we develop these properties, the more quickly we get clients in them, it serves both purposes. But the overall strategy that we're looking at is very similar to what we've accomplished at our North Carolina 1 facility.

We'll go to our next question from Greg Lewis with BTIG.

I was hoping we could talk a little bit about the cloud service business. Congratulations on bringing on a couple more customers. One of the things we've been hearing is that there's ample opportunities to bring on prepayments. How do you balance those upfront prepayments as you're thinking about your structures versus the overall return on, say, a multiyear cloud service business? Just trying to understand, I guess, what the hands worth going to bush, but just kind of curious how you're thinking about that as we continue to build out the cloud business.

Glad you asked that question. We have Michael Francisco, who is in the weeds of all that on the cloud side. Go ahead, Michael.

Thanks, Sam. So the way we think about this is we evaluate all of our deals at the project level and look for healthy terms across the life cycle of that deal. When we started kind of restructuring the cloud business earlier this year, we set some -- we set a framework around that, that really forced us to think about how we run this business in a way that might be a little bit different from the rest of the market and really focusing on high-quality customers as well as deals that have a positive cash flow throughout as well as deals that limit the amount of capital that we have to take out of our own funds in order to make those deals happen. So when we think about the prepayments, that is a mechanism that we can leverage in order to help reduce the amount of capital that we deploy in support of these deals. And then we look at the structure of the deal across its life cycle to ensure that it is cash flow positive and get creative around the last couple of years on those deals. So you noticed as an example, Base 1 has a 2-year option for the customer to extend that deal. We can be creative with how we structure that to both benefit the customer over the term of that deal, but also allow us to adhere to the parameters we set out upfront.

Okay. Super helpful. And then my other question was around the pipeline. I guess the way -- like how do we think about with the growth pipeline, some of these projects where from a colocation standpoint, I'm assuming that those megawatts are just going to be bigger when -- versus, say, sites where we're going to use cloud services. But really, what I'm wondering is, could we see opportunities over the next couple of years where we're using a colocation customer, but also at the same location, maybe not in the same buildings, running GPU as a service. Is that something how we're thinking about maybe scaling that business also?

Yes, in fact. Michael, you should take this -- take that answer, but we'll be doing that, I think, sooner rather than later. Go ahead, Michael.

Yes. Getting to the vertically integrated model has always been the goal. And so to make that happen, we have to have our development pipeline on the data center side align with our customer pipeline on the cloud services side and have customers of the right quality that will allow us to get the right cost of capital to make that an interesting arrangement for us. We -- Billy and I have been talking about how we go get this done. And I think the time line on this has gotten shorter versus longer. And so ultimately, I think we will see a move to that. I don't think we will see all cloud services roll into the data center business, and I don't think that all customers at the data center level will come from the cloud business, but we'll be opportunistic about how we do that and look for other opportunities such as the arrangement with to identify and build capacity for our customers that we don't place in those data centers. It is something we want to get to, and we're getting there more quickly than we thought.

Super helpful. And congrats on getting NC1 off and running.

We'll next go to Raimo Lenschow with Barclays.

Congrats from me as well. That's amazing progress across the board, actually. I have 2 quick questions. One is, if you think, Sam, it's for you, as you think about the business, how do you think about the mix that we should think about in the long run between cloud services, colocation, -- you talked about managed services as well. on the last answer, it sounds like the first 2 are related, but how do you think about the evolution of the mix there and the pros and cons? And I had one follow-up.

Is the question, what do I -- how do we think of the colocation business and the cloud business and the pros and cons of mixing the 2 rather than keeping them separate? Is that the one?

And pursuing one more than the other, like just completely 2 slightly separate ways of doing the work.

Well, aside from -- I'd love Michael to add to this, but aside from the market assigns different multiples. to colocation versus cloud, and they both require different types of expertise and skill set. We have 2 very separate teams working on those businesses. Our colocation team is very separate from the cloud team and vice versa. And that's by design because, again, it's a very different skill set. And integrating the 2, I sometimes wonder if that will affect multiples, but there's also a big reason to integrate the 2 because in a way, we can sort of double dip into the margin into the profits of the revenue. So maybe, Michael, if you want to add to that. But I know it's an ongoing debate that we have internally, and there is a path towards integrating the 2, which is what we're thinking about doing soon. I would love to hear from Michael if he has additional thoughts about that.

Yes. I think that there are benefits to both models there. But the way that we have it structured today, I actually think creates a good tension -- a healthy tension within the business. In order for the cloud business to be able to become a customer of the data center business and partner on those vertically integrated projects, we almost have to earn that opportunity. We are not -- the data center team is not beholden to the cloud organization to put our customers in those locations. Instead, we need to have a compelling customer and a compelling economic case in order to displace some of the demand that they already have. And I think that tension is very healthy because it allows the cloud team to have some goals and some parameters around how they're going to actually be able to do that vertical integration. So again, I could see benefits to both sides, but I think the healthy tension inside the organization and the desire for the cloud team to partner more closely with the data center team on specific projects is good for all of us.

Okay. Perfect. And then can you talk to the managed service approach? Like how -- I mean, obviously, it helps you a lot on not having to deploy capital, et cetera. But like what sort of a margin profile that you -- that we should think about there?

The managed services model is pretty interesting. It was actually something that we put together in anticipation of internal enterprise adoption of AI for R&D and kind of internal development projects. What we found as we put that together is that the demand for it is much greater than enterprise customers who traditionally want to actually own the CapEx expense for a number of different reasons. We're actually seeing a lot of demand both from other Neo clouds, interesting financial partners as well as some of the frontier and AI labs that are -- or have grown to a point where they're actually considering taking on some of the CapEx. From a margin perspective, we see a very healthy margin on those. And I'm going to pause for now on talking about margin until we have some other things to talk about around this. But one of the key benefits, along with the capital-light kind of deployment opportunity is that we start driving a meaningful margin from day 1. So because we are not working on having to pay off finance debt or data center costs, all of the revenue that we produce as part of those deals starts evenly creating revenue for the company from day 1 throughout the life cycle of the deal. And then on top of just standard development and operations, we have adjusted the way we think about software development, focusing our internal software development primarily on projects that help us drive revenue and balance sheet growth. So we have a road map focused on how do we drive better efficiency to reduce costs, and we have a road map to think about how we drive incremental value for customers and revenue inside of those deals and deployments. On top of that then, we layer on third-party services to provide an appropriate toolbox of APIs for developers that are leveraging our bare metal solutions. So it allows us to have layers of sales opportunities on top of each of these managed services deals that create incremental revenue and incremental margin and significant value for our customers. In general, the margin profile would look more like a software offering than a hardware offering.

And we'll take our next question from Brian Dobson with Clear Street.

So you've been signing a significant number of contracts and agreements over the past quarter. I guess as you're in discussions with those clients, do you find that they're leaning more toward longer duration contracts? And I guess, how is the execution that you've done at NC1 impacting those conversations? It must be a net benefit?

I don't think the execution at NC1 is related to the cloud contracts that we've been signing up. They're 2 separate businesses. But maybe, Michael, do you want to just speak about the longer duration contracts on the cloud side? And I'm happy to double-click on if there's anything unanswered, Brian, feel free to ask away. I just want to make sure your questions are answered. Go ahead, Michael.

On the cloud side of the business, we're seeing an interesting dynamic with regard to term of contract. Last year and kind of coming into this year, customers were often looking for shorter-term arrangements. But with the dynamics of the pricing that we're seeing inside the cloud GPU model, I think customers are starting to reevaluate how they procure these and on what duration. If we look at H100s are probably the best example, given they've been in the market the longest, the actual cost per GPU hour for those is actually higher today than they were when they released into the market. And so customers are looking at some of those dynamics and then considering what is their total cost of ownership or total lease cost across the life cycle of those deals and looking to both, a, preserve their access to those GPUs, so they're not having to go out and fight a tough market 3 years from now to go find new capacity, but also looking for ways to bring that cost down and ensure that they have access to those GPUs for as long as makes sense for them. And so those longer duration contracts also allow us to adjust the economics within those deals in a way that's favorable to the customer and actually helps improve our margin throughout the life cycle. So there's a couple of dynamics there, both in terms of in the market and kind of how customers are thinking about these things that are influencing these longer-term deals.

Yes. Great. And then you mentioned that your next opportunity is now in late-stage diligence, I guess. Can you give us a little bit more color on what that might look like? And at this point, given your experience, would you favor like a single campus opportunity or a multi-campus portfolio type of development?

Yes, those are great questions. Billy, do you want to take that?

Sure. So it's leaned towards a single tenant opportunity. And again, think of the process that we went through for North Carolina One, kind of the same deal here, final stages of due diligence. We'll be marrying the opportunity to a client shortly if everything goes well with the technical due diligence and executing the same game plan that we've done and are completing right now in North Carolina One.

We'll take our next question from George Sutton with Craig-Hallum.

So a lot of great updates. I wanted to take a higher-level view on one of the challenges in the market recently have been the not in my backyard theme. And it would seem to me that retrofits along with your cross DC initiatives would be great answers to that challenge. Can you just talk through that in terms of the things you're looking at?

Yes, certainly, and Billy will talk to that just before he starts, I do want to embrace how important it is to engage with the community. We had a Community Day at North Carolina One, and we discussed how we're taking 85% less water than the previous tenant that there'll be less noise than the previous tenant. The retrofit format really does solve a lot of the pushback related to data center build-out, particularly against Greenfields. And so we think engaging with the community, getting support from local community leaders using retrofit as opposed to greenfield really does help solve a lot of the problems that are being discussed right now nationally. In fact, CNN just published a pretty long interview about WhiteFiber's approach and how it's uniquely designed to help mitigate all the pushback. I would encourage all the listeners to listen in on that. Billy, do you want to add a few more points on that question?

Yes, for sure. I mean, like Michael said, the GPU division and the data center division work hand-in-hand and the cross data center platform is going to enable us to deploy that technology in our sites and all the projects, all the stuff in our pipeline that we've been presenting have always been deemed on the smaller side, 30 megawatts, 60 megawatts, 99 megawatts. There's a reason for that. It's done on purpose. Like we're able to execute these sites much quicker and bring that capacity online much quicker than competitors can, like we've proved with North Carolina One. And with the cross data center platform, we can bundle these sites into larger clusters. So all this stuff is work in progress, stuff that we're cooperating together with the GPU division and the data center division, and it's all strategic.

Yes. I want to highlight that point that Billy made. This technology that we patented was patent pending is very unique. And the reason for it -- the impetus for it is if we have these smaller modular sites and if we can create a super virtual super cluster on these modular sites, we can basically solve for disparate smaller sites and just create them into these virtual larger ones under one logical system. And so this technology helps basically solve for that issue. And if we have smaller sites, we could just connect them through this technology, which we think is transformational for the industry, let alone white fiber.

Makes great sense. One other question on Krambu. So if I understand it, you have worked out access to 100 megawatts in 2027 with Power Access. Can you just walk through how that's influencing what's in your pipeline and how you're -- just a little bit more on that deal?

Yes. So the genesis for this, we have been working with Krambu for quite a while, and we have some -- a couple of deals in late stage that we hope to be able to talk about where we're leveraging their facilities. Both Krambu and ourselves see the market today is trying to solve GPU and power access as 2 separate problems. And it's really hard to get those time lines to match with customer demand and their own time lines and goals and priorities around deploying the infrastructure. By partnering together, we create a single phase, and we can align our -- both of our sales pipelines as well as our supply chain pipelines together in order to provide very clear views into what's available and when for our customers. The genesis of this actually started as a technical collaboration because as we've shifted our focus to the physical layer of GPU infrastructure, we have been working with them around how do we think about driving the most value out of these highly dense GPU clusters. And so for us and them being able to bring the skill sets of our engineering teams together as well as align on the availability time lines. We have a very compelling kind of offering and workflow for customers who are looking to do planning going forward, particularly those customers who have, I would say, defined scaling plans where we can align their needs with what we have upcoming. From how it has affected our pipeline, it's actually what it has done today because we're just announcing this. So we'll see what it does relative to growing the pipeline. But what it does is it makes some of our pipeline more realistic in terms of being able to fulfill those customer demands, both more near term, but also long term. We had the good fortune of expanding a couple of customers this quarter, and we have others that we're talking to about working with them to partner across the next 12 months around their deployments and what they need and an arrangement like Krambu allows us to give them a very clear time line and be able to fulfill and act as a good partner for them to help fulfill those needs.

We'll take our next question from Paul Golding with Macie Capital.

Congrats on all the progress. Just wanted to ask initially on the 200-megawatt incremental opportunity at MC1 that Duke is evaluating. How would you expect to see that capacity potentially come on? Would it be phased once again as with the first around 100 gross? Or would you expect to see this load study potentially lead to the full 200 coming on all at once? And then how might you market that? And then I have a follow-up.

Billy, you should definitely take that one.

Paul, a little difficult to say right now. It's still too soon in the game for that. There will more than likely be one or even multiple sites that we're enacting on before that 200 megawatts is approved or any schedule for deployment on that is to be released.

Understood. And then maybe from a cloud perspective, just turning to the comments on the prior question. I just wanted to double-click on the GPU availability itself. We've been seeing in the marketplace, of course, how constrained GPU capacity is through this partnership that you have, just in terms of access to the compute, how -- I guess, how confident are you into sort of the forward-looking availability of that supply, in particular, as you noted that you have a new cloud services agreement around Vura Rubin and V300 infrastructure, maybe in particular around Vura Rubin, given the memory considerations there and presumably the opportunity to sell through at a higher price to your customers. Just how is the absolute quantum of availability of compute looking based on the relationships that you have?

So I'll address this in 2 parts. So the first part is relative to our relationship with Krambu, it actually helps us with availability, being able to leverage both our connections kind of across the industry from OEMs and NVIDIA as well as their own allows us a little bit better access. And I think some of the work they've done around cluster density and kind of the footprint and how their data centers are designed have helped them obtain some allocations that we can then take advantage of. So on the whole, it is a net benefit to us to be able to have this partnership relative to allocations. A second piece, I think I would like to address on this is that one of the things that we did when we went to restructure this business is to put a strategy in place that prevents us from chasing our tails around near-term GPU demand. It's funny, one of the things that our customers love about us is that we're very willing to say no. And the reason we say no is because we do not want to be able -- we do not want to put ourselves or our customers in a position where we are making commitments around delivery time lines that we are not absolutely certain that we can meet. And so a lot of the discussions we're having are for deployments that are far enough out that we can be very certain that we can get the GPU allocations in place in order to serve those customers. And particularly for those customers that are partnering with us to scale, we are looking out at a time line of about 12 months. And so it's a little bit easier for us to make sure that we can source the right infrastructure in order to support those customers because of the way that we've set the business up.

Maybe just to sneak one in on the back of that response. Do you -- might we expect to see White Fiber buying GPU compute speculatively in the marketplace based on your visibility to this sort of demand curve and how it's coming to you and realizing committed contracts?

Perhaps, but I don't see that happening in the near term. It would have to be really the right opportunity for us. If I go back to the initial parameters that we put in place as we started restructuring the business, that speculative purchasing doesn't really fall into that. Now there are some things that we're working on where it might make sense for us to do that in the future, but I'm not ready to comment on kind of what those developments are. But I will say that today, we are really focused on fulfilling real customer need based on real contracts. with high-quality customers. And so the speculative purchasing is not a thing that's on the table for us at the moment. Priority given our available capital today.

We'll take our next question from John Todaro with Needham & Company.

I was hoping to just get a little bit more commentary on the financing market, whether for NC1 or some of the future sites, the most likely guarantors here. We talking about chip manufacturers? Are the banks starting to step in more? In the future, do you target more hyperscaler leases? Just any commentary there.

I mean, overall, I mean, we're really just trying to solve for the lowest cost of capital. And I think we've had certain things that we've learned along the way in this NC1 financing process that, as noted, has taken longer than expected, and there would have been certain contractual features certainly that would have made it easier to finance. So we know what we need to solve. We know that we want to establish a structure with counterparty that's financeable from day 1 and have that firmly underwritten. So whether that be directly with a hyperscaler, backed by a chip manufacturer, whatever structure is really advantageous from a cost of capital perspective. That's kind of our priority. So there's not one above the other. It's really just solving for the lowest cost of capital and the best financing structure.

Okay. Understood. Makes sense. And then one on the Cloud segment. It seems like pretty good pricing on all of them. The GPU per hour pricing I was backing into was ranging from $3.47 up to above $7. And I think that lower one includes a revenue share, so it likely comes even better. Just wondering if margin starts to expand maybe sooner than folks were initially thinking, I would love to just get your thoughts there on that margin expansion opportunity.

So from a margin expansion standpoint, as we look across the deal types, I think we will see an improvement in margin kind of across our deals as we look at the mix that we're looking to deploy over the coming years. The customers that we talk to are especially these folks that are more mature in the AI lab space or in other areas or particularly in the enterprise, they understand the balance between cost and quality and overall ROI on those clusters. And so many folks have been burned kind of going for the cheaper pricing and winning -- in doing so, they actually get less value out of that because they suffer from more downtime missed SLAs and those sorts of things. So because of the quality of our engineering team, we are able to deliver really high-quality deployments. And as a result of that, that's the thing that customers are willing to pay a bit more for. So I think we will see improvement for a couple of reasons over time, but it's going to take some time for that to develop.

We'll next go to Michael Donovan with Compass Point.

Congrats on the progress, guys. So you now have operations across the U.S., Canada, Iceland and France. How do you think about geographic expansion from here? What other markets look most attractive? And what factors are driving where you may potentially expand?

Those are probably different answers depending on the business unit. Billy, do you want to talk about it from a colocation perspective and then Michael can discuss it.

Sure. On the data center colocation side, it's quite simple. It's a mix of client opportunity and where we can marry that and match that with available power in the time line required. So everything that we're looking at right now is mostly in the United States, a little bit in Canada for the data center colocation side.

On the cloud side, it's -- pardon me, sorry, you there. On the cloud side, it's really driven by customer demand. And customers have different requirements for where they want their GPUs to be placed, whether it be for compliance reasons or other things, performance due to low latency, things like that. So it's really driven by our customers. And so most of our deals that we're seeing today are in North America, but we are seeing some interest in European deployments, particularly for folks that have GDPR concerns, things like that. So we'll see how that goes over time. But right now, the economics of where we place those GPUs also has an impact. And right now, the U.S. is the most attractive market relative to what we're seeing from our customers.

That's helpful. And I understand you want to keep discussions at a high level, but on Project Redwood and cross data networking, is this primarily suited for inference? Or could it support training as well? And theoretically, how many geographically separate sites could you aggregate?

Today, the way that we're building it is to support multiple use cases. One of the reasons why we selected Modal as the customer for our R&D cluster is because they were doing some intense training workloads. And those workloads being able to put those clusters and run them as a single virtual cluster, training is the most demanding workload that we could put on there. So I think we can support kind of both ends of the spectrum from training to inference, and it will be interesting to see what kind of use cases our customers want to use that for because while we talk about it as a single virtual cluster is kind of the primary way people are talking about that today. There's lots of other potential use cases we can look at from telecommunications to edge computing and others. So we'll be really interested to see what our customers want to do with that once we bring that to market and finalize the testing across the full fiber span.

And our last question comes from Nathan Francovitz with Cantor Fitzgerald.

Just on the cross data center product, I guess, how do you think about the long-term opportunity? And what's the pathway to monetization? Is it more of an internal capability? Or can you talk through like the potential scalability for commercialization?

Could be both internal and we're even thinking about licensing it, but Michael is leading that work stream. So go ahead, Michael.

Thanks, Sam. Yes, Sam is correct. I think there's -- and as Billy mentioned earlier as well, we think there's some really compelling use cases for our own internal utilization of this, whether it be connecting 2 large sites with lots of megawatts. There's clearly some economic value in being able to connect as an example, to 50-megawatt sites and go market that as 100. There's some value in that. There's also value in being able to leverage fragmented power resources.

That's an understatement. There is massive value in that.

So I think as power continues to become a challenge for folks, being able to aggregate multiple sites into a single cluster is going to be a value proposition. And we don't know yet what's going to happen from a legislative standpoint. But say we get to a world where there are taxes applied to clusters -- or excuse me, data centers over certain megawatts, this technology allows us to really think strategically around how we deploy it in order to preserve kind of the economic value of the sites by kind of bringing them together. In terms of the number of sites, we will see. The next phase of testing around this will be to test and demonstrate the efficacy of the hub-and-spoke model. And so we believe that it can expand significantly, but we will wait to see when we have some real data that we can present to the market.

I'd now like to turn it back to our speakers for any final or closing remarks.

Sorry, I was on mute. Thank you, everyone, for joining us today. We look forward to the next quarterly call. Until then, we'll be working very hard and delivering results. Thank you.

Thank you. And this does conclude today's call. We thank you for your participation. You may now disconnect.