A month has gone by since the last earnings report for Applied Digital Corporation (APLD Quick QuoteAPLD - Free Report) . Shares have lost about 40.6% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Applied Digital Corporation due for a breakout? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Applied Digital Corporation before we dive into how investors and analysts have reacted as of late.

Applied Digital Q1 Earnings Miss on Higher Costs, Revenues Beat

Applied Digital Corporation reported a first-quarter fiscal 2027 loss from continuing operations of 76 cents per share, wider than the 7-cent loss a year ago. The figure missed the Zacks Consensus Estimate of a 26-cent loss by 192.3%, as higher operating costs, interest expense and fair-value losses pressured results.

Revenues rose 322% year over year to $341.9 million, beating the $134 million consensus by 154.95%. High-performance computing (HPC) tenant fit-out services and new rental revenue led growth. APLD had 1.41 GW of critical IT load under lease across five campuses, representing $36 billion of base-term contracted revenues.

APLD's Q1 HPC Hosting Powers Revenue Growth

The HPC Hosting Business generated $262.6 million in revenues, including $183.5 million from tenant fit-out services, $65.8 million of base rent and $13.3 million from tenant recoveries. Segment operating profit was $33.4 million for the quarter.

Phase 1 of Building 2 at Polaris Forge 1, representing 75 MW, became ready for service on July 1, lifting live capacity at the campus to 175 MW. A second 75 MW phase became ready on Oct. 1, after quarter-end, taking live capacity to 250 MW.

Applied Digital's Q1 Hosting Business Holds Steady

The Data Center Hosting Business generated $37.8 million in revenues compared with $37.9 million a year earlier. The 106 MW Jamestown facility and 180 MW Ellendale facility were operating at full capacity as of Aug. 31.

Segment operating profit rose 121% year over year to $13.3 million, primarily reflecting lower cost of revenues from more advantageous power pricing. Reported assets for the business totaled $111.9 million at quarter-end.

APLD's Q1 Cost Base Weighs on Profitability

Services cost of revenues increased 318% year over year to $245.7 million, mainly due to higher tenant fit-out expenses and ChronoScale GPU hardware costs. Data center rental and other cost of revenues totaled $43.9 million, including $22.4 million of depreciation and amortization and $13.3 million of reimbursable tenant recovery expenses.

Selling, general and administrative expenses climbed 289% to $114.7 million. The increase reflected $51.7 million of higher stock-based compensation, $12.1 million of additional professional service expense and $9.9 million of higher personnel costs.

Interest expense surged 866% to $77.4 million, while interest income rose to $35.8 million. APLD also recorded a $49.5 million loss on the change in fair value of derivatives and an $11.4 million loss on the change in fair value of its Babcock & Wilcox investment.

Applied Digital's Adjusted Results Strengthen

Adjusted revenues, which exclude ChronoScale, rose to $300.4 million from $64.2 million. Adjusted operating income was $37.8 million compared with an adjusted operating loss of $3.6 million a year ago, while adjusted operating margin improved to 13% from negative 6%.

Adjusted net loss from continuing operations narrowed to $4.1 million, or 1 cent per share, from $7.6 million, or 3 cents. Adjusted EBITDA increased to $64.4 million from $0.5 million, while net operating income was $58.8 million with an 89% margin.

APLD's Balance Sheet and Cash Flows

Cash, cash equivalents and restricted cash totaled $3.7 billion as of Aug. 31, while debt stood at $6.4 billion. 

Operating activities provided $63.9 million of cash compared with $81.5 million used a year ago.

Investing activities used $2.08 billion, largely reflecting $2.07 billion of purchases of property, equipment and other assets. Financing activities provided $1.54 billion, supported by long-term debt borrowings and preferred stock issuance during the quarter.

Applied Digital's Expansion Pipeline Advances

APLD closed $1.59 billion of 7% senior secured notes due 2031 to fund construction of the third 150 MW HPC building at Polaris Forge 1 and repay the $300 million bridge facility. The company also expanded revolving commitments to $430 million during the quarter.

Subsequent to quarter-end, Applied Digital secured up to approximately 1 GW of potential power capacity in Finland and entered a power purchase agreement with Base Electron for capacity and energy from an approximately 1,200 MW natural gas-fired generation facility planned in North Dakota.

Management expects initial Polaris Forge 2 operations to lift the delivered critical IT load across its North Dakota campuses to 300 MW by the end of calendar 2026.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -44.13% due to these changes.

VGM Scores

At this time, Applied Digital Corporation has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a score of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Applied Digital Corporation has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Applied Digital Corporation is part of the Zacks Financial - Miscellaneous Services industry. Over the past month, Jefferies (JEF Quick QuoteJEF - Free Report) , a stock from the same industry, has gained 9.5%. The company reported its results for the quarter ended August 2026 more than a month ago.

Jefferies reported revenues of $2.22 billion in the last reported quarter, representing a year-over-year change of +8.5%. EPS of $1.09 for the same period compares with $1.05 a year ago.

For the current quarter, Jefferies is expected to post earnings of $0.95 per share, indicating a change of -1% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

Jefferies has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.