APLD: A Turnaround in Profitability or Mirage Behind Adjusted EBITDA?

Applied Digital’s APLD fiscal third-quarter 2025 results reflect a mixed bag of progress and persistent challenges, fueling a deeper debate over the company's ability to maintain consistent profitability. The 878% year-over-year jump in adjusted EBITDA (to $10 million) is indicative of its operational strength. However, the bottom-line GAAP reality tells a different story — a net loss of $36.1 million or 16 cents per share, which missed Street estimates by 5 cents. This widening gap between adjusted metrics and actual profitability has raised fresh concerns over the company’s capital structure and earnings quality.

Despite recording top-line revenue growth of 22% (totaling $52.9 million), APLD missed expectations by nearly $10 million. The quarter reflected operational hiccups, including technical issues transitioning its GPU clusters from single-tenant to a multi-tenant, on-demand model in the Cloud Services segment — an issue now resolved but responsible for revenue deceleration. Meanwhile, the Data Center Hosting segment experienced margin compression due to seasonal power cost increases.

Strategically, Applied Digital made bold moves with financing partnerships — securing a $5 billion capital commitment from Macquarie and a $375 million loan from SMBC — strengthening its liquidity for the Ellendale campus buildout. However, the company also announced that it is reviewing strategic alternatives for its AI Cloud Services business, citing conflict with hyperscaler leasing prospects and potential REIT conversion benefits.

With a rising debt load of $689.1 million and mounting interest expenses, investors are increasingly assessing whether Applied Digital’s growth is self-sustaining or overly reliant on adjusted metrics and leveraged financing. As management eyes a potential sale of its AI business and continues to push aggressive campus expansion, the fundamental question looms: Is this a genuine turnaround or simply a mirage created by non-GAAP profitability optics? The answer may shape the next leg of APLD’s market narrative.

How Are APLD Rivals CORZ & MARA Performing?

Core Scientific CORZ reported first-quarter 2025 revenues of $79.5 million, reflecting a sharp 55.6% year-over-year decline.  This is indicative of the continued challenges in the crypto mining environment. The company posted an operating loss of $42.6 million, and adjusted EBITDA swung to a negative $6.1 million from $88 million in the prior-year period.

While GAAP net income turned positive due to a $621.5 million non-cash gain related to warrants, core operations remained under pressure. The results highlight Core Scientific’s transitional phase post-bankruptcy, as it works to stabilize operations amid fluctuating Bitcoin prices and elevated energy costs that continue to compress mining margins.

Marathon Digital MARA reported first-quarter 2025 revenues of approximately $214 million, marking a 30% year-over-year increase. Despite strong top-line growth and a nearly doubled hashrate reaching 54.3 EH/s, the company posted a net loss of $533 million, or $1.55 per share. The loss was primarily due to a $552 million non-cash fair value adjustment on digital assets and derivative instruments. Adjusted EBITDA also turned negative at $484 million. The top and bottom-line figures missed analyst expectations, raising concerns about volatility in crypto asset valuations and its impact on Marathon’s bottom line despite ongoing operational expansion.

APLD’s Price Performance, Valuation and Estimates

Shares of APLD have surged 29.2% in the year-to-date period against the industry’s decline of 3.7%.

From a valuation standpoint, Applied Digital trades at a forward price-to-sales ratio of 8.97X, above the industry average as well as its five-year median of 1.44X. APLD carries a Value Score of F.

The Zacks Consensus Estimate for Applied Digitals’ fiscal 2026 earnings implies a 73.6% rise year over year.

The stock currently carries 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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