Why Applied Digital Stock Is Sinking Today
Key Points
Applied Digital's fiscal Q3 sales-and-earnings results actually crushed Wall Street's expectations.
Investors weren't thrilled with elements of the company's sales mix, and some were hoping for more concrete lease news.
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Applied Digital (NASDAQ: APLD) stock is getting hit with selling pressures Thursday. The data-center company's share price was down 5.4% as of noon ET amid the backdrop of a 0.3% gain for both the S&P 500 and the Nasdaq Composite. The tech stock had been off as much as 9.8% earlier in the session.
Applied Digital posted its fiscal Q3 results after yesterday's market close, reporting sales and earnings that exceeded Wall Street's targets. Unfortunately, the market wasn't happy with all aspects of the report -- and shares are selling off today.
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Applied Digital sinks despite strong Q4 beats
Yesterday, Applied Digital published results for the third-quarter of its current fiscal year -- which ended Feb. 28. The company actually crushed Wall Street's expectations for the period.
Applied Digital reported non-GAAP (adjusted) earnings per share of $0.09 on sales of $126.6 million. The company's adjusted earnings per share arrived $0.30 better than the average Wall Street analyst estimate had predicted, and its sales beat the average forecast by $48.1 million. Revenue was up an impressive 139% year over year in the quarter, but the performance hasn't been enough to stave off sell-offs today.
What's driving the sell-off?
While Applied Digital far exceeded sales and earnings targets for fiscal Q3, some investors and analysts may not be thrilled with some of the catalysts driving the beat. Contributions from relatively low-margin categories, including fit-out services and power passthroughs, played big roles in delivering results that crushed Wall Street's targets.
In addition to margin-related concerns, investors may have also wanted to hear more news about new lease contracts with major hyperscaler customers. Expectations were high heading into the quarterly report, and the market apparently didn't get the outlook clarity it was looking for.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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