APLD's AI Pivot Explained: What the 2025-2027 Ramp Means for the Stock

Applied Digital APLD is executing a multiyear shift from crypto hosting to AI-focused data centers, backed by long-term leases. The strategy is anchored in North Dakota and financed with asset-level capital. 

In the first quarter of fiscal 2026 and subsequent events, the company drew $112.5 million from a Macquarie preferred equity facility for Polaris Forge 1, secured $50 million from Macquarie Equipment Capital for Polaris Forge 2 and raised additional preferred equity. Management is targeting project financing completion for Polaris Forge 1 in the second quarter of fiscal 2026, while noting no guarantees. 

These facilities, alongside staged project finance, underpin construction and the transition from installation revenues to rental cash flows as leases commence.

Why Leases Change APLD’s Business Model

At Polaris Forge 1 in Ellendale, CoreWeave CRWV fully leased 400 MW by August 2025, with management citing 15-year terms and $11 billion of anticipated contracted lease revenues. Lease recognition is expected to start as the first 100 MW comes online toward the end of calendar 2025, followed by 150 MW stages in mid-2026 and 2027. This shifts mix from one-time fit-out to recurring rent and increases visibility. 

Polaris Forge 2 near Harwood broke ground and has an executed lease with a U.S. investment-grade hyperscaler covering 200 MW, representing about $5 billion in contracted revenues over roughly 15 years. The tenant holds a right of first refusal on another 800 MW. Initial capacity is expected in 2026, with the full 300 MW campus targeted for 2027.

Management targets 12-14 month build timelines, down from about 24 months, and is scaling to develop multiple campuses in parallel. Design features include direct-to-chip liquid cooling with a 1.18 PUE target, near-zero water usage leveraging the Dakotas’ natural cooling, and secured supply chains. These capabilities support speed to delivery as grid capacity tightens.

What Can APLD Investors Expect Financially?

Until rents commence, revenues are dominated by low-margin tenant fit-out, pressuring margins and keeping cash burn elevated. In the fiscal first quarter, adjusted EBITDA fell as fit-out ramped and operating cash flow was negative. Lease revenue recognition is slated to begin as the first 100 MW at Ellendale becomes fully online toward the end of 2025. 

The Zacks Consensus Estimate for second-quarter fiscal 2026 revenues is expected to be $75.95 million, suggesting 18.91% growth from the figure reported in the year-ago quarter. The consensus mark for loss is pegged at 10 cents per share, unchanged over the past 30 days. APLD reported a loss of 66 cents in the year-ago quarter. 

Applied Digital Corporation Price and Consensus

 

Applied Digital Corporation price-consensus-chart | Applied Digital Corporation Quote

Applied Digital shares have jumped 186.4% in a year, outperforming the broader Zacks Finance sector’s 10.7% return.

APLD Faces Stiff Competition

Applied Digital faces competition from large-scale data center operators, such as Equinix EQIX, which runs more than 260 global data centers and uses its xScale portfolio to serve hyperscalers seeking power-dense infrastructure. This underscores the importance of APLD’s speed and liquid-cooling design in AI-grade builds.

In APLD’s legacy lane, Riot Platforms RIOT is expanding beyond crypto mining with new HPC facilities exceeding 1 gigawatt of planned capacity to support AI workloads, highlighting a crowded field pursuing similar demand. Execution and lease depth will be key differentiators.

Zacks Rank

Applied Digital currently has a Zacks Rank #3 (Hold). 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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