One Reason To Buy Applied Digital Stock After Its Fall

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Applied Digital (APLD) stock has lost 40.6% over the past year, while the S&P 500 returned 14.0%. On its October 7 earnings call, management said the data center builder holds about $36 billion in contracted revenue across five campuses. Those contracts are the reason to look at the stock, but the company still loses money and borrows heavily to build the campuses behind them. So how much of that $36 billion is reaching sales today?

How Much Are Applied Digital’s Contracts Bringing In?

Applied Digital’s revenue was $342 million in fiscal Q1 2027, up 322.4% from a year earlier. Its sales grew an average of 138.2% a year over the past three twelve-month periods, against 6.1% for the S&P 500.

Rent remains a small part of those sales. The HPC hosting business, which leases out the company’s AI data centers, brought in $262.6 million in the quarter, but base rent accounted for only $65.8 million of that total. Most of the rest came from fitting out space for tenants.

Applied Digital’s contracts are worth a look for how they are written. Management said the company targets take-or-pay leases of at least 15 years, which bill tenants whether or not they use the space. It wants these tenants to be large cloud companies rated investment grade. The three campuses the company will finance next are all leased to one such company on 15-year take-or-pay terms. That is the case for owning Applied Digital: rent owed for years by a tenant with strong credit.

Investors already pay for that promise. The stock trades at 7.0 times its sales over the past twelve months, against 3.2 for the S&P 500, and its price-to-earnings ratio is not meaningful because the company lost money. That multiple is set against sales that rose 286.2% over those twelve months, and whether it lasts likely depends on how fast base rent grows.

What Is Applied Digital Paying To Build Its Campuses?

Applied Digital is paying far more than its business brings in. In fiscal Q1 2027, its free cash flow, the cash left after capital spending, was a negative $2.01 billion, against $63.9 million of cash from its operations.

The company pays for much of that spending with debt. Its debt equals 109.1% of its stock market value, against 19.4% for the S&P 500. The next campuses management needs to finance are Polaris Forge 3, Delta Forge 1 and Delta Forge 2. It plans to do so through preferred equity from Macquarie Asset Management and then project-level debt, a structure management said lets shareholders keep a majority stake in each site.

Management also said more than 80% of its debt principal does not come due until fiscal 2031 or later. Even so, each new campus needs fresh money before its rent arrives, and that is the risk a shareholder takes on.

What Applied Digital Expects Next

Management expects about 250 megawatts of expansion leases to be signed by the end of calendar 2026 at materially higher pricing than earlier leases. When that pricing came up on the call, management said lease rates could rise by more than 15%, though it would not pin the figure down.

Management also expects to put over 600 megawatts into service in the 12 months after the October 7 call, against 250 megawatts in the 12 months before it. Base rent from Applied Digital’s HPC hosting business is the figure to watch in its next report, expected in January 2027.

What Would Another Fall In Applied Digital Do To Your Plan?

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