Shares of Applied Digital (NASDAQ:APLD) increased by approximately 16% in early trading Friday following the release of better-than-expected fiscal first-quarter financial results. The company also announced a significant expansion of its data center capacity through a new agreement with AI cloud provider CoreWeave.
The digital infrastructure company reported substantial year-over-year revenue growth and a smaller-than-anticipated loss per share, signaling positive momentum to investors. The new lease agreement is projected to generate billions in long-term revenue, solidifying the company's position in the rapidly growing artificial intelligence infrastructure market.
Key Takeaways
- Applied Digital's stock (APLD) climbed about 16% after its latest corporate update.
- Fiscal first-quarter revenue reached $64.2 million, an 84% increase from the previous year, surpassing analyst estimates of $54.6 million.
- The company secured a new 150-megawatt lease with CoreWeave, fully contracting its 400 MW Polaris Forge 1 campus.
- This new agreement is expected to generate approximately $11 billion in revenue over its 15-year term.
Strong Financial Performance Exceeds Expectations
Applied Digital reported strong financial results for its fiscal first quarter, which played a key role in the positive market reaction. The company's revenue grew to $64.2 million, marking an 84% increase compared to the same period last year.
This figure significantly outperformed Wall Street's consensus estimate, which had projected revenues of $54.6 million. The substantial revenue beat demonstrates the company's ability to capitalize on the high demand for digital infrastructure.
Detailed Earnings Metrics
On the earnings front, Applied Digital posted a non-GAAP loss of $0.03 per share. While still a loss, this result was narrower than what financial analysts had forecasted, suggesting improved operational efficiency or cost management.
The company's adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for the quarter was positive, standing at $537,000. However, the operating margin widened to negative 34.7% from negative 24.2% a year earlier, indicating that increased operational costs are accompanying its rapid expansion.
Understanding Operating Margin
Operating margin is a measure of profitability that indicates how much profit a company makes from its core business operations before interest and taxes. A widening negative margin, as seen with Applied Digital, often reflects heavy investment in growth and expansion, which can increase costs in the short term with the expectation of future profitability.
Major Data Center Expansion for AI Infrastructure
Alongside its financial report, Applied Digital announced a landmark agreement that expands its capacity dedicated to artificial intelligence workloads. The company secured an additional 150-megawatt (MW) lease for its Polaris Forge 1 campus.
This new lease is with CoreWeave, a specialized cloud provider focused on large-scale AI and high-performance computing (HPC). This deal is significant because it brings the entire 400 MW of critical IT load at the campus under contract with a single, high-demand client.
A Multi-Billion Dollar Agreement
The new 150 MW lease agreement with CoreWeave is projected to be highly lucrative for Applied Digital. The company expects the deal to generate approximately $11 billion in lease revenue over its 15-year term, providing a stable and predictable long-term income stream.
Strategic Position in the AI Gold Rush
The expansion and partnership with CoreWeave highlight Applied Digital's strategic focus on the booming AI sector. As companies across industries race to develop and deploy AI models, the demand for specialized data centers capable of handling immense computational power has surged.
In a statement, Applied Digital's Chairman and CEO, Wes Cummins, addressed the company's role in this technological shift.
"The expansion underscores the company's role as a strategic infrastructure partner amid an estimated $350 billion in hyperscale investments for AI deployment this year," Cummins stated.
This comment positions Applied Digital not just as a service provider but as a critical enabler of the broader AI ecosystem. By providing the foundational infrastructure, the company is tapping into a massive wave of capital investment from the world's largest technology firms.
The CoreWeave Partnership
CoreWeave has emerged as a key player in the AI cloud market, offering access to the high-powered GPUs (Graphics Processing Units) necessary for training and running complex AI models. Securing CoreWeave as the sole tenant for the 400 MW campus provides Applied Digital with several advantages:
- Revenue Stability: A long-term, single-tenant lease reduces vacancy risk and simplifies operations.
- Market Validation: A partnership with a leading AI cloud provider validates the quality and strategic value of Applied Digital's infrastructure.
- Focused Growth: It allows the company to tailor its facilities to the specific, high-density power and cooling needs of AI workloads.
The market's enthusiastic response, reflected in the 16% stock price increase, suggests that investors view this strategic focus on AI infrastructure as a powerful catalyst for future growth. The combination of exceeding near-term financial expectations and securing a long-term, multi-billion dollar revenue pipeline has created significant optimism for Applied Digital's outlook.
