Last Update 04 Feb 26

Fair value Increased 3.60%

APLD: Long-Term Hyperscale Leases And Power Access Will Support Future AI Demand

Analysts have lifted their price target for Applied Digital by about US$1.57, citing stronger expected revenue growth, updated discount rate assumptions, and higher implied future P/E multiples, tempered by more conservative profit margin expectations and increased confidence in hyperscaler leasing momentum and AI infrastructure demand.

Analyst Commentary

Recent Street research on Applied Digital has been broadly constructive, with multiple firms updating price targets and initiating coverage around the company’s AI focused data center and hyperscaler leasing story. The commentary centers on execution at key projects, visibility into contracted power, and how these factors might justify higher valuation multiples tied to AI infrastructure growth.

Bullish Takeaways

Bullish analysts highlight Applied Digital’s positioning as a scalable, pure play AI infrastructure landlord. They point to advanced discussions for 900 MW across multiple hyperscale sites and 600 MW already under contract as key supports for revenue visibility and valuation frameworks.
Several reports point to ongoing development at the Polaris Forge 1 and 2 projects and initial energization milestones as important execution markers. These could support the case for higher implied future P/E multiples if the buildout stays on track.
Some analysts reference Macquarie backed funding as an important factor for growth. They argue that access to capital can help the company pursue large scale hyperscaler agreements without putting as much pressure on the balance sheet, which they see as supportive for long term earnings power.
Research notes describing Q2 results as better than expected frame strong AI infrastructure demand and potential hyperscaler leasing momentum as the core reasons for raising price targets. They tie these to an outlook in which Applied Digital could fill large capacity needs across multiple sites.

Bearish Takeaways

Even within generally positive coverage, there is an undercurrent of caution around execution risk at major sites like PF1 and PF2. Delays or cost overruns at these locations could affect the company’s ability to achieve the financial outcomes some models assume.
Assumptions around adjusted EBITDA margin, including expectations that margins might exceed 60% in two fiscal years, rely on successful ramp up and stable operating performance at large scale. These assumptions could be pressured if power costs, construction expenses, or utilization trends differ from forecasts.
The reliance on large hyperscaler leases is a concentration risk that some investors may view carefully. Slower contracting or changes in customer priorities could impact growth trajectories and the justification for higher P/E or EV/EBITDA multiples used in recent target price work.
Valuation sensitivity to interest rate assumptions and discount rates is also a factor, as higher capital costs or shifts in required returns could weigh on the present value of long dated AI infrastructure cash flows that feed into analysts’ models.

What's in the News

Applied Digital broke ground on Delta Forge 1, an AI Factory campus in a southern U.S. market, designed for 430 MW of total utility power and up to 300 MW of critical IT load, with potential to scale further from 2028 onward, aimed at high density AI capacity for hyperscale customers (Key Developments).
The company is advancing Delta Forge 1 while in discussions with another prospective investment grade hyperscale customer, indicating ongoing interest in purpose built AI infrastructure for high density workloads (Key Developments).
Applied Digital reported on time Ready for Service for the second 50 MW phase at the first 100 MW building at its Polaris Forge 1 AI Factory Campus in Ellendale, North Dakota, bringing Building 1 to its full 100 MW critical IT load (Key Developments).
This Polaris Forge 1 milestone follows a US$5b lease with a U.S. based investment grade hyperscaler at Polaris Forge 2, bringing total contracted revenue across both campuses to US$16b, tied to the company’s long term North Dakota development pipeline (Key Developments).
At its November 5, 2025 annual meeting, Applied Digital stockholders approved a Certificate of Amendment to increase authorized common shares to 600,000,000, each with a par value of US$0.001 (Key Developments).

Valuation Changes

Fair Value: updated from US$43.70 to US$45.27 per share, a modest upward adjustment in the modelled estimate.
Discount Rate: revised from 9.26% to 9.61%, reflecting a slightly higher required return in the cash flow assumptions.
Revenue Growth: adjusted from 79.93% to 96.17%, indicating a meaningfully higher growth rate embedded in forecasts.
Net Profit Margin: reduced from 21.79% to 1.67%, a very large downward reset in profitability assumptions.
Future P/E: increased from 88.47x to a very large 612.80x, implying a much richer earnings multiple in the updated valuation work.

Long-term AI hyperscaler contracts, efficient building processes, and strategic locations drive revenue growth, margin expansion, and sustainability advantages.
Growing pipeline with major hyperscale clients and industry demand lowers customer risk and supports earnings visibility amid the digital transformation trend.
Heavy reliance on volatile crypto, aggressive debt-fueled expansion, concentrated customers, intensifying competition, and escalating regulatory and technology upgrade demands pose substantial financial and operational risks.

Catalysts

About Applied Digital

Designs, develops, and operates digital infrastructure solutions to high-performance computing (HPC) and artificial intelligence industries in North America.What are the underlying business or industry changes driving this perspective?

The company has recently secured long-term (15-year) leasing agreements with CoreWeave-a major AI hyperscaler-for its purpose-built AI/HPC data center campus, Polaris Forge 1, representing a total of $7 billion in contracted revenue and a multi-year, recurring, and predictable revenue stream that directly supports future revenue growth and cash flow stability.
Momentum in the data center segment is underpinned by surging demand for AI infrastructure, and Applied Digital is leveraging its streamlined proprietary building designs to reduce build times from 24 months to 12–14 months, enabling faster scaling of capacity and greater capital efficiency, which is likely to benefit both revenue growth and net margin expansion.
The company's focus on locating campuses in the Dakotas enables access to abundant, low-cost, and renewable power, with optimized liquid cooling and energy efficient designs (projected PUE of 1.18 and near-zero water consumption), significantly lowering operating costs per megawatt and providing a long-term net margin advantage in a market that increasingly prioritizes sustainability.
Relationships with multiple investment-grade North American hyperscalers-with two new customers already onboarded and several others in late-stage negotiations-suggest a robust pipeline of additional large-scale, high-value contracts, reducing future customer concentration risks and boosting long-term revenue visibility.
The accelerating industry need for high-density, geographically distributed data centers to support AI and machine learning workloads places Applied Digital in a favorable position, capitalizing on digital transformation trends that are set to drive ongoing utilization growth, improved asset values, and ultimately earnings expansion over the next several years.

Applied Digital Earnings and Revenue Growth

Applied Digital Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Applied Digital's revenue will grow by 73.7% annually over the next 3 years.
Analysts assume that profit margins will increase from -111.6% today to 13.5% in 3 years time.
Analysts expect earnings to reach $102.2 million (and earnings per share of $0.35) by about September 2028, up from $-161.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $221.2 million in earnings, and the most bearish expecting $18 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 79.4x on those 2028 earnings, up from -23.4x today. This future PE is greater than the current PE for the US IT industry at 32.4x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.27%, as per the Simply Wall St company report.

Applied Digital Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company maintains significant exposure to cryptocurrency mining customers, and although management is optimistic about this segment, continued volatility in the crypto market may result in inconsistent revenue streams and undermine long-term earnings stability.
Applied Digital's aggressive expansion involves substantial capital expenditures and a rising debt load ($688.2 million in debt as of quarter end), which increases financial leverage and balance sheet risk; failure to achieve targeted utilization or contract new customers could depress net margins and strain cash flows if growth assumptions are not met.
The company's major revenue growth hinges on a limited number of large hyperscaler customers (such as CoreWeave), creating meaningful client concentration risk-losing or renegotiating these contracts could lead to sharp reductions in both revenue and earnings reliability.
Long-term industry competition is intensifying with well-capitalized hyperscalers and infrastructure providers, who may leverage their scale to exert pricing pressure, erode Applied Digital's market share, and potentially compress margins over time.
Ongoing technological evolution in HPC/data center infrastructure (e.g., chipsets, liquid cooling, energy efficiency) may require Applied Digital to commit to frequent and expensive upgrades; combined with increasing regulatory and ESG scrutiny on data centers' energy usage, this could result in sustained capital intensity, impact net margins, and limit access to capital.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $19.375 for Applied Digital based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $24.0, and the most bearish reporting a price target of just $13.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $755.7 million, earnings will come to $102.2 million, and it would be trading on a PE ratio of 79.4x, assuming you use a discount rate of 9.3%.
Given the current share price of $14.38, the analyst price target of $19.38 is 25.8% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Power Control And Long-Term Leases Will Drive AI Data Center Expansion