Applied Digital's Risks and Opportunities Amid $16 Billion Pipeline

Written by Emily J. Thompson, Senior Investment Analyst

Source: Fool

Updated: 10 hours ago

0mins

APLD+0.29%

CRWV+4.84%

Should l Buy APLD?

Source: Fool

Contract Revenue Outlook: Applied Digital boasts $16 billion in contracted lease revenue, yet $11 billion of this comes from a single customer, heightening financial risk and uncertainty.
Data Center Delivery Capacity: The company is on track to deliver 100 megawatts of data center capacity at its Polaris 1 campus, showcasing strong execution, while competitors face delays, highlighting intense market competition.
Core Customer Risk: Applied Digital's reliance on CoreWeave, which carries over $21 billion in debt and has revenue growth lagging behind debt accumulation, raises concerns about financial stability that could impact Applied Digital's future earnings.
Macroeconomic Impact: With the macroeconomic landscape deteriorating, Applied Digital's growth prospects are under threat, particularly as its substantial debt could hinder stock performance relative to the market in the coming years.

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Analyst Views on APLD

Wall Street analysts forecast APLD stock price to rise

10 Analyst Rating

10 Buy

0 Hold

0 Sell

Strong Buy

Current: 24.490

Low

36.00

Averages

52.22

High

99.00

Current: 24.490

Low

36.00

Averages

52.22

High

99.00

Roth Capital

Darren Aftahi

Buy

maintain

$58

2026-02-17

Reason

Roth Capital

Darren Aftahi

Price Target

$58

AI Analysis

2026-02-17

maintain

Buy

Reason

Roth Capital analyst Darren Aftahi keeps a Buy rating and $58 price target on Applied Digital (APLD) while noting the firm is "buying shares" as the company's stock falls about 8% afterhours on the news that Nvidia (NVDA) has eliminated its 7.7M share position. Much has changed since that Nvidia-led financing, including 2 colocation leases, one with CoreWeave (CRWV) and another with a hyperscaler, and soon to be a third lease, the analyst tells investors in a research note, adding the decline is more due to "headline risk than any fundamental change" in Applied Digital's investment story.

Northland

Mike Grondahl

Outperform

maintain

$40 -> $56

2026-01-28

Reason

Northland

Mike Grondahl

Price Target

$40 -> $56

2026-01-28

maintain

Outperform

Reason

Northland analyst Mike Grondahl raised the firm's price target on Applied Digital to $56 from $40 and keeps an Outperform rating on the shares following "some exciting commentary" on the Q2 call that indicates that the company is currently in advanced discussions with a new top-of-the-stack IG hyperscaler for potentially three sites and 900 MW.

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About APLD

Applied Digital Corporation is a designer, builder, and operator of sustainably engineered data centers and colocation services for artificial intelligence, cloud, networking, and blockchain workloads. The Company’s segments include data center hosting (Data Center Hosting Business) and high-performance compute hosting (HPC Hosting Business). The Data Center Hosting Business operates data centers to provide energized space to crypto mining customers. Customer-owned hardware is installed in its facilities, and the Company provides operational and maintenance services for a fixed fee. Its facilities include a 106 megawatt (MW) facility in Jamestown and a 180 MW facility in Ellendale, North Dakota. The HPC Hosting Business designs, builds, and operates data centers which are designed to support high-compute applications using advanced technologies and infrastructures to provide services to customers. Its HPC data center is located at its Polaris Forge 1 campus with 100 MW capacity.

About the author

Emily J. Thompson

Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.

Applied Digital Adds $2.15 Billion Debt Amid Rising Risks

1 day agoFool

Debt Surge: Applied Digital has added $2.15 billion in new debt at a 6.75% interest rate, bringing its total debt to approximately $5 billion, a significant increase from just $468 million a year ago, indicating heightened financial vulnerability under pressure.
Revenue Pipeline Dependency: The company boasts a $16 billion pipeline of contracted lease revenue, with $11 billion sourced from CoreWeave, creating a precarious financial situation for Applied Digital, especially as CoreWeave itself carries over $21 billion in debt.
Profitability Concerns: CoreWeave reported a $1.2 billion loss last year, and while its revenue is growing rapidly, its debt is escalating even faster, raising alarms for investors regarding its potential impact on Applied Digital, particularly in a deteriorating macroeconomic environment.
Reliance on OpenAI: CoreWeave's financial health is heavily reliant on OpenAI's ability to secure funding, with OpenAI projected to face $14 billion in losses by 2026 and total losses reaching $115 billion, casting significant uncertainty over Applied Digital's future prospects.

Surge in Demand for AI Data Centers Amid Neocloud Boom

1 day agoFool

Surging Market Demand: The rapid advancement of artificial intelligence has led to a dramatic increase in demand for dedicated data centers, particularly GPU-powered neoclouds, indicating a supercycle where demand significantly exceeds supply.
Massive Revenue Potential: Applied Digital is constructing two data centers in North Dakota with a combined capacity of 700 megawatts (MW), of which 600 MW has already been leased, potentially generating $16 billion in lease revenue.
Long-Term Growth Plans: The company aims to build 4.3 gigawatts (GW) of AI data centers in the future, leveraging controlled land and power agreements with utility companies to ensure sustained customer demand.
Optimistic Profit Expectations: Management anticipates surpassing $1 billion in net operating income by 2026, and with the projected growth in AI data center demand over the next decade, Applied Digital's stock is poised for further appreciation.

Applied Digital Faces Core Risks Amid $16 Billion Revenue Pipeline

9 hours agoNASDAQ.COM

Revenue Pipeline: Applied Digital boasts a $16 billion contracted revenue pipeline, but $11 billion of this is reliant on CoreWeave, which poses a risk to revenue stability; any financial issues at CoreWeave could directly impact Applied Digital's cash flow.
CoreWeave's Financial Strain: CoreWeave's debt has surged from $7.9 billion to over $21 billion, with interest payments consuming 25% of its total revenue, indicating a precarious financial situation that may hinder its ability to support Applied Digital's operations.
Dependency on OpenAI: CoreWeave's reliance on OpenAI, which is projected to incur $14 billion in losses in 2026 and a cumulative cash burn of $115 billion through 2029, adds another layer of instability that could adversely affect Applied Digital's future revenue.
Uncertain Market Outlook: While Applied Digital could potentially generate billions in annual lease revenue over the next five years, the uncertainty in the macroeconomic environment and its substantial debt burden necessitate a cautious evaluation of its stock's long-term performance.