Applied Digital APLD shares have plunged 33% over the past month, significantly underperforming the Zacks Finance sector, which has gained 2.3% and the Zacks Finance Miscellaneous Services industry, which has declined 4.6% over the same period.
The weakness comes as APLD continues to pursue an aggressive artificial intelligence data center expansion strategy that requires substantial capital investment. While long-term hyperscale agreements and capacity additions support its long-term growth outlook, elevated valuation, customer concentration and execution risks continue to weigh on the investment thesis. Let's dig deeper to determine whether APLD stock deserves a place in investors' portfolios at current levels.
APLD Price Performance
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APLD's Aggressive Capital Spending Could Delay Profitability
APLD continues to pursue an aggressive multi-campus buildout that requires capital deployment well ahead of revenue recognition. Between Polaris Forge 1, Polaris Forge 2 and the newly broken ground Delta Forge 1 campus, APLD has layered on $2.15 billion in senior secured notes for Polaris Forge 2 and secured access to $4.1 billion in preferred equity from Macquarie Asset Management tied to future hyperscaler leases, alongside CoreWeave's CRWV tenant fit-out obligations at Polaris Forge 1. Part of that spending funds proprietary liquid cooling infrastructure, an area where Vertiv Holdings VRT has spent years building scale, while APLD is still proving out its own approach, adding execution risk on top of an already heavy capital burden as more campuses come online.
This is already showing up on the income statement. In the third quarter of fiscal 2026, revenues grew 139% year over year to $126.6 million, yet net loss attributable to common stockholders came in at 36 cents per share, reflecting how far construction and financing costs continue to outpace earnings generation. The Zacks Consensus Estimate for fiscal 2026 loss is pegged at 70 cents per share, improved from 80 cents a year ago, indicating a gradual path toward profitability rather than a rapid turnaround.
With debt near $2.7 billion against $2.1 billion in cash, APLD will likely require continued disciplined execution as Polaris Forge 1 and Polaris Forge 2 ramp through fiscal 2027 before earnings improve meaningfully.
Applied Digital Corporation Price and Consensus
Applied Digital Corporation price-consensus-chart | Applied Digital Corporation Quote
Customer Concentration Remains a Risk for APLD’s Stock
APLD's growth story continues to depend on a limited number of counterparties. Total contracted lease revenues have climbed to approximately $36 billion across five AI Factory campuses with just three tenants supporting the platform. CoreWeave anchors Polaris Forge 1, one investment-grade hyperscaler has signed at Polaris Forge 2, while a second investment-grade hyperscaler has now signed three separate leases across Delta Forge 1, Polaris Forge 3 and Delta Forge 2. Approximately 70% of contracted revenue is now backed by investment-grade hyperscalers, improving APLD's overall credit profile. However, revenue visibility remains closely tied to the expansion plans and financial strength of only a handful of customers.
APLD's close peer, IREN Limited IREN, also faces customer concentration, with its Microsoft partnership expected to account for a substantial portion of its fiscal 2026 AI Cloud revenue alongside a separate multibillion-dollar agreement with Nvidia. By comparison, Vertiv Holdings serves a broad base of hyperscale and enterprise customers, reducing its reliance on any single client. For APLD, any slowdown in infrastructure spending by CoreWeave or its investment-grade hyperscale partner could materially affect future lease growth, making customer concentration an important investment risk despite its expanding backlog.
APLD Trades at Premium Valuations
APLD trades at a forward 12-month price-to-sales (P/S) multiple of 12.66X, well above the industry average of 2.8X and the broader sector average of 8.97X. Against direct peers, IREN Limited trades at 4.58X and Vertiv Holdings at 7.75X, both meaningfully below APLD's multiple despite longer operating histories and broader customer bases. APLD's premium looks difficult to justify given its ongoing net losses, elevated leverage and dependence on just three hyperscale tenants across five AI Factory campuses still under construction.
APLD’s P/S F12M Ratio
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Conclusion
APLD's near-term outlook remains challenged by heavy capital spending, elevated leverage and dependence on just three hyperscale tenants across five AI Factory campuses still under construction. Despite continued triple-digit revenue growth, persistent net losses and a stretched valuation relative to both industry and sector averages, along with premium multiples versus peers like IREN Limited and Vertiv Holdings, make the stock look unattractive at current levels.
Given these trends, APLD's Zacks Rank #5 (Strong Sell) appears well justified, and investors should stay away from the stock for now.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Applied Digital Corporation (APLD): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).