Applied Digital Stock (APLD) Makes New High Ahead of Earnings

Applied Digital's stock (NASDAQ: APLD) is currently trading around $27.40 ahead of earnings, fresh off highs of $29.26, reflecting a an impressive 250% gain since the start of the year. A new high into the earnings release on Thursday, after market close, sets the stage for a potentially volatile trading period.

Analysts expect APLD to report an earnings per share (EPS) loss of $0.16 for the upcoming quarter, slightly wider than the $0.15 loss reported in the same quarter last year, indicating a modest decline in profitability. Revenue is projected to come in at $45.46 million, reflecting a significant 25.10% year-over-year decrease.

The bullish sentiment surrounding APLD is largely fueled by its aggressive expansion into the AI data center market. The company's strategic moves, including a major lease agreement expansion with CoreWeave and the announcement of the Polaris Forge 2 data center, have captured market attention.

The expanded agreement with CoreWeave, valued at approximately $11 billion, promises substantial future revenue, while the $3 billion Polaris Forge 2 project underscores APLD's commitment to meeting the surging demand for high-performance computing infrastructure.

Adding further credibility to APLD's ambitions, Macquarie Group's $5 billion investment in the company's AI data centers has solidified its financial position and provided crucial capital for expansion. This investment not only validates APLD's business model but also signals confidence from a major institutional player.

However, beneath the surface of these positive developments lie some critical financial realities. Despite the soaring stock price, APLD has reported a net loss of $233.68 million over the last 12 months, with a loss per share of $1.16. This stark contrast between market enthusiasm and financial performance raises questions about the company's ability to translate its ambitious plans into sustainable profitability. The upcoming earnings release will be crucial in determining whether APLD can begin to bridge this gap.

While the prevailing narrative focuses on APLD's potential in the AI data center market, a more cautious perspective is warranted. The company's heavy reliance on a few key contracts, particularly the CoreWeave agreement, introduces significant concentration risk. Any disruption to this relationship could have a severe impact on APLD's revenue and stock price.

Furthermore, the ambitious expansion plans require substantial capital and flawless execution. Delays, cost overruns, or technological challenges could derail these plans and undermine market confidence.

The upcoming earnings release will be a pivotal moment for APLD. but more as far as guidance than the actuals of today. With sales growth of 18.65% expected in the current FY26, the big focus will be on FY27 expectations for 91.19% in growth. The markets will be closely watching for signs that the company is making progress towards profitability and effectively managing its expansion projects. Any indication of slowing growth, rising costs, or execution challenges could trigger a pull back.