We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
APLD is a Zacks Rank #5 Strong Sell trading at $13B with F scores in Value, Growth, and VGM.
The AI data center revenue ramp is real but years away, while $2.7B in debt is accumulating now.
CoreWeave concentration adds risk to an already complicated story.
Applied Digital (APLD - Free Report) is a Zacks Rank #5 (Strong Sell) that has captured investor imagination with its AI data center buildout story. However, with a $13 billion market cap, a beta of 5.69, and F scores across Value, Growth, and VGM, the stock is priced for a future that is still years away from being realized.
About the Company
Applied Digital is a data center developer and operator building large-scale GPU-optimized AI infrastructure campuses in the Dakotas, with a side business in bitcoin mining hosting that ironically remains the most profitable part of the company.
The firm is developing what it calls "hyperscale data center regions" which are massive campuses designed to serve the compute demands of AI workloads for some of the world's largest technology companies.
The Quarter Looked Good on the Surface
To be fair, Q3 results were impressive at first glance. Applied Digital reported EPS of $0.09 versus estimates of negative $0.10, and revenue of $126.6M absolutely demolished the $75.1M consensus. Adjusted EBITDA came in at $44.1M versus $6.3M a year ago.
But dig into the details and the picture gets more complicated. The standout performer was the bitcoin mining hosting business, which generated nearly $14 million in segment operating profit on $120 million in net assets, the highest return on assets in the company.
The AI data center story, the reason the stock trades at $13 billion, is still largely a construction project.
The Debt Load is Real, the Revenue Ramp is Not Yet
Applied Digital has placed $2.15 billion in senior secured notes at 6.75% due 2031, sits on $2.7 billion in total debt, and is still working to place one remaining debt tranche for its final 150MW building at Polaris Forge 1.
Management targets long-term leverage of 5 to 6 times NOI, but they have to actually get to $1 billion in NOI first, which is a five-year goal. In the meantime, the company is carrying significant interest expenses on a construction-stage asset base.
Revenue recognition will be lumpy and non-linear by management's own admission. The next meaningful step-up comes when the second 150MW building at Polaris Forge 1 goes live around July 1, with phased energization running through September.
Delta Forge 1 won't see initial operations until mid-2027. Investors buying the stock today at $13 billion are paying a steep price for cash flows that are still being built, not earned.
Another important note is that of the $16 billion in disclosed contracted lease revenue, approximately $11 billion is tied to CoreWeave. This is a single customer representing roughly 70% of the contracted backlog. Management has explicitly stated its goal is to shift the mix toward 70% investment-grade tenants, which signals they know the concentration risk is real. Any deterioration in CoreWeave's business or creditworthiness hits Applied Digital disproportionately hard.
Estimates and Valuation
The estimate revision picture offers no support. Analysts have made zero upward revisions over the last 30 or 60 days while cutting current-year estimates, and the Style Scores tell the same story, with a F in Value, F in Growth, and F in VGM.
With a beta of 5.69, this is a stock that moves violently in both directions, and with the AI data center trade having already priced in years of future growth, the risk-reward skews unfavorably from here.
Technicals Look Bleak
The stock has been one of the most volatile in the market, rocketing from a 52-week low of $9 to a high of $50 before settling around $45 today. And for now, the chart still looks good as it trades near the recent highs. However, a break of the $40 level could start a cascade of selling that would cause a test of the 200-day MA down at $32.
In Summary
Applied Digital has a real asset base, real contracted revenue, and a management team executing on an ambitious long-term vision. But at $13 billion in market cap, the stock is pricing in flawless execution on a pipeline that won't fully ramp until 2027 or beyond.
For investors who like their risk-reward balanced, the Zacks Rank #5 says look elsewhere. Those interested in a name in the same industry grouping, Atlanticus Holdings (ATLC - Free Report) is a Zacks Rank #1 (Strong Buy) that is trading near 2026 highs.
View the Zacks #1 Rank List
Bear of the Day: Applied Digital (APLD)
Key Takeaways
Applied Digital (APLD - Free Report) is a Zacks Rank #5 (Strong Sell) that has captured investor imagination with its AI data center buildout story. However, with a $13 billion market cap, a beta of 5.69, and F scores across Value, Growth, and VGM, the stock is priced for a future that is still years away from being realized.
About the Company
Applied Digital is a data center developer and operator building large-scale GPU-optimized AI infrastructure campuses in the Dakotas, with a side business in bitcoin mining hosting that ironically remains the most profitable part of the company.
The firm is developing what it calls "hyperscale data center regions" which are massive campuses designed to serve the compute demands of AI workloads for some of the world's largest technology companies.
The Quarter Looked Good on the Surface
To be fair, Q3 results were impressive at first glance. Applied Digital reported EPS of $0.09 versus estimates of negative $0.10, and revenue of $126.6M absolutely demolished the $75.1M consensus. Adjusted EBITDA came in at $44.1M versus $6.3M a year ago.
But dig into the details and the picture gets more complicated. The standout performer was the bitcoin mining hosting business, which generated nearly $14 million in segment operating profit on $120 million in net assets, the highest return on assets in the company.
The AI data center story, the reason the stock trades at $13 billion, is still largely a construction project.
The Debt Load is Real, the Revenue Ramp is Not Yet
Applied Digital has placed $2.15 billion in senior secured notes at 6.75% due 2031, sits on $2.7 billion in total debt, and is still working to place one remaining debt tranche for its final 150MW building at Polaris Forge 1.
Management targets long-term leverage of 5 to 6 times NOI, but they have to actually get to $1 billion in NOI first, which is a five-year goal. In the meantime, the company is carrying significant interest expenses on a construction-stage asset base.
Revenue recognition will be lumpy and non-linear by management's own admission. The next meaningful step-up comes when the second 150MW building at Polaris Forge 1 goes live around July 1, with phased energization running through September.
Delta Forge 1 won't see initial operations until mid-2027. Investors buying the stock today at $13 billion are paying a steep price for cash flows that are still being built, not earned.
Another important note is that of the $16 billion in disclosed contracted lease revenue, approximately $11 billion is tied to CoreWeave. This is a single customer representing roughly 70% of the contracted backlog. Management has explicitly stated its goal is to shift the mix toward 70% investment-grade tenants, which signals they know the concentration risk is real. Any deterioration in CoreWeave's business or creditworthiness hits Applied Digital disproportionately hard.
Estimates and Valuation
The estimate revision picture offers no support. Analysts have made zero upward revisions over the last 30 or 60 days while cutting current-year estimates, and the Style Scores tell the same story, with a F in Value, F in Growth, and F in VGM.
With a beta of 5.69, this is a stock that moves violently in both directions, and with the AI data center trade having already priced in years of future growth, the risk-reward skews unfavorably from here.
Technicals Look Bleak
The stock has been one of the most volatile in the market, rocketing from a 52-week low of $9 to a high of $50 before settling around $45 today. And for now, the chart still looks good as it trades near the recent highs. However, a break of the $40 level could start a cascade of selling that would cause a test of the 200-day MA down at $32.
In Summary
Applied Digital has a real asset base, real contracted revenue, and a management team executing on an ambitious long-term vision. But at $13 billion in market cap, the stock is pricing in flawless execution on a pipeline that won't fully ramp until 2027 or beyond.
For investors who like their risk-reward balanced, the Zacks Rank #5 says look elsewhere. Those interested in a name in the same industry grouping, Atlanticus Holdings (ATLC - Free Report) is a Zacks Rank #1 (Strong Buy) that is trading near 2026 highs.