Applied Digital (APLD) is at a critical juncture in its transition from cryptocurrency hosting to AI data center leasing, with revenue showing explosive growth and long-term lease contracts carrying substantial value. However, risks such as a high proportion of low-margin businesses, significantly negative free cash flow, and customer concentration cannot be overlooked. Investors need to weigh the short-term growing pains of expansion against the long-term demand growth for AI infrastructure. Overall, the stock has distinct growth attributes, but risks and opportunities coexist, making it suitable for investors with a higher risk tolerance to consider cautiously.
Applied Digital presents a “dual image”: over the past year, its stock price has risen approximately 150% cumulatively, but it has nearly halved since its spring peak. Against the backdrop of the company’s continuously surging revenue, investors are currently focusing on whether the pullback represents a buying opportunity.
In terms of business substance, Applied Digital is more like an AI data center real estate company than a pure technology enterprise. Earlier this year, the company spun off its cloud computing business and merged it with EKSO Bionics Holding to form a new entity, ChronoScale, but Applied Digital still holds 96% equity in the new company. Meanwhile, the company is considering a transformation into a real estate investment trust (REIT).
At present, Applied Digital’s core business is building and operating data centers designed for AI workloads. However, it still retains its data center hosting business that provides services for cryptocurrency mining machines—this was the company’s original business foundation. Its greatest advantages lie in its ability to secure low-cost power resources and its expertise in constructing large-scale data center facilities.
From the latest financial data, the company’s revenue growth momentum is strong. In the fourth quarter of fiscal year 2025 (ending May 31, 2026), total revenue surged 407% year-over-year to $258.7 million. Excluding the spun-off ChronoScale portion, revenue increased from $38 million to $240.4 million.
Breaking it down, the high-performance computing (HPC) business contributed $203 million in revenue, of which base rental income was $44.1 million, tenant recovery payments were $6.5 million, and the vast majority—approximately $152.1 million—came from tenant improvement service revenue, which is income generated from building specialized facilities for large clients. This portion of business comes primarily from its largest customer, CoreWeave. Although tenant improvement services carry lower gross margins, they generate higher-margin recurring income for the future.
At the same time, its traditional data center hosting business saw revenue decline slightly by 2% year-over-year to $37.63 million, with operating profit of $12.5 million. This business includes two facilities in North Dakota, with 286 megawatts of power capacity dedicated to cryptocurrency mining.
On the profitability front, the company reported adjusted net income of $12.9 million, or $0.04 per share. Adjusted EBITDA was $42.4 million, compared to just $1 million in the same period last year.
Applied Digital’s revenue is growing rapidly, but most of its current revenue comes from low-margin, non-recurring tenant improvement services. Nevertheless, this lays the foundation for higher-margin recurring rental income in the future. At the same time, the company is consuming substantial cash and significantly increasing debt to expand capacity.
All things considered, with the company projecting an annualized net operating income (NOI) run rate of $1 billion in about one year and a strong backlog of orders, the current stock price appears attractive at certain levels. The stock remains a high-risk, high-reward proposition, but against the backdrop of power supply becoming a bottleneck for AI infrastructure, Applied Digital’s long-term competitive position is relatively solid.
