APLD Q3 Deep Dive: Long-Term Contracts and Data Center Expansion Fuel Outlook

Digital infrastructure provider Applied Digital (NASDAQ:APLD) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, with sales up 5.8% year on year to $64.22 million. Its non-GAAP loss of $0.03 per share was 80.6% above analysts’ consensus estimates.

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StockStory’s Take

Applied Digital's third quarter results were well received by the market, as the company surpassed Wall Street’s expectations for both revenue and adjusted earnings per share. Management attributed the outperformance to accelerated demand for AI and high-performance computing infrastructure, as well as expanded long-term lease agreements with major hyperscale customers. CEO Wes Cummins emphasized that the company’s ability to secure and deliver on large-scale data center projects, particularly through its partnership with CoreWeave, drove a significant ramp in contracted revenue and operational integration.

Looking ahead, management sees robust demand for AI data center capacity as the central driver of Applied Digital’s growth trajectory. The company is focused on scaling development across multiple campuses, leveraging recently secured project financing to support rapid expansion. Cummins noted, “Our pipeline is as strong or stronger than most of our peers, and we plan to continue to expand this in future updates,” highlighting ongoing negotiations with additional hyperscalers and a growing multi-gigawatt development pipeline.

Key Insights from Management’s Remarks

Management pointed to several major developments in the AI infrastructure market and Applied Digital’s execution as key factors behind both quarterly results and future expectations.

• CoreWeave contract expansion: Applied Digital extended its long-term lease agreements with CoreWeave, a leading AI hyperscaler, covering the full 400 megawatts of capacity under construction at the Polaris Forge One campus. This move increased the total contract value to approximately $11 billion and deepened operational ties through additional tenant fit-out services.
• Polaris Forge Two launch: The company broke ground on a new data center campus near Harwood, North Dakota, with initial construction targeting 300 megawatts and plans to scale to one gigawatt. Initial funding was secured, and Applied Digital is in advanced lease discussions with an investment-grade hyperscaler for the site.
• Project financing secured: Management highlighted the initial draw from a $5 billion preferred equity facility with Macquarie Asset Management, aimed at funding large-scale campus projects and reducing equity requirements for future expansions. This financing approach is intended to fully support ongoing and upcoming construction without additional shareholder dilution.
• Industry-wide AI infrastructure surge: CEO Wes Cummins described an unprecedented level of capital investment in AI data centers, noting that the industry is shifting from GPU availability as the main constraint to a shortage of capable data centers—so-called "AI factories"—to support advanced workloads.
• Operational scalability and supply chain: The company has shortened construction timelines and developed internal expertise to manage multiple campuses in parallel, supported by strategic supply chain partnerships and a focus on efficient, power-dense facility designs suitable for next-generation AI hardware.

Drivers of Future Performance

Management expects demand for large-scale, power-dense data centers to remain the primary growth driver, with execution on new contracts and timely project delivery being critical for future profitability.

• Accelerating AI data center demand: The company believes continued growth in hyperscaler investments for AI infrastructure will drive sustained demand for its purpose-built data centers. Management cited ongoing negotiations for additional capacity and a robust active pipeline as signs that momentum is likely to persist.
• Execution risks and resource constraints: Timely project delivery and scaling construction across multiple sites will require careful management of human capital and supply chain resources. Management acknowledged potential headwinds from industry-wide equipment lead times and the need to attract sufficient local labor for simultaneous campus builds.
• Strategic capital deployment: The recently secured project financing structure, particularly the preferred equity facility from Macquarie, is expected to enable Applied Digital to fund aggressive expansion with limited dilution. The company’s ability to maintain favorable financing terms as it pursues new projects will be a key factor in meeting its long-term earnings targets.

Catalysts in Upcoming Quarters

In the coming quarters, our team will be watching (1) the pace at which Applied Digital converts its development pipeline into signed long-term leases with new hyperscaler customers, (2) updates on the timing and execution of ongoing construction projects, particularly at Polaris Forge One and Two, and (3) management’s ability to maintain efficient cost structures and project financing as expansion accelerates. Progress on divesting the cloud services business and developments in supply chain partnerships will also be critical markers of execution.

Applied Digital currently trades at $34.20, up from $29.25 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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