It has been about a month since the last earnings report for Applied Digital Corporation (APLD). Shares have added about 62.4% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Applied Digital Corporation due for a pullback? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Applied Digital Corporation before we dive into how investors and analysts have reacted as of late.
Key Highlights
• Revenue: $126.6 million, up 139% year over year from $52.9 million.
• Adjusted net income per diluted share (Non-GAAP): 9 cents, up from an adjusted net loss of 1 cent in the prior-year quarter.
• Adjusted EBITDA (Non-GAAP): $44.1 million versus $6.3 million in the prior-year quarter.
• Data Center Hosting revenue: $37.5 million, up 7% from $35.2 million in the prior-year quarter.
• HPC Hosting revenue: $71.0 million in total, including $44.1 million from base rent, $18.9 million from tenant fit-out services, and $8.1 million from power pass-through arrangements and other ancillary revenue streams.
Applied Digital reported a loss of 36 cents per share in the third quarter of fiscal 2026, a deterioration from a loss of 16 cents registered in the year-ago quarter. The figure missed the Zacks Consensus Estimate by 260%.
Revenues soared 139.3% year over year to $126.6 million, driven by the ramp-up of HPC tenant fit-out services at Polaris Forge 1 and continued growth in the Data Center Hosting Business. The figure beat the Zacks Consensus Estimate by 68.73%.
APLD's Segment Performance
The Data Center Hosting Business generated $37.5 million in revenues, up 7% year over year, with both Jamestown (106 MW) and Ellendale (180 MW) operating at full capacity as of Feb. 28. The segment generated approximately $13.9 million in operating profit during the quarter, operating on an asset base of $119.6 million, demonstrating strong operational efficiency.
The HPC Hosting Business contributed $71 million in revenues during the quarter. This included approximately $18.9 million from tenant fit-out services for CoreWeave at Polaris Forge 1, $44.1 million related to base rent, and $8.1 million related to power pass-through arrangements and other ancillary revenue streams. The segment generated an operating profit of $17.6 million.
The company plans to merge its Cloud Services Business with EKSO Bionics Holdings to form ChronoScale Corporation, of which Applied Digital will retain approximately 97% ownership upon closing. Reflecting this, the company consolidated cloud revenues of $18.1 million for the quarter. However, the segment reported a loss of $52.2 million, which included a $59.7 million non-cash write-down following the reclassification of the Cloud Services Business from held-for-sale.
APLD's Operating Details
Cost of revenues jumped 48% year over year to $72.8 million, primarily reflecting $18.9 million associated with tenant fit-out services for the HPC Hosting Business and increased energy costs for the Data Center Hosting Business.
Selling, general and administrative expenses surged 251% year over year to $79.7 million. The increase was driven by $39.3 million in stock-based compensation due to accelerated vesting of certain employee stock awards, $8.6 million in professional services primarily related to legal work on discrete transactions and $5.1 million in personnel expenses to support business growth.
Interest expense (income) was interest income, net of $2.4 million, compared with net interest expense of $8.9 million in the year-ago quarter, reflecting a 127% year-over-year decline. The decline was primarily due to an increase of $19.3 million in interest income, driven by higher funds held in interest-bearing demand deposit accounts, and a $3.0 million decrease in finance lease interest associated with the renegotiation of the majority of finance leases during the three months ended Feb. 28, 2026.
The company recognized a $9.4 million gain on the change in fair value of derivatives, comprising a $6.1 million increase on its Babcock & Wilcox common stock warrant and a $3.3 million gain on derivative assets related to preferred units. It recorded a $3.3 million gain on the change in fair value of investments, reflecting a $1.3 million increase in the fair value of its B&W common stock position and a $2.0 million rise in the fair value of its investment in Base Electron, a related party. None of these non-cash gains were present in the year-ago quarter.
APLD's Balance Sheet and Cash Flows
As of Feb. 28, Applied Digital held cash, cash equivalents and restricted cash of approximately $2.1 billion compared with $2.3 billion as of Nov. 30. Total debt stood at approximately $2.7 billion compared with $2.6 billion at the end of the second quarter of fiscal 2026. During the quarter, the company entered into a $100 million DevCo Facility with Macquarie Equipment Capital to fund initial development and construction costs for new data center projects.
Operating cash flow was negative $42.9 million for the nine months ended Feb. 28, 2026, reflecting construction scaling and early-stage HPC activity.
APLD Offers Positive Outlook
Applied Digital provided updates reflecting strong growth expectations for its data center portfolio. The company now has 600 MW under contract with two hyperscalers across Polaris Forge 1 and Polaris Forge 2, representing approximately $16 billion in prospective lease revenues over 15 years.
Lease revenues are expected to ramp significantly over the coming quarters as the second 150 MW building at Polaris Forge 1 comes online in mid-2026 and the third 150 MW building follows in 2027. Initial capacity at Polaris Forge 2 is anticipated in 2026, with full build-out expected in 2027.
The company is in advanced discussions with another investment-grade hyperscaler covering approximately 900 MW across three sites in the Dakota and select southern U.S. markets. APLD expects to begin construction on at least one new campus by the end of January 2026, supported by a $100 million development loan facility secured after quarter-end.
Applied Digital anticipates exceeding its long-term goal of $1 billion in NOI within five years. The company plans to spin out its Cloud Services Business and merge it with EKSO Bionics to form ChronoScale, with closing expected in the first half of 2026, and Applied Digital retaining approximately 97% ownership.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -7.32% due to these changes.
VGM Scores
Currently, Applied Digital Corporation has a poor Growth Score of F, a score with the same score on the momentum front. Following the exact same course, the stock has a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Interestingly, Applied Digital Corporation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Applied Digital Corporation belongs to the Zacks Financial - Miscellaneous Services industry. Another stock from the same industry, Jefferies (JEF), has gained 14.1% over the past month. More than a month has passed since the company reported results for the quarter ended February 2026.
Jefferies reported revenues of $2.02 billion in the last reported quarter, representing a year-over-year change of +26.6%. EPS of $0.89 for the same period compares with $0.60 a year ago.
For the current quarter, Jefferies is expected to post earnings of $0.90 per share, indicating a change of +109.3% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Jefferies. Also, the stock has a VGM Score of F.
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This article originally published on Zacks Investment Research (zacks.com).