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APLD Stock Significantly Beats Industry So Far in June: Is It a Buy?
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Key Takeaways
APLD stock surged 52% in June, far exceeding the Financial Services industry's 9.3% rise.
A 15-year, $7B lease deal with CoreWeave boosts APLD's AI and HPC infrastructure presence.
APLD secured $150M in funding to support data center buildout amid rising costs and cash burn.
Applied Digital Corporation’s (APLD - Free Report) shares have surged 52% so far in June, significantly outperforming the Financial - Miscellaneous Services industry’s increase of 9.3%. The upside can be attributed to the rising demand for AI services as well as the company’s progress with its infrastructure. APLD recently entered into two approximately 15-year lease agreements with the AI hyperscaler, CoreWeave.
Moreover, calendar-year first-quarter earnings commentary by industry leaders, including Microsoft (MSFT - Free Report) and Meta Platforms (META - Free Report) , signaled accelerating demand across hyperscale, colocation and AI workloads despite macro uncertainty. Meta plans to invest $62.5 billion, while Microsoft’s capital expenditure is expected to reach $80 billion in 2025. Other tech giants, such as Amazon, Alphabet, and Oracle, are also expanding their AI data center capacity to support cloud services.
APLD registered a loss of 16 cents per share for the third quarter of fiscal 2025 against earnings of 52 cents a year ago despite robust sales growth during the quarter. The company is expected to register a small uptick in sales during the fourth quarter while earnings are likely to improve nearly 81% year over year.
Following the recent surge in APLD’s share price, investors are likely to be tempted to add the stock to their portfolio. Let’s delve deeper to understand the factors that are in favor of and against Applied Digital to determine how investors should play the stock.
One-Month Price Performance
Image Source: Zacks Investment Research
Factors Supporting APLD’s Upside
CoreWeave Deal: Applied Digital's newly signed 15-year lease agreements with CoreWeave mark a significant inflection point in its growth trajectory. The deal — likely to generate $7 billion in total revenues from the leases — covers 250MW of AI and HPC-dedicated infrastructure at APLD’s Ellendale, ND campus, with potential expansion to 400MW. This not only secures a long-term revenue stream but also elevates APLD’s status as a key player in AI-focused digital infrastructure. The campus’ scalable design, energy efficiency, and rapid deployment capabilities make it an attractive destination for hyperscalers. With phased go-live dates through 2027, this deal positions APLD to capitalize on accelerating AI demand and infrastructure investment.
APLD’s Expansion Plans Look Promising: Applied Digital is steadily expanding its infrastructure to support its HPC data center hosting business. Over the past year, the company has deployed nearly $1 billion in assets, primarily directed to data center construction. It currently operates 286 megawatts of fully contracted hosting capacity, largely serving Bitcoin miners. In addition, APLD is building three new facilities that are expected to add 700 megawatts of capacity by 2027, significantly scaling its footprint to meet growing demand for HPC and AI workloads.
Recent Financial Deal Boosts Balance Sheet: APLD has secured a $150 million equity facility, enabling it to raise capital in $25 million increments over 36 months to fund its expansion of HPC infrastructure. The company has experienced significant cash burn in recent quarters, caused by elevated capital expenditures, ending the fiscal third quarter with $100 million in cash, down from $308 million in the prior quarter. This new facility, combined with financing agreements from Macquarie Asset Management and Sumitomo Mitsui Banking Corporation, is expected to provide the necessary liquidity to support APLD’s continued growth and data center buildout.
Sales and EPS Growth Rates
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
Short-Term Challenges
APLD continues to face rising costs, caused by increased depreciation of newly built facilities, which is expected to put pressure on near-term profitability. Seasonal fluctuations in power costs impacted margins in its Data Center Hosting segment during the fiscal third quarter. While total revenues improved, it fell short of expectations due to a significant sequential drop in Cloud Services revenues, attributed to technical issues during its transition from single-tenant reserve contracts to a multi-tenant on-demand model.
Currently, four of APLD’s six GPU clusters remain on reserve contracts, with two shifted to the on-demand setup. The transition challenges have since been resolved, and management expects revenue normalization in the coming quarters.
Looking ahead, depreciation expenses are likely to remain elevated as APLD plans to invest $30-$50 million per month in infrastructure expansion over the next 12-18 months. While these investments could support future revenue growth as new facilities come online, the company is yet to secure customers for the majority of the planned capacity. The 400MW Ellendale campus, slated to be operational in 2025, represents a major milestone. However, with only one signed lease, the added capacity may weigh heavily on margins in the short term.
APLD’s Valuation Looks Lofty
APLD stock is currently trading at a premium, as suggested by the Value Score of F. Following its recent surge in share price, the company trades at 9.24X forward 12-month price-to-sales (P/S) ratio compared to 3.86X for the industry. APLD’s current valuation is also significantly above its 5-year median of 4.94X.
5-Year P/S F-12M Ratio
Image Source: Zacks Investment Research
Conclusion: Buy APLD Stock for Now
Despite near-term cost pressures and transitional challenges, Applied Digital is strategically positioning itself for long-term growth in the AI and HPC infrastructure market. The CoreWeave partnership, robust expansion plans, and access to fresh capital provide a strong foundation for future scalability. As new facilities go live and demand for high-performance computing accelerates, APLD is well-placed to convert its ambitious investments into sustainable revenue streams, potentially unlocking significant shareholder value over the coming years. The outlook remains promising for this emerging AI infrastructure player.
Image: Bigstock
APLD Stock Significantly Beats Industry So Far in June: Is It a Buy?
Key Takeaways
Applied Digital Corporation’s (APLD - Free Report) shares have surged 52% so far in June, significantly outperforming the Financial - Miscellaneous Services industry’s increase of 9.3%. The upside can be attributed to the rising demand for AI services as well as the company’s progress with its infrastructure. APLD recently entered into two approximately 15-year lease agreements with the AI hyperscaler, CoreWeave.
Moreover, calendar-year first-quarter earnings commentary by industry leaders, including Microsoft (MSFT - Free Report) and Meta Platforms (META - Free Report) , signaled accelerating demand across hyperscale, colocation and AI workloads despite macro uncertainty. Meta plans to invest $62.5 billion, while Microsoft’s capital expenditure is expected to reach $80 billion in 2025. Other tech giants, such as Amazon, Alphabet, and Oracle, are also expanding their AI data center capacity to support cloud services.
APLD registered a loss of 16 cents per share for the third quarter of fiscal 2025 against earnings of 52 cents a year ago despite robust sales growth during the quarter. The company is expected to register a small uptick in sales during the fourth quarter while earnings are likely to improve nearly 81% year over year.
Following the recent surge in APLD’s share price, investors are likely to be tempted to add the stock to their portfolio. Let’s delve deeper to understand the factors that are in favor of and against Applied Digital to determine how investors should play the stock.
One-Month Price Performance
Image Source: Zacks Investment Research
Factors Supporting APLD’s Upside
CoreWeave Deal: Applied Digital's newly signed 15-year lease agreements with CoreWeave mark a significant inflection point in its growth trajectory. The deal — likely to generate $7 billion in total revenues from the leases — covers 250MW of AI and HPC-dedicated infrastructure at APLD’s Ellendale, ND campus, with potential expansion to 400MW. This not only secures a long-term revenue stream but also elevates APLD’s status as a key player in AI-focused digital infrastructure. The campus’ scalable design, energy efficiency, and rapid deployment capabilities make it an attractive destination for hyperscalers. With phased go-live dates through 2027, this deal positions APLD to capitalize on accelerating AI demand and infrastructure investment.
APLD’s Expansion Plans Look Promising: Applied Digital is steadily expanding its infrastructure to support its HPC data center hosting business. Over the past year, the company has deployed nearly $1 billion in assets, primarily directed to data center construction. It currently operates 286 megawatts of fully contracted hosting capacity, largely serving Bitcoin miners. In addition, APLD is building three new facilities that are expected to add 700 megawatts of capacity by 2027, significantly scaling its footprint to meet growing demand for HPC and AI workloads.
Recent Financial Deal Boosts Balance Sheet: APLD has secured a $150 million equity facility, enabling it to raise capital in $25 million increments over 36 months to fund its expansion of HPC infrastructure. The company has experienced significant cash burn in recent quarters, caused by elevated capital expenditures, ending the fiscal third quarter with $100 million in cash, down from $308 million in the prior quarter. This new facility, combined with financing agreements from Macquarie Asset Management and Sumitomo Mitsui Banking Corporation, is expected to provide the necessary liquidity to support APLD’s continued growth and data center buildout.
Sales and EPS Growth Rates
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
Short-Term Challenges
APLD continues to face rising costs, caused by increased depreciation of newly built facilities, which is expected to put pressure on near-term profitability. Seasonal fluctuations in power costs impacted margins in its Data Center Hosting segment during the fiscal third quarter. While total revenues improved, it fell short of expectations due to a significant sequential drop in Cloud Services revenues, attributed to technical issues during its transition from single-tenant reserve contracts to a multi-tenant on-demand model.
Currently, four of APLD’s six GPU clusters remain on reserve contracts, with two shifted to the on-demand setup. The transition challenges have since been resolved, and management expects revenue normalization in the coming quarters.
Looking ahead, depreciation expenses are likely to remain elevated as APLD plans to invest $30-$50 million per month in infrastructure expansion over the next 12-18 months. While these investments could support future revenue growth as new facilities come online, the company is yet to secure customers for the majority of the planned capacity. The 400MW Ellendale campus, slated to be operational in 2025, represents a major milestone. However, with only one signed lease, the added capacity may weigh heavily on margins in the short term.
APLD’s Valuation Looks Lofty
APLD stock is currently trading at a premium, as suggested by the Value Score of F. Following its recent surge in share price, the company trades at 9.24X forward 12-month price-to-sales (P/S) ratio compared to 3.86X for the industry. APLD’s current valuation is also significantly above its 5-year median of 4.94X.
5-Year P/S F-12M Ratio
Image Source: Zacks Investment Research
Conclusion: Buy APLD Stock for Now
Despite near-term cost pressures and transitional challenges, Applied Digital is strategically positioning itself for long-term growth in the AI and HPC infrastructure market. The CoreWeave partnership, robust expansion plans, and access to fresh capital provide a strong foundation for future scalability. As new facilities go live and demand for high-performance computing accelerates, APLD is well-placed to convert its ambitious investments into sustainable revenue streams, potentially unlocking significant shareholder value over the coming years. The outlook remains promising for this emerging AI infrastructure player.
Meanwhile, APLD currently carries a Zacks Rank #2 (Buy) with a Growth and Momentum Score of B, suggesting continued upside for the stock in the upcoming period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.