Applied Digital vs. IREN: Which Technology Stock Is a Better Buy for 2027?

The race to build the physical backbone of artificial intelligence has intensified, and investors may want to choose between Applied Digital (NASDAQ:APLD) and IREN (NASDAQ:IREN) for their digital infrastructure exposure.

Both companies operate high-performance data centers, but they target different ends of the computing spectrum. While one focuses on massive AI campuses for hyperscalers, the other is pivoting away from digital assets toward cloud services. Understanding their distinct growth strategies and financial health is essential for evaluating these competitors.

The case for Applied Digital

In its latest annual report, filed for the fiscal year ended May 31, 2026, Applied Digital highlights its transition toward providing specialized infrastructure for artificial intelligence and high-performance computing workloads. As infrastructure becomes a central theme for tech stocks, the company's ability to deliver specialized environments is critical. Its Hosting segment relies on contracts with three major customers, including CoreWeave (NASDAQ:CRWV) and two large investment-grade hyperscalers. Customer concentration like this adds a layer of risk to the business, as revenue depends on a limited number of long-term lease agreements.

In FY 2026, revenue reached nearly $611.3 million, which is an increase of approximately 167.5% from the previous fiscal year. Despite this rapid expansion, the company reported a net loss of close to $249 million. This result shows that the high costs of building and operating advanced data centers continue to outpace current revenue generation.

Based on its May 2026 balance sheet, the debt-to-equity ratio is approximately 2.9x. This metric indicates that the company's total debt is nearly three times the value of its shareholder equity. The current ratio stands at roughly 4.0x, showing its ability to pay short-term debts with current assets. Free cash flow, which is operating cash flow minus capital expenditures, was negative $2.8 billion. Note that stock-based compensation represented roughly 245.5% of operating cash flow, meaning reported cash generation is heavily inflated by this non-cash add-back.

The case for IREN

IREN builds and operates next-generation data centers across North America, focusing on high-performance computing and AI cloud infrastructure. The company is actively transitioning away from its legacy Bitcoin (CRYPTO:BTC) mining operations, a process it expects to finish by late 2026. It has secured significant partnerships with Microsoft (NASDAQ:MSFT) and NVIDIA (NASDAQ:NVDA) to support its transition into high-end cloud services. With over 2,100 megawatts currently under construction, the company is aggressively expanding its physical footprint to meet future demand.

In FY 2026, revenue reached approximately $707.0 million, representing a growth of nearly 41.1% compared to the prior year. However, the company reported a net loss of close to $702.6 million for the period. This represents a significant shift from the net income recorded in the previous fiscal year, reflecting the heavy capital requirements of its business pivot toward artificial intelligence.

As of its June 2026 balance sheet, the debt-to-equity ratio is roughly 1.9x. The current ratio is approximately 3.6x, indicating a solid ability to cover short-term liabilities with current assets. Free cash flow for the period was roughly negative $2.2 billion as the company directed significant capital toward its data center expansion.

Risk profile comparison

Applied Digital faces risks from its heavy reliance on a handful of customers for the majority of its revenue. The company is managing high levels of debt and restrictive covenants that could limit its operational flexibility. Additionally, construction delays and dependence on third-party power suppliers could impact its ability to meet development timelines. Regulatory uncertainties surrounding data centers focused on artificial intelligence also present a potential hurdle for future growth.

IREN is exposed to significant financial risks due to its capital-intensive expansion into AI cloud services and its high level of indebtedness. The company must contend with rapid hardware obsolescence, especially for high-end graphics processing units in a competitive market. It also faces volatile electricity prices and regulatory scrutiny in the regions where its data centers operate. Complexity following recent acquisitions could also lead to integration challenges as the company scales.

Valuation comparison

IREN carries a higher P/S ratio, which measures market capitalization relative to sales over the past twelve months, while Applied Digital appears cheaper on a sales basis.

Valuation metrics include sourcing from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy for 2027?

I'd go with Applied Digital. I like that it has turned the AI data center build-out into signed, long-term leases, which gives investors clearer visibility into future revenue.

In its most recent quarter, reported in October, Applied Digital's revenue more than tripled as its flagship data center campus came online, and adjusted EBITDA swung from roughly break-even to solidly positive. Management says roughly $36 billion of revenue is now contracted. The catch is that much of that growth came from building out space for tenants, not ongoing rent, and the company has borrowed heavily. Over time, the heavy building should give way to steady rent from tenants already under contract.

To be fair to IREN, its AI cloud business is growing fast and management has raised its recurring revenue target. But it missed earnings estimates last quarter, and the stock recently hit a 52-week low on worries about how AI infrastructure gets financed. Q1 2027 results arrive Nov. 5.

When you're investing for the long haul, it helps to own a business with customers already signed up to pay. Applied Digital's signed leases give it that foundation, and each new tenant adds to it.

Sara Appino has positions in Bitcoin and Nvidia. The Motley Fool has positions in and recommends Bitcoin, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.