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Should you Buy, Sell or Hold Applied Digital Stock Post Q2 earnings?
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Key Takeaways
APLD posted Q2 revenues of $126.6M, up 250% year over year, while reporting an 11-cent per-share loss.
APLD expects revenues to grow as Polaris Forge amps and new hyperscale leases begin.
The Zacks Consensus Estimate pegs Q3 loss at 9 cents per share, widened by 2 cents in the past 30 days.
Applied Digital (APLD - Free Report) shares have surged 18% following the release of its second-quarter fiscal 2026 results on Jan. 8, 2026. The uptick can be attributed to revenue growth of 250% year over year to $126.6 million, driven by HPC tenant fit-out services at Polaris Forge 1 and the initial recognition of lease revenue from CoreWeave (CRWV - Free Report) . Earnings, however, remained under pressure. APLD reported a loss of 11 cents per share, an improvement from the year-ago loss of 61 cents, but the result missed the Zacks Consensus Estimate by 22.22%.
APLD shares have appreciated 295.8% over the past six months, outperforming the Zacks Finance sector's 8.6% advance and the Financial – Miscellaneous Services industry’s 15.9% decline. The stock has also far outpaced peers, with Riot Platforms' (RIOT - Free Report) shares advancing 22.5% and Equinix's (EQIX - Free Report) shares appreciating 5.3% over the same period. The rally reflects rising investor confidence in APLD's shift from a speculative infrastructure developer to a contracted hyperscale data center operator.
APLD Stock Performance
Image Source: Zacks Investment Research
APLD Benefits From Strong Q2 Results and Positive Outlook
APLD's second-quarter fiscal 2026 results mark a meaningful inflexion as the company moved from construction toward revenue generation from operational data centers. The on-schedule completion of the first 100-megawatt building at Polaris Forge 1 demonstrates APLD's ability to deliver complex infrastructure projects on time. CoreWeave's facility reached operational status during the quarter, contributing $12 million in lease revenues alongside $73 million from tenant fit-out services. The Data Center Hosting segment generated $16 million in operating profit on $130.8 million of assets, providing a stable earnings base as larger HPC facilities continue to ramp.
Securing a second investment-grade hyperscaler at Polaris Forge 2 validated APLD’s platform beyond the CoreWeave relationship and reduces customer concentration risk. The company has 600 megawatts under contract across Polaris Forge 1 and Polaris Forge 2, representing approximately $16 billion in prospective lease revenues. Lease revenues are expected to ramp as additional capacity comes online through 2026 and 2027, while discussions for an additional 900MW across three sites point to sustained demand over the next 18 to 24 months.
APLD concluded the second quarter of fiscal 2026 with over $2.3 billion in cash, cash equivalents and $2.6 billion in debt, leaving the company with ample liquidity to support its capital-intensive expansion. The financing framework with Macquarie Asset Management, which provides access to up to $4.1 billion of remaining preferred equity capital, allows APLD to fund large-scale data center projects while retaining more than 85% ownership at the site level. This approach limits equity dilution, though the 9.25% senior secured notes add near-term interest cost pressure until projects stabilise and refinancing becomes viable.
With most debt maturing in 2030, APLD faces limited near-term refinancing risk and can stay focused on project execution. The planned spinoff of Applied Digital Cloud into ChronoScale separates two businesses with distinct capital needs. The cloud platform generated over $60 million in trailing revenues on $313 million of assets, requiring far less capital than APLD’s data center developments. Retaining more than 80% ownership preserves strategic upside while allowing ChronoScale to operate independently, though the platform must still prove its ability to compete in the crowded GPU-as-a-service market.
APLD Faces Premium Valuation
APLD stock is overvalued as suggested by a Zacks Value Score of F. The company trades at 24.08x forward 12-month sales, above the sector multiple of 9.08x and the industry average of 3.36x. This premium assumes flawless execution, including on-time facility buildouts and smooth lease revenue ramps. Any delays in construction schedules, financing execution, or tenant contributions could compress valuation multiples toward industry norms.
APLD trades at a premium to Riot Platforms and Equinix, which trade at 7.77x and 7.82x forward sales, respectively. Both Riot Platforms and Equinix operate with diversified customer bases and steadier cash flow profiles, lowering execution risk relative to APLD’s concentrated revenue pipeline.
APLD Stock Trades at a Premium
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for APLD’s third-quarter fiscal 2026 loss is pegged at 9 cents per share, widened by 2 cents over the past 30 days. Downward estimate revisions, combined with the recent 22.22% earnings miss, weaken support for sustaining elevated multiples.
APLD continues to benefit from solid execution, with Polaris Forge 1 delivered on schedule and approximately $16 billion in contracted lease revenue supporting long-term visibility. The robust balance sheet supports ongoing expansion plans. However, the premium valuation combined with downward estimate revisions makes APLD a risky bet.
Image: Bigstock
Should you Buy, Sell or Hold Applied Digital Stock Post Q2 earnings?
Key Takeaways
Applied Digital (APLD - Free Report) shares have surged 18% following the release of its second-quarter fiscal 2026 results on Jan. 8, 2026. The uptick can be attributed to revenue growth of 250% year over year to $126.6 million, driven by HPC tenant fit-out services at Polaris Forge 1 and the initial recognition of lease revenue from CoreWeave (CRWV - Free Report) . Earnings, however, remained under pressure. APLD reported a loss of 11 cents per share, an improvement from the year-ago loss of 61 cents, but the result missed the Zacks Consensus Estimate by 22.22%.
APLD shares have appreciated 295.8% over the past six months, outperforming the Zacks Finance sector's 8.6% advance and the Financial – Miscellaneous Services industry’s 15.9% decline. The stock has also far outpaced peers, with Riot Platforms' (RIOT - Free Report) shares advancing 22.5% and Equinix's (EQIX - Free Report) shares appreciating 5.3% over the same period. The rally reflects rising investor confidence in APLD's shift from a speculative infrastructure developer to a contracted hyperscale data center operator.
APLD Stock Performance
Image Source: Zacks Investment Research
APLD Benefits From Strong Q2 Results and Positive Outlook
APLD's second-quarter fiscal 2026 results mark a meaningful inflexion as the company moved from construction toward revenue generation from operational data centers. The on-schedule completion of the first 100-megawatt building at Polaris Forge 1 demonstrates APLD's ability to deliver complex infrastructure projects on time. CoreWeave's facility reached operational status during the quarter, contributing $12 million in lease revenues alongside $73 million from tenant fit-out services. The Data Center Hosting segment generated $16 million in operating profit on $130.8 million of assets, providing a stable earnings base as larger HPC facilities continue to ramp.
Securing a second investment-grade hyperscaler at Polaris Forge 2 validated APLD’s platform beyond the CoreWeave relationship and reduces customer concentration risk. The company has 600 megawatts under contract across Polaris Forge 1 and Polaris Forge 2, representing approximately $16 billion in prospective lease revenues. Lease revenues are expected to ramp as additional capacity comes online through 2026 and 2027, while discussions for an additional 900MW across three sites point to sustained demand over the next 18 to 24 months.
APLD's Balance Sheet Strength Supports Expansion Strategy
APLD concluded the second quarter of fiscal 2026 with over $2.3 billion in cash, cash equivalents and $2.6 billion in debt, leaving the company with ample liquidity to support its capital-intensive expansion. The financing framework with Macquarie Asset Management, which provides access to up to $4.1 billion of remaining preferred equity capital, allows APLD to fund large-scale data center projects while retaining more than 85% ownership at the site level. This approach limits equity dilution, though the 9.25% senior secured notes add near-term interest cost pressure until projects stabilise and refinancing becomes viable.
With most debt maturing in 2030, APLD faces limited near-term refinancing risk and can stay focused on project execution. The planned spinoff of Applied Digital Cloud into ChronoScale separates two businesses with distinct capital needs. The cloud platform generated over $60 million in trailing revenues on $313 million of assets, requiring far less capital than APLD’s data center developments. Retaining more than 80% ownership preserves strategic upside while allowing ChronoScale to operate independently, though the platform must still prove its ability to compete in the crowded GPU-as-a-service market.
APLD Faces Premium Valuation
APLD stock is overvalued as suggested by a Zacks Value Score of F. The company trades at 24.08x forward 12-month sales, above the sector multiple of 9.08x and the industry average of 3.36x. This premium assumes flawless execution, including on-time facility buildouts and smooth lease revenue ramps. Any delays in construction schedules, financing execution, or tenant contributions could compress valuation multiples toward industry norms.
APLD trades at a premium to Riot Platforms and Equinix, which trade at 7.77x and 7.82x forward sales, respectively. Both Riot Platforms and Equinix operate with diversified customer bases and steadier cash flow profiles, lowering execution risk relative to APLD’s concentrated revenue pipeline.
APLD Stock Trades at a Premium
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for APLD’s third-quarter fiscal 2026 loss is pegged at 9 cents per share, widened by 2 cents over the past 30 days. Downward estimate revisions, combined with the recent 22.22% earnings miss, weaken support for sustaining elevated multiples.
Applied Digital Corporation Price and Consensus
Applied Digital Corporation price-consensus-chart | Applied Digital Corporation Quote
Conclusion
APLD continues to benefit from solid execution, with Polaris Forge 1 delivered on schedule and approximately $16 billion in contracted lease revenue supporting long-term visibility. The robust balance sheet supports ongoing expansion plans. However, the premium valuation combined with downward estimate revisions makes APLD a risky bet.
APLD currently has a Zacks Rank #3 (Hold), suggesting that investors should wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.