Why APLD Stock Is Still A Bargain At $44

Applied Digital stock (APLD) hit a fresh high of around $44 in extended trading, surging from its recent base near $40. The catalyst? The company reached a massive milestone, surpassing 1 gigawatt of contracted capacity by securing a U.S.-based, high-investment-grade hyperscaler lease at its fourth campus, Polaris Forge 3. This is catching investors’ attention.

Image by Pete Linforth from Pixabay

But does this milestone change the fundamental picture?

Absolutely. While some capacity announcements look impressive on paper without moving the needle, Applied Digital’s core business tells a highly compelling story. Revenue growth has exploded at an average rate of 117.8% annually over three years, well above the S&P 500’s recent 11.4% trailing revenue growth. In the last 12 months alone, revenue jumped 104.9% from $139 million to $284 million. Quarterly revenues also grew 139.3% to $127 million. The company that once seemed speculative is now aggressively expanding its top line.

What about profitability? Aren’t the margins negative?

On a trailing GAAP basis, yes. Operating margins sit at a bleak -23.2% over the last four quarters, with net margins at -65.6% and operating cash flow margins at -12.7%. But excluding non-cash expenses like depreciation, stock-based compensation, and project-transition costs, a different operational picture emerges. For its most recent quarter, APLD generated an Adjusted EBITDA margin of 40.6% on $108.6 million in adjusted revenue. It also posted an Adjusted Net Profit margin of 30.6% by bringing in $33.2 million in adjusted net income. Underneath the GAAP accounting adjustments, the core unit economics of the data centers demonstrate strong profitability.

So it’s financially sound?

Very. Applied Digital carries $2.8 billion in debt against an $11 billion market capitalization. This implies a Debt-to-Equity ratio of 22.7%, tracking closely with the S&P 500’s average of 21.7%. With $1.7 billion in cash representing a massive 27.7% of its $6.2 billion in total assets, the balance sheet is highly liquid. This easily dwarfs the S&P 500’s 6.7% cash-to-assets ratio, providing the company with substantial runway to fund its capital-intensive buildout without immediate liquidity concerns.

Then what’s the problem?

Two things. First, the stock has proven extremely fragile during macro turbulence. It plunged 82.6% during the 2022 inflation shock, compared to a 25.4% decline for the broader market. It also dropped 67.6% during the 2020 pandemic and suffered a 91.7% collapse during the 2008 global financial crisis. When the market panics, APLD gets punished disproportionately. Second, the valuation demands flawless operational execution.

What does the valuation say?

At levels around $44, APLD trades at a steep 200 times trailing EV/EBITDA. But here is the rub: forward multiples tell a different story. The moment you consider the forward expected EBITDA of $234 million, the valuation drops to 135x. Looking ahead to 2027 expected EBITDA, it dips under 45x. The market is pricing in exactly what Applied Digital is projecting: hyper-growth and rapid backlog conversion.

Bottom line?

Applied Digital is aggressively priced, making it structurally volatile. The Polaris Forge 3 lease confirms real execution, and underlying growth metrics are exceptional. If you believe APLD can convert its pipeline without major delays, the stock presents a compelling risk/reward profile for growth-oriented investors.

Navigating the AI cycle requires balancing hyperscaler giants driving the demand with specialized pure-plays actually building the capacity. The Trefis High Quality (HQ) Portfolio is designed to manage this exact balance, consistently outperforming its benchmark with returns exceeding 105% since inception. Ultimately, APLD’s premium multiple relies entirely on flawless execution as its massive pipeline comes online.

The billions in capital expenditures fueling APLD’s explosive backlog are coming directly from tech titans racing to build AI superintelligence. To see how this infrastructure spending translates into long-term value for the companies writing the checks, read our deep dive: How META Stock Rises To $1,000.