Revenue Beats Estimates, Operating Profit Achieved: Why Is Applied Digital Still Facing a Market Selloff?

TradingKey - After the market close on April 8, high-performance data center operator Applied Digital ( APLD.US) released its fiscal 2026 third-quarter financial results.

Revenue surged 139% year-over-year to $126.6 million, significantly exceeding Wall Street's consensus estimate of approximately $76.56 million; adjusted earnings per share (EPS) was $0.09, also crushing market expectations for a loss of $0.10 per share.

However, its GAAP net loss attributable to common shareholders widened to $100.9 million, a 179% deterioration from the net loss in the prior-year period. Consequently, shares fell more than 5% in after-hours trading.

Why is the market unimpressed despite a revenue surge and a return to profitability?

Net loss attributable to shareholders widened to $100.9 million, primarily impacted by a one-time non-cash asset impairment charge of approximately $59.7 million. This impairment directly weighed on GAAP-basis net income performance and became a core factor dampening market sentiment.

Furthermore, the company is currently in a rapid expansion cycle, where rising stock-based compensation from headcount growth, professional service fees, and SG&A (Selling, General and Administrative) expenses have also acted as a temporary drag on net profit.

In terms of operational quality, the results delivered by Applied Digital were quite solid.

Adjusted net income recorded $33.2 million and adjusted EBITDA reached $44.1 million, indicating that the core business has achieved profitability. By the end of the quarter, the company held approximately $2.1 billion in cash and cash equivalents; following the subsequent completion of a $2.15 billion senior secured notes financing, overall liquidity remains ample.

Hyperscalers' Demand for Compute is "Accelerating": How Long Can the AI Data Center Boom Last?

Following the earnings release, Applied Digital Chairman and CEO Wes Cummins reassured the market during the conference call: "We are seeing a significant acceleration in demand for high-performance AI data center capacity, and the aggressiveness of hyperscale customers has reached unprecedented levels."

Operational milestones are being realized. At the company's Polaris Forge 1 campus in Ellendale, North Dakota, the first 100-megawatt direct-to-chip liquid-cooled data center is now fully operational; Cummins described it as "one of the few 100-megawatt-class liquid-cooled data centers currently in operation globally."

From a broader perspective, capital expenditures of major global cloud service providers are entering an unprecedented expansion cycle. In its latest report dated April 2026, Morgan Stanley projects that the combined capital expenditures of the four tech giants—Amazon, Google, Microsoft, and Meta—will reach approximately $660 billion in 2026, representing a 60% increase from 2025 and a 165% increase from 2024. This CapEx cycle, driven by tech giants, continues to accelerate.

Overall, Applied Digital's Q3 earnings report essentially reflects a situation of "short-term pressure, but the long-term thesis has been validated." While one-time asset impairments weighed on net income for the quarter and widened losses on a GAAP basis, the adjusted net income has turned positive, leases with hyperscale customers are materializing, and liquid-cooled data centers are fully operational—all of which represent tangible performance results.

This also indicates that the underlying drivers of AI compute demand have not weakened, and the CapEx cycle for hyperscale customers is still accelerating. The CapEx cycle for AI computing is far from over, and Applied Digital's project implementation serves as the best proof of this trend.