Analysts have significantly raised their price target for Applied Digital, doubling it from $20 to as high as $43 per share. They cite strong execution, major new contracts, and growing demand for AI data center capacity as key drivers behind the upward revision.

Analyst Commentary

Recent Street research paints an overall optimistic outlook for Applied Digital, with analysts raising their price targets and highlighting the company's strategic growth in AI data centers. However, a few notes of caution remain around valuation drivers and revenue quality.

Bullish Takeaways

• Bullish analysts emphasize Applied Digital’s successful execution on major contracts, such as a 15-year, multi-billion dollar hyperscale agreement. This is seen as supporting robust long-term revenue visibility.
• The company’s expanding pipeline, including over 4GW of prospective builds and new discussions with multiple hyperscale customers, is viewed as positioning Applied Digital to capture growing AI infrastructure demand.
• Monetizing its first-mover advantage and building data center capacity ahead of commitments is credited with strengthening the company’s leadership in the market, supporting ongoing upward re-ratings by analysts.
• Substantial external financing and recent partnerships are expected to facilitate significant scale-up of capital projects. These factors are believed to minimize dilution while enabling rapid expansion across multiple campuses.

Bearish Takeaways

• Bearish analysts suggest some recent revenue strength may be attributable to one-time contributions, which casts a degree of uncertainty over the sustainability of outperformance in upcoming quarters.
• There is a view that future valuation will rely almost entirely on the company's continued success in securing new and expanded leasing activity with AI-focused hyperscalers. This introduces execution risk if momentum slows.
• Caution remains around the timing and certainty of securing new major colocation agreements, as well as the challenge of scaling multiple large projects at the same time.
• Ongoing sector consolidation and power scarcity could intensify competition for strategic assets, potentially placing additional pressure on margins or capital requirements for further expansion.

What's in the News

• Secured a 15-year, $5 billion lease agreement with a U.S. investment-grade hyperscaler for 200MW at the under-construction Polaris Forge 2 Campus near Harwood, North Dakota, with an option for 800MW additional capacity (Client Announcements).
• Finalized a new lease with CoreWeave for an additional 150MW at the Polaris Forge 1 Campus. This brings total anticipated contracted lease revenue to approximately $11 billion and advances its rapid growth trajectory (Business Expansions).
• Raised $50 million in funding through a private placement with new lender Macquarie Equipment Capital Inc. by issuing a promissory note bearing interest at 8% per annum plus 1.50% per month (Private Placements).
• Announced plans to break ground in September 2025 on the $3 billion, 280MW Polaris Forge 2 AI Factory, supporting scalable growth and reinforcing North Dakota's role as a leading hub for AI infrastructure (Business Expansions).

Valuation Changes

• Consensus Analyst Price Target: Reaffirmed at $43.70 per share, reflecting stable long-term fair value expectations after the latest revisions.
• Discount Rate: Increased slightly from 9.07% to 9.19%, indicating a marginal uptick in perceived risk or required return.
• Revenue Growth: Projected rate remains essentially unchanged at approximately 79.93%, highlighting continued optimism around Applied Digital’s top-line expansion.
• Net Profit Margin: Improved substantially from 9.02% to 21.79%, suggesting significantly higher expected profitability for future periods.
• Future P/E: Decreased markedly from 212.66x to 88.32x, which signals enhanced expectations for earnings growth relative to share price levels.