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Applied Digital Corporation
Technology | Information Technology Services
⚡ Executive Summary
📊 The Bottom Line
Applied Digital operates digital infrastructure for high-performance computing (HPC) and AI, including services for crypto mining. The company is rapidly expanding its data center capacity, especially in the growing AI sector, positioning itself in a high-demand market. However, it is currently unprofitable, carrying significant debt, and experiences high stock volatility.
⚖️ Risk vs Reward
At a current price of US$33.88, APLD trades at a high price-to-sales ratio of 35.88 and has a negative forward P/E, indicating it is valued on future growth potential rather than current profitability. Analyst price targets range from US$36 to US$58, suggesting potential upside. However, its high beta of 6.924 points to substantial risk and volatility, making the risk/reward profile suitable for investors with a high-risk tolerance.
🚀 Why APLD Could Soar
- • Booming demand for AI/HPC infrastructure could drive exponential growth and data center utilization, fueling significant revenue expansion.
- • Strategic partnerships, like the lease agreement with CoreWeave, secure long-term revenue streams and validate APLD's infrastructure capabilities.
- • Expansion of data center capacity and strategic acquisitions could solidify market position and achieve economies of scale, improving profitability.
⚠️ What Could Go Wrong
- • High levels of debt (US$2.61B) combined with persistent unprofitability pose significant financial risks and limit operational flexibility.
- • Intense competition from larger, more established players in the data center and HPC hosting market could lead to pricing pressures and reduced margins.
- • Exposure to the volatile cryptocurrency mining market could introduce unpredictability in revenue and operational performance.
🏢 Company Overview
💰 How APLD Makes Money
- • Applied Digital designs, develops, and operates digital infrastructure solutions primarily for high-performance computing (HPC) and artificial intelligence (AI) industries in North America.
- • The company offers infrastructure services to crypto mining customers, providing facilities and power for their operations.
- • It also provides GPU computing solutions for critical workloads related to AI, machine learning, and other HPC tasks.
- • Applied Digital engages in the designing, constructing, and managing of data centers specifically built to support HPC applications.
- • A significant revenue driver is through large-scale lease agreements for its data center campuses, such as the 150MW lease with CoreWeave at its Polaris Forge 1 Campus.
Revenue Breakdown
HPC Hosting (AI/ML)
60%
Providing GPU computing infrastructure for AI and machine learning workloads.
Data Center Hosting (Crypto Mining)
40%
Hosting services and infrastructure for cryptocurrency mining operations.
🎯 WHY THIS MATTERS
Applied Digital's dual business model allows it to capitalize on the rapid growth of AI/HPC while maintaining a base in the established, albeit volatile, crypto mining sector. The strategic shift towards AI-focused HPC hosting is critical for long-term relevance and higher-value services, aiming to leverage high-demand computational needs.
⭐ Competitive Advantage: What Makes APLD Special
1. Specialized HPC Infrastructure
Applied Digital focuses on purpose-built, high-density data centers optimized for HPC and AI workloads. This specialization allows for efficient power delivery and cooling tailored to high-demand GPU clusters, which general-purpose data centers may struggle to provide. This niche focus attracts customers with specific, high-power computing needs, creating a competitive edge in a specialized market segment.
2. Strategic Geographic Footprint
The company strategically locates its data centers in North America, particularly regions like North Dakota, often leveraging access to ample, low-cost power and cooler climates. This reduces operational expenses for cooling and energy, offering a cost advantage over competitors in less favorable locations. This geographic positioning is crucial for profitability in energy-intensive HPC operations, providing a structural advantage that is hard to replicate quickly.
3. Key Partnerships and Lease Agreements
Applied Digital has secured significant, long-term lease agreements with major players like CoreWeave for its HPC campuses. These partnerships provide stable, predictable revenue streams and validate the quality and capacity of their infrastructure. Such large-scale commitments from reputable clients offer a strong competitive barrier, as they represent substantial capital investments and long-term relationships that competitors cannot easily disrupt, enhancing customer stickiness.
🎯 WHY THIS MATTERS
These advantages collectively position Applied Digital as a critical infrastructure provider in the rapidly expanding HPC and AI sectors. Their specialized facilities, cost-effective operations, and strategic client relationships create a defensible moat, allowing them to attract and retain high-value customers in an increasingly competitive market.
👔 Who's Running The Show
Wesley Cummins
Chairman, CEO, Secretary & Treasurer
Wesley Cummins, 47, leads Applied Digital as Chairman and CEO. He brings significant entrepreneurial experience to the rapidly evolving digital infrastructure space. His leadership has been central to the company's strategic pivot towards high-performance computing and AI infrastructure, securing key partnerships and overseeing substantial data center expansions to meet surging demand.
⚔️ What's The Competition
The digital infrastructure and HPC hosting market is highly competitive, featuring both established cloud providers and specialized data center operators. Competition centers on power availability, geographic location, cooling capabilities, network connectivity, and pricing. Larger cloud providers like Amazon Web Services and Microsoft Azure offer comprehensive, integrated solutions, while specialized firms like Applied Digital focus on niche, high-density computing needs.
📊 Market Context
- Total Addressable Market - The global data center market is projected to reach US$1.3T by 2030, driven by AI, IoT, and cloud adoption; HPC segment growing at 15%+ annually.
- Key Trend - The accelerating adoption of AI and machine learning is rapidly increasing demand for specialized, high-density GPU-accelerated data center infrastructure.
Competitor
Description
vs APLD
CoreWeave
A specialized cloud provider focused on GPU-accelerated workloads for AI and HPC, operating its own infrastructure and offering services.
CoreWeave is both a partner and a potential competitor, as they also build and operate their own HPC infrastructure. APLD currently hosts CoreWeave.
Digital Realty Trust
A large global provider of carrier-neutral data centers, colocation, and interconnection solutions across various industries.
Digital Realty offers broad data center services but is less specialized in the extreme high-density requirements of GPU-intensive AI/HPC compared to APLD's focused approach.
Equinix
A global interconnection and data center company, providing colocation, interconnection, and digital infrastructure services.
Similar to Digital Realty, Equinix provides extensive data center services but primarily focuses on interconnection rather than purpose-built, high-density HPC/AI infrastructure like APLD.
📊 Valuation & Analysis
📈 Wall Street Summary
Analyst Rating Distribution - 10 Buy, 2 Strong Buy
10
2
12-Month Price Target Range
Low Target
US$36
+6%
Average Target
US$45
+34%
High Target
US$58
+71%
Closing: US$33.88 (30 Jan 2026)
🚀 The Bull Case - Upside to US$58
1. Surging AI Demand Drives Capacity Utilization
High Probability
The exponential growth in AI adoption could lead to full utilization of Applied Digital's expanding data center capacity, significantly boosting revenue and potentially driving the stock toward the high target of US$58 as profitability improves with scale.
2. Successful Diversification Beyond Crypto Mining
Medium Probability
If Applied Digital successfully pivots further into high-margin AI/HPC hosting, reducing its reliance on volatile crypto mining, it could attract a broader investor base and improve financial stability, enhancing its valuation and reducing perceived risk.
3. Accretive Strategic Partnerships and Acquisitions
Medium Probability
Forming additional long-term partnerships with leading AI companies or acquiring smaller, complementary infrastructure assets could expand its market reach and technology offerings, accelerating growth and driving valuation beyond current analyst estimates.
🐻 The Bear Case - Downside to US$36
1. Persistent Unprofitability and High Debt Burden
High Probability
Continued operating losses coupled with a substantial debt load of US$2.61B could strain liquidity, making it difficult to fund expansion or service debt, potentially pushing the stock towards its low target of US$36 or lower.
2. Intensified Competition and Pricing Pressure
Medium Probability
Increased competition from hyperscalers and specialized HPC providers could lead to reduced pricing power and lower margins, hindering Applied Digital's ability to achieve sustainable profitability and grow market share.
3. Execution Risks in Data Center Development
Medium Probability
Delays or cost overruns in constructing and bringing new data center capacity online could impact projected revenue growth, erode investor confidence, and negatively affect cash flow, thereby pressuring the stock price.
🔮 Final thought: Is this a long term relationship?
Owning Applied Digital for a decade hinges on its ability to capitalize on the sustained growth of AI and HPC, transforming its current unprofitability into robust, consistent earnings. The durability of its specialized infrastructure and strategic partnerships will be critical to fend off larger competitors. Management must skillfully navigate high debt and execution risks while maintaining innovation. If the AI revolution continues to fuel demand for specialized infrastructure and APLD proves its operational efficiency and financial discipline, it could be a valuable long-term holding; otherwise, its high volatility and current losses present substantial challenges.
📋 Appendix
Financial Performance
Metric
31 May 2025
31 May 2024
31 May 2023
Income Statement
Revenue
US$0.14B
US$0.14B
US$0.00B
Gross Profit
US$0.04B
US$0.03B
US$0.00B
Operating Income
US$-0.04B
US$-0.02B
US$0.00B
Net Income
US$-0.23B
US$-0.15B
US$0.00B
EPS (Diluted)
0.00
-1.31
0.00
Balance Sheet
Cash & Equivalents
US$0.04B
US$0.00B
US$0.03B
Total Assets
US$1.87B
US$0.76B
US$0.26B
Total Debt
US$0.70B
US$0.14B
US$0.09B
Shareholders' Equity
US$0.63B
US$0.12B
US$0.06B
Key Ratios
Gross Margin
29.6%
21.9%
0.0%
Operating Margin
-28.0%
-11.0%
0.0%
string
-36.46
-119.58
0.00
Analyst Estimates
Metric
Annual (31 May 2026)
Annual (31 May 2027)
EPS Estimate
US$-0.41
US$-0.90
EPS Growth
-28.1%
-118.3%
Revenue Estimate
US$0.3B
US$0.5B
Revenue Growth
+60.9%
+54.5%
Number of Analysts
1
2
Valuation Ratios
| Metric | Value | Description |
|---|---|---|
| Forward P/E | -37.85 | Indicates the current share price relative to estimated future earnings per share, reflecting investor expectations for future profitability. |
| Price/Sales (TTM) | 35.88 | Evaluates the company's stock price relative to its total revenue over the last twelve months, often used for growth companies or those with inconsistent earnings. |
| Price/Book (MRQ) | 6.52 | Compares the market value of a company's stock to its book value per share, indicating how much investors are willing to pay for each dollar of assets. |
| EV/EBITDA | 503.94 | Measures the enterprise value against earnings before interest, taxes, depreciation, and amortization, providing a valuation metric that accounts for debt and is useful for capital-intensive businesses, though a high multiple here indicates significant valuation relative to current EBITDA for a loss-making company. |
| Return on Equity (TTM) | -0.08 | Measures the profitability in relation to shareholders' equity, showing how much profit the company generates for each dollar of equity, with a negative value indicating losses. |
| Operating Margin | -0.24 | Represents the percentage of revenue left after paying for operating expenses, highlighting the company's operational efficiency before taxes and interest, with a negative value indicating operating losses. |