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Should You Hold APLD at 16.8x P/E? 3 Reasons Despite the Premium
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Key Takeaways
Applied Digital trades at a premium with valuation far above its industry and peer benchmarks.
APLD's $11B CoreWeave contracts support multi-year revenue visibility.
APLD is advancing 700MW of construction with a 4GW development pipeline.
Applied Digital (APLD - Free Report) shares are overvalued, as suggested by a Value Score of F. The stock is trading at a significant premium with a forward 12-month Price/Sales (P/S) of 16.76X compared with the Zacks Financial - Miscellaneous Services industry’s 3.06X. APLD is valued significantly above its peers, such as RIOT Platforms (RIOT - Free Report) and Equinix (EQIX - Free Report) , which trade at 7.04X and 7.77X, respectively.
The premium valuation reflects investors’ current view of Applied Digital’s positioning within the AI infrastructure segment, though a meaningful portion of the longer-term narrative already appears reflected in the stock. The company has moved away from its cryptocurrency-hosting roots and is now developing high-density, AI-focused data centers supported by long-term leases and a multi-gigawatt development pipeline. This mix of activities, which differs from the operating profiles of RIOT Platforms and Equinix, contributes to the higher multiple assigned to APLD at this stage.
APLD’s P/S F12M Ratio
Image Source: Zacks Investment Research
Applied Digital’s year-to-date (YTD) performance has stood apart from the sector. The stock has appreciated 209.5% YTD, compared with a 6.4% decline for the sub-industry. RIOT Platforms has gained 36.6% over the same period, while Equinix has slipped 16.7%. The strong YTD move in APLD suggests that a considerable portion of the company’s long-term AI infrastructure story is already reflected in the share price, as investors respond to its expanding development pipeline and deepening alignment with hyperscaler demand.
APLD’s YTD Performance
Image Source: Zacks Investment Research
So how should investors approach APLD at this stage? Let's take a closer look.
Contracted Revenue Visibility Provides Foundation
Applied Digital’s long-term revenue visibility continues to be shaped by its arrangements with CoreWeave (CRWV), which stands at roughly $11 billion in contracted lease revenue tied to the full 400-megawatt commitment at Polaris Forge 1. This provides APLD with a clear multi-year outlook as the first 100-megawatt building approaches readiness and begins to transition into lease revenue over time. CoreWeave’s additional engagement for tenant fit-out work adds another layer of visibility to near-term activity. With a large portion of capacity already spoken for under long-duration agreements, Applied Digital is positioned to move toward a more predictable revenue mix as additional phases come online. For the fiscal second quarter, the Zacks Consensus Estimate for revenues is pegged at $75.95 million, up 18.91% year over year, reflecting expectations for a gradual ramp as capacity comes online.
Superior Capital Structure Enables Non-Dilutive Growth
Applied Digital’s capital structure continues to support its development plans while limiting reliance on frequent equity issuance. In October 2025, APLD drew an initial $112.5 million from its $5 billion preferred equity facility with Macquarie Asset Management to advance the build-out of Polaris Forge 1 and reduce future equity funding requirements. The company has secured an additional $50 million in equipment financing from Macquarie Equipment Capital for Polaris Forge 2, the planned 300-megawatt campus in Harwood, ND, where construction has already commenced. The initial 200 megawatts at this site are expected to start coming online in 2026, with full capacity targeted for 2027.
As additional project-finance arrangements are finalized, Applied Digital expects to have access to roughly $20-$25 billion in capital capacity, positioning it to pursue multiple large-scale developments as demand for AI-focused infrastructure continues to build. This financial architecture enables the company to scale at a pace commensurate with the accelerating deployment timelines demanded by hyperscale customers racing to build compute capacity for next-generation artificial intelligence workloads. For the fiscal second quarter, the Zacks Consensus Estimate for loss is pegged at 10 cents per share, up 84.85% year over year, with estimates improving by a penny over the past 30 days, suggesting expectations are stabilising as the company transitions toward operational revenue generation.
Expanding Development Activity and Pipeline Progress
Applied Digital continues to advance a sizeable development pipeline at a time when demand for AI-oriented data center capacity is rising. The company has approximately 700 megawatts under construction across its projects and has been working to shorten build timelines to meet customer requirements more efficiently. In addition, Applied Digital has outlined an active pipeline of roughly 4 gigawatts, representing projects that could move toward construction over the next year, along with earlier-stage opportunities in other regions. Features such as direct-to-chip liquid cooling, low-cost power availability and favourable climate conditions in its North Dakota sites form part of its development approach as the broader market shifts toward higher-density, AI-focused infrastructure.
Conclusion
Applied Digital is positioned to participate in the growing demand for AI infrastructure, supported by long-term contracted revenue from CoreWeave and a sizable development pipeline. These factors contribute to greater long-term visibility. However, the near-term picture remains less certain. Loss estimates for the upcoming quarter remain elevated, and the stock’s sharp year-to-date appreciation has already priced in much of the anticipated growth narrative. When combined with its premium valuation relative to peers such as RIOT Platforms and Equinix, the setup introduces a degree of risk for investors considering new positions at current levels.
Applied Digital holds a Zacks Rank #3 (Hold) at present. Existing investors may consider maintaining their positions, while new investors could benefit from waiting for a more favorable entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Should You Hold APLD at 16.8x P/E? 3 Reasons Despite the Premium
Key Takeaways
Applied Digital (APLD - Free Report) shares are overvalued, as suggested by a Value Score of F. The stock is trading at a significant premium with a forward 12-month Price/Sales (P/S) of 16.76X compared with the Zacks Financial - Miscellaneous Services industry’s 3.06X. APLD is valued significantly above its peers, such as RIOT Platforms (RIOT - Free Report) and Equinix (EQIX - Free Report) , which trade at 7.04X and 7.77X, respectively.
The premium valuation reflects investors’ current view of Applied Digital’s positioning within the AI infrastructure segment, though a meaningful portion of the longer-term narrative already appears reflected in the stock. The company has moved away from its cryptocurrency-hosting roots and is now developing high-density, AI-focused data centers supported by long-term leases and a multi-gigawatt development pipeline. This mix of activities, which differs from the operating profiles of RIOT Platforms and Equinix, contributes to the higher multiple assigned to APLD at this stage.
APLD’s P/S F12M Ratio
Image Source: Zacks Investment Research
Applied Digital’s year-to-date (YTD) performance has stood apart from the sector. The stock has appreciated 209.5% YTD, compared with a 6.4% decline for the sub-industry. RIOT Platforms has gained 36.6% over the same period, while Equinix has slipped 16.7%. The strong YTD move in APLD suggests that a considerable portion of the company’s long-term AI infrastructure story is already reflected in the share price, as investors respond to its expanding development pipeline and deepening alignment with hyperscaler demand.
APLD’s YTD Performance
Image Source: Zacks Investment Research
So how should investors approach APLD at this stage? Let's take a closer look.
Contracted Revenue Visibility Provides Foundation
Applied Digital’s long-term revenue visibility continues to be shaped by its arrangements with CoreWeave (CRWV), which stands at roughly $11 billion in contracted lease revenue tied to the full 400-megawatt commitment at Polaris Forge 1. This provides APLD with a clear multi-year outlook as the first 100-megawatt building approaches readiness and begins to transition into lease revenue over time. CoreWeave’s additional engagement for tenant fit-out work adds another layer of visibility to near-term activity. With a large portion of capacity already spoken for under long-duration agreements, Applied Digital is positioned to move toward a more predictable revenue mix as additional phases come online. For the fiscal second quarter, the Zacks Consensus Estimate for revenues is pegged at $75.95 million, up 18.91% year over year, reflecting expectations for a gradual ramp as capacity comes online.
Superior Capital Structure Enables Non-Dilutive Growth
Applied Digital’s capital structure continues to support its development plans while limiting reliance on frequent equity issuance. In October 2025, APLD drew an initial $112.5 million from its $5 billion preferred equity facility with Macquarie Asset Management to advance the build-out of Polaris Forge 1 and reduce future equity funding requirements. The company has secured an additional $50 million in equipment financing from Macquarie Equipment Capital for Polaris Forge 2, the planned 300-megawatt campus in Harwood, ND, where construction has already commenced. The initial 200 megawatts at this site are expected to start coming online in 2026, with full capacity targeted for 2027.
As additional project-finance arrangements are finalized, Applied Digital expects to have access to roughly $20-$25 billion in capital capacity, positioning it to pursue multiple large-scale developments as demand for AI-focused infrastructure continues to build. This financial architecture enables the company to scale at a pace commensurate with the accelerating deployment timelines demanded by hyperscale customers racing to build compute capacity for next-generation artificial intelligence workloads. For the fiscal second quarter, the Zacks Consensus Estimate for loss is pegged at 10 cents per share, up 84.85% year over year, with estimates improving by a penny over the past 30 days, suggesting expectations are stabilising as the company transitions toward operational revenue generation.
Applied Digital Corporation Price and Consensus
Applied Digital Corporation price-consensus-chart | Applied Digital Corporation Quote
Expanding Development Activity and Pipeline Progress
Applied Digital continues to advance a sizeable development pipeline at a time when demand for AI-oriented data center capacity is rising. The company has approximately 700 megawatts under construction across its projects and has been working to shorten build timelines to meet customer requirements more efficiently. In addition, Applied Digital has outlined an active pipeline of roughly 4 gigawatts, representing projects that could move toward construction over the next year, along with earlier-stage opportunities in other regions. Features such as direct-to-chip liquid cooling, low-cost power availability and favourable climate conditions in its North Dakota sites form part of its development approach as the broader market shifts toward higher-density, AI-focused infrastructure.
Conclusion
Applied Digital is positioned to participate in the growing demand for AI infrastructure, supported by long-term contracted revenue from CoreWeave and a sizable development pipeline. These factors contribute to greater long-term visibility. However, the near-term picture remains less certain. Loss estimates for the upcoming quarter remain elevated, and the stock’s sharp year-to-date appreciation has already priced in much of the anticipated growth narrative. When combined with its premium valuation relative to peers such as RIOT Platforms and Equinix, the setup introduces a degree of risk for investors considering new positions at current levels.
Applied Digital holds a Zacks Rank #3 (Hold) at present. Existing investors may consider maintaining their positions, while new investors could benefit from waiting for a more favorable entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.