APLD: Long-Term Hyperscale Power Control Will Drive Future Sector Leadership

Analysts have lifted their price targets on Applied Digital, in many cases doubling them to the mid to high $30s and low $40s per share, citing stronger than expected Q1 results, long term hyperscale contracts, a deep multi gigawatt development pipeline, and increasing confidence that the company can scale and monetize its AI focused data center footprint.

Analyst Commentary

Street research following the quarter has turned markedly more constructive on Applied Digital, with a wave of target price increases reflecting rising confidence in the company’s ability to convert its development pipeline and power portfolio into durable, high margin AI data center revenues.

Bullish Takeaways

• Bullish analysts point to the 15 year, multibillion dollar CoreWeave contract and other long duration leases as evidence that Applied Digital has validated its hyperscale data center model and secured a visible, recurring revenue base that supports higher valuation multiples.
• The accelerating buildout of Polaris Forge 1 and 2, Ellendale, and Harwood, combined with an active multi gigawatt pipeline, is viewed as a sign that the company can scale capacity rapidly enough to meet AI demand, driving outsized growth and operating leverage as campuses fill.
• Access to structured financing, including a large MAM facility and backing from infrastructure capital partners, is seen as a key enabler for expanding multiple AI campuses with limited equity dilution. This reinforces the case for substantial upside to current enterprise value as projects are de risked.
• Several notes highlight that control of power and sites in power constrained markets positions Applied Digital to benefit from a broader sector re rating, as investors increasingly reward platforms with secured power portfolios and colocation agreements in place.

Bearish Takeaways

• Bearish analysts emphasize that near term financial results include one time technical fit out and other non recurring items, and argue that valuation is now driven almost entirely by the pace and quality of future leasing to AI hyperscale customers rather than recent quarterly beats.
• There is caution that portions of the revenue pipeline remain tied to early stage discussions for new campuses and hyperscaler relationships, which could introduce timing risk and execution uncertainty if negotiations or site development milestones slip.
• Some commentary flags the inherently lumpy nature of hyperscale deployment cycles and capital intensive buildouts, warning that delays in ramping new facilities or securing additional long term contracts could pressure near term growth expectations and lead to multiple compression.
• At higher share price levels following significant target hikes, skeptics question whether the market is already discounting a best case build and lease out scenario. This could leave limited room for missteps in construction timelines, financing costs, or customer concentration management.

What's in the News

• Completed the second 50 MW phase at Building 1 of the Polaris Forge 1 AI Factory Campus in Ellendale, bringing the facility to its full 100 MW critical IT load and marking completion of the first of three contracted buildings at the site, with total contracted revenue across Polaris Forge 1 and 2 now at $16 billion (Company announcement).
• Entered a 15 year lease with a U.S. based investment grade hyperscaler at the under construction Polaris Forge 2 campus near Harwood, North Dakota. The lease represents approximately $5 billion in contracted revenue for 200 MW of AI and HPC capacity and includes a first right of refusal on an additional 800 MW, bringing total leased capacity with two hyperscalers in North Dakota to 600 MW (Client announcement).
• Secured $50 million in new funding via a promissory note private placement led by Macquarie Equipment Capital Inc., with the note bearing interest at 8% per annum plus 1.50% per month and maturing upon acceleration of the loan or earlier specified events (Private placement filing).
• Shareholders approved a Certificate of Amendment increasing authorized common stock to 600,000,000 shares with a par value of $0.001 per share, expanding the company’s equity capacity for future financing and corporate purposes (Annual meeting and corporate filing).

Valuation Changes

• Fair Value Estimate remains unchanged at approximately $43.70 per share, indicating no material revision to the long term intrinsic value assessment.
• The Discount Rate has fallen slightly from about 9.23% to 9.17%, reflecting a marginally lower perceived risk profile or cost of capital.
• Revenue Growth is effectively unchanged at roughly 79.93%, signaling stable long term top line growth expectations.
• Net Profit Margin is stable at approximately 21.79%, with no meaningful adjustment to projected long run profitability.
• The Future P/E has edged down slightly from about 88.41x to 88.26x, implying a marginally lower valuation multiple applied to forward earnings.