Applied Digital

APLD

Market cap $8.99B

Applied Digital relies on a small customer base, fueling strong growth, but heavy dependence on a key client clouds long-term visibility.

Applied Digital's revenues grow sharply, but mounting costs, ongoing losses and dependence on a single tenant keep its long-term outlook uncertain.

Applied Digital (APLD +2.62%) has the kind of AI growth story that can pull investors in fast, but the deeper you look, the more tension you find. This video breaks down why the upside still looks real, why the risks suddenly matter more, and what could decide where the stock goes next.

APLD's FQ3 earnings highlighted its HPC hosting segment's immense earnings upside potential, after reporting a 24.7% segment operating margin. Amendments to CoreWeave's leases de-risk the agreements and allow raising the final Polaris Forge 1 debt tranche and refinancing the $2.35 billion debt at more favorable terms. A lease agreement for Delta Forge 1 could be announced by April 18th, while CoreWeave's latest deals with Meta and Anthropic potentially suggest additional leases at Polaris Forge 1.

They collectively sold out of the shares on Thursday, despite very impressive fundamentals. A bullish analyst note helped change their minds the following day.

Applied Digital remains a buy after a 20% pullback, supported by robust long-term growth prospects and reaffirmed $1B NOI target. Q3 revenue surged 139% YoY, but no new leases were secured, raising questions about near-term demand strength. Debt levels have increased following a $2.15B senior notes offering, introducing higher leverage risk despite a still-strong cash balance.

Applied Digital delivered a strong Q3'26, beating top and bottom line estimates amid rapid Data Center expansion. APLD's 139% Y/Y revenue growth is driven by hyperscaler AI infrastructure demand, but operating losses and debt have surged due to aggressive CapEx. With 700 MWs of IT load under construction, APLD is positioned to benefit from secular Data Center CapEx growth, despite its high 12.1X forward P/S.

Applied Digital remains a hold as recurring lease revenue scales and financing conditions improve, but equity returns and dilution risks persist. Q3 FY2026 results confirm a transition to higher-quality, recurring revenue, with ~$44m of $71m HPC segment revenue now from base rent tied to long-term leases. Financing conditions have improved with new debt at 6.75% and strengthened CoreWeave lease structures, but total debt remains high at $2.7-2.8b.

Applied Digital is scaling AI and blockchain data centers, targeting hyperscale clients with long-term leases and aggressive capacity expansion. APLD has secured $16B in aggregate rental revenue via five long-term leases and is marketing over 4 GW of accessible power. Financial health is improving with nearly $2B in cash, but operating losses are widening, and profitability is not expected before 2028.

Applied Digital this week posted fiscal third-quarter revenue of $126.6 million versus a $76.56 million estimate and delivered adjusted EPS of nine cents versus expectations for a loss of 10 cents.