Applied Digital Shares Soar. Is It Too Late to Buy the Stock?

Share prices of Applied Digital (NASDAQ: APLD) exploded higher after the company reported strong revenue growth that topped expectations. The stock is now trading up about 393% so far in 2025, as of this writing.

Let's take a closer look at the company and whether or not it's too late to buy the stock.

An AI winner

Applied Digital isn't a traditional tech company. What it has really built is a specialized real estate and power infrastructure business designed for artificial intelligence (AI). The company designs, constructs, and operates data centers that are tailor-made for high-performance computing workloads, like training large language models and inference.

Image source: Getty Images.

The company started out as a Bitcoin miner. While a shift to AI may sound like a red flag, its cryptocurrency background actually gives it a competitive advantage because it already knows how to source large amounts of cheap, stable power. One of the biggest bottlenecks in deploying next-generation data centers now isn't a lack of chips; it's a lack of access to affordable power.

The company provides two main services: colocation and renting out the computing power of its graphics processing units (GPUs) on demand. With colocation, it leases out capacity inside its huge facilities to customers that want access to its power but use their own hardware.

Given the need for power to run AI workloads, Applied Digital is seeing rapid revenue growth. In its fiscal first quarter, revenue soared 84% year over year to $64.2 million. That came largely from a $26.3 million contribution from tenant fit-out services, which is basically revenue that comes from building out specialized facilities for major customers.

In this case, it was a facility for CoreWeave (NASDAQ: CRWV). This is a nonrecurring form of revenue with a low gross margin, but it sets the company up for higher-quality revenue growth with CoreWeave in the future.

On the profitability front, the company reported an adjusted $0.03 loss per share compared to a loss of $0.01 per share a year earlier. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $500,000 compared to $6.3 million last year. While its profitability numbers fell, the company noted that many of the investments it has made have yet to translate into earnings.

Its balance sheet ended the quarter with $114.1 million in cash against $687.3 million in debt. Since the quarter ended, it has raised another $362.5 million in fresh financing.

While Applied Digital saw strong revenue growth, most of this was from a one-time, low-margin situation. As such, that's not what really got investors excited. What likely sent the stock soaring were the deals and financing management announced. The company expanded its lease agreement with CoreWeave, which is one of the fastest-growing players in cloud computing, bumping up the total value of its contract to about $11 billion.

On top of that, management announced that it broke ground on its huge Polaris Forge 2 campus in North Dakota, backed initially by funding from Macquarie Equipment Capital. It also signed a huge $5 billion preferred equity facility with Macquarie Asset Management, which is expected to finance a big portion of the company's ongoing expansion while minimizing how much new stock it needs to issue.

Taken together, these could unlock as much as $20 billion to $25 billion in total capital, which would be enough money for multiple new campuses over the next few years.

Polaris Forge 1 is already scaling up rapidly and is expected to exceed 1 gigawatt between 2028 and 2030, depending on new transmission line approvals. The first Polaris Forge 2 building is set to come online in late 2026 and reach full capacity by 2027.

Applied Digital's big advantage is its access to power, and it said its proven designs are leading to more opportunities with third parties that have access to power but lack the ability to design these facilities. It currently has a pipeline for 4 gigawatts of power.

Is it too late to buy the stock?

Applied Digital's investment case is pretty straightforward. The limiting factor in the AI boom isn't chips anymore; it's the lack of facilities capable of supporting them.

Nvidia has said that the AI infrastructure market could grow to between $3 trillion to $4 trillion in the next several years, which is a huge number. Applied Digital, meanwhile, is positioning itself as one of the few players ready to deliver the power and facilities needed to host these vast data centers.

If its business can scale up and eventually show strong operating leverage, the stock could have much more upside from here.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Nvidia. The Motley Fool has a disclosure policy.