“Applied Digital’s shares have rocketed over 270% in the past year, fueled by booming AI infrastructure demand and key contracts. With Q2 earnings looming, recent revenue jumps, a planned cloud spin-off, and bullish analyst targets point to further gains, though market volatility and execution risks could sway the outcome for investors eyeing entry now.”
Applied Digital Corporation, a key player in next-generation digital infrastructure, designs and operates data centers tailored for high-performance computing, AI, and cloud services. The company has positioned itself at the forefront of the AI boom, providing colocation, hosting, and specialized facilities for hyperscalers and enterprise clients.
Recent Stock Performance and Market Position
The stock, trading under ticker APLD on Nasdaq, closed at $28.11, marking a 14.64% daily gain and pushing its market cap to approximately $4.2 billion. Over the trailing 12 months, shares have climbed more than 270%, outpacing broader market indices amid surging interest in AI-related stocks. This momentum stems from the company’s expansion in AI factories and data centers, capitalizing on the explosive growth in computational needs for machine learning and large language models.
Year-to-date performance shows resilience, with the stock recovering from a 52-week low of $3.31 to approach its high of $40.20. Trading volume has spiked recently, averaging 29.89 million shares over the past 65 days, indicating heightened investor interest ahead of the upcoming catalyst.
Financial Highlights from Q1 Fiscal 2026
In the first quarter ending August 31, 2025, revenue soared 84% year-over-year to $78.5 million, driven by increased utilization in data center hosting and the ramp-up of cloud services. The data center segment alone contributed $62.3 million, up 92%, reflecting strong demand for GPU-powered infrastructure. Adjusted EBITDA improved to $15.2 million from a loss in the prior year, signaling operational efficiencies and margin expansion.
However, net losses persisted at $0.18 per share, narrower than the previous year’s $0.25, as the company invests heavily in capacity buildouts. Cash reserves stood at $45.7 million, bolstered by recent financing, while total debt was $210.4 million, manageable given the growth trajectory.
Key Strategic Developments
A major boost came from a $5 billion, 15-year lease agreement signed in October 2025 for a 200 MW AI factory, securing long-term revenue from a major hyperscaler. This deal underscores Applied Digital’s role in supporting AI workloads beyond traditional GPUs, including custom ASICs, where shipments are projected to grow 45% industry-wide in 2026 compared to 16% for GPUs.
Additionally, the company announced plans to spin off its cloud business and merge it with EKSO to form ChronoScale, a move aimed at unlocking value and focusing core operations on data centers. This restructuring could enhance shareholder returns by separating high-growth segments.
Analyst Perspectives and Forecasts
Wall Street remains optimistic, with a consensus buy rating and a median price target of $42.50, implying over 50% upside from current levels. Analysts project fiscal 2026 revenue at $297.3 million, a 38% increase, with earnings turning positive by year-end. Growth is expected to accelerate to 101% annually over the next five years, outstripping peers in the digital infrastructure space.
One firm highlighted Applied Digital as a top pick for 2026, citing its undervalued position relative to EV/revenue multiples of 14x, compared to competitors at 20x or higher.
Potential Risks and Considerations
| Metric | Fiscal 2025 | Fiscal 2026 Estimate | Year-over-Year Growth |
|---|---|---|---|
| Revenue | $215.6M | $297.3M | 38% |
| Data Center Revenue | $165.4M | $240.1M | 45% |
| Cloud Services Revenue | $50.2M | $57.2M | 14% |
| Adjusted EBITDA | $28.4M | $65.7M | 131% |
| EPS | -$0.72 | $0.15 | N/A |
Despite the positives, investors face uncertainties. The AI sector’s hype could lead to overvaluation corrections if growth slows. Applied Digital’s reliance on a few large clients exposes it to contract risks, and ongoing capital expenditures—projected at $300 million for 2026—may strain liquidity if financing costs rise.
Market-wide factors, such as interest rate fluctuations or regulatory scrutiny on energy-intensive data centers, add volatility. The stock’s beta of 2.1 indicates it moves sharply with tech sentiment, potentially amplifying losses in a downturn.
Valuation Metrics
At current prices, Applied Digital trades at a forward P/S ratio of 14.1, below the sector average of 18.5, suggesting room for appreciation if earnings meet expectations. Enterprise value to EBITDA stands at 22.4x, reasonable for a high-growth firm.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, financial recommendations, or an endorsement of any securities. Readers should conduct their own research and consult with licensed financial advisors before making any investment decisions. All data and opinions are based on publicly available information and are subject to change.
