APLD Trades Higher Than Industry at 13.5X P/S: Is the Stock a Buy?

Applied Digital APLD shares are overvalued, as suggested by a Value Score of F. APLD stock is trading at a significant premium with a forward 12-month Price/Sales (P/S) of 13.5X compared with the Zacks Financial - Miscellaneous Services industry’s 3.5X.

APLD is trading at a premium compared to its competitors, such as Equinix EQIX and Digital Realty Trust DLR. Equinix and Digital Realty Trust shares are currently trading at a P/S ratio of 7.8X and 8.9X, respectively.

APLD Valuation

APLD shares have jumped 109% year to date, outperforming the industry’s return of 5.6% and the Zacks Finance sector’s appreciation of 12.5%. Equinix and Digital Realty Trust have plunged 17% and 6.5% in the year-to-date period, respectively.

Applied Digital has been benefiting from the expansion of its data center hosting capacity, backed by advanced cooling technology and energy-efficient site design. Its ability to lower build times and operate at scale provides a competitive edge as demand for AI-focused infrastructure accelerates.

APLD Stock’s YTD Performance

The stock is currently trading above the 50-day and the 200-day moving averages, indicating a bullish trend.

Is Applied Digital an attractive stock for investors at the current valuations? Let’s delve deep to find out.

Transformational CoreWeave Partnership Drives Growth

Applied Digital's expanding AI infrastructure portfolio across data center hosting and high-performance computing continues to drive platform adoption. The company's transformational partnership with CoreWeave CRWV has generated approximately $11 billion in contracted revenue through 15-year lease agreements for up to 400 megawatts of critical IT load at its Polaris Forge 1 campus in North Dakota.

The CoreWeave partnership validates Applied Digital's strategic pivot from cryptocurrency mining to AI-optimized data center infrastructure. CoreWeave exercised its option for an additional 150 megawatts in a third building at Polaris Forge 1, demonstrating the strength and expansion of this key relationship. This partnership provides unprecedented revenue visibility and effectively de-risks Applied Digital's business model.

Applied Digital reported fiscal 2025 revenues of $144.2 million, up 6% from the previous year, with the CoreWeave agreements representing the foundation for sustained demand growth. 
demonstrating sustained demand for the company's AI-optimized data center infrastructure. The company's revenues for the fourth quarter of fiscal 2025 reached $38 million, representing 41% year-over-year growth, supported by increased capacity coming online in the Data Center Hosting segment.

Strategic Advantages in AI Infrastructure

Applied Digital has been expanding its data center footprint with purpose-built facilities designed specifically for artificial intelligence workloads. The Polaris Forge 1 campus in North Dakota is designed to scale to 1 gigawatt, supported by proprietary closed-loop liquid cooling that targets a PUE of 1.18 and near-zero water consumption.

The North Dakota location offers abundant low-cost energy and over 200 days of free natural cooling annually, which is expected to provide significant cost advantages over traditional metropolitan data center markets once operational. These design and location advantages position Applied Digital to compete effectively in the rapidly growing AI infrastructure sector.

Efficiency Gains and New Campus Drive Momentum

Applied Digital achieved adjusted EBITDA of $1 million for the fourth quarter of fiscal 2025, compared to a loss of $0.2 million in the prior year quarter, reflecting improving operational efficiency as the business scales. APLD has streamlined its construction processes, reducing projected build times from 24 months to 12-14 months through SKU reduction and supplier consolidation, enabling faster project delivery and improved capital efficiency.

Growth is expected to accelerate with Polaris Forge 2, a $3 billion, 280-megawatt AI factory in Harwood, ND. The project will break ground in September 2025, with initial operations planned for 2026 and full capacity targeted for early 2027. The new campus builds on the success of Polaris Forge 1 and expands Applied Digital’s multi-gigawatt pipeline, strengthening its role as a leading provider of AI infrastructure.

APLD’s Earnings Estimates Revisions Trend Upwards

The Zacks Consensus Estimate for Applied Digital’s first quarter fiscal 2026 loss is pegged at 6 cents per share, which has improved by 3 cents over the past 30 days. The figure indicates a decline from the year-ago quarter’s reported loss of 3 cents per share.

The consensus mark for fiscal 2026 loss is pegged at 21 cents per share, which has improved by 12 cents over the past 30 days, suggesting 73.75% year-over-year improvement.

Applied Digital Corporation Price and Consensus

Conclusion

Applied Digital’s premium valuation is justified by its transformational CoreWeave partnership, accelerating AI-focused infrastructure buildout and improving operating profile. The company’s rapid share price appreciation reflects growing investor confidence in its ability to scale Polaris Forge and deliver predictable contracted revenues over the long term. With adjusted EBITDA turning positive and earnings estimates trending upward, APLD appears well-positioned to sustain momentum despite its elevated P/S multiple.

Applied Digital currently carries a Zacks Rank #2 (Buy), which implies that investors should start accumulating the stock at current levels. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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