Applied Digital (APLD) enters fiscal Q1 with a formidable AI infrastructure business and one of the largest contracted data center pipelines among smaller publicly traded infrastructure developers. With Polaris Forge 1’s recently ramped capacity, the focus has been on whether it is transforming revenue-generating contracts and improving the company’s net operating income.

Applied Digital has transformed its investment case in record time. The company is no longer a former crypto hoster, trying to convince the market of an AI transition. The company now has 1.4 GW of contracted critical IT load across five AI campuses, and approximately $36 billion of base-term contracted lease revenue, and 250 MW of Polaris Forge 1 operational.

Another 75 MW Is Now Operational

Applied Digital announced on October 2 that an additional 75 MW of IT load has reached Ready for Service at Polaris Forge 1 in North Dakota. With this announcement, Polaris Forge 1 is fully leased and contracted to deliver 400 MW upon completion of the project.

This development is significant because it marks the transition of the company’s focus from the promise of development to the presence of operating assets. Each data hall that is completed gives Applied Digital an opportunity to shift its emphasis away from development and construction to operational revenue and earnings.

Polaris Forge 1 has 400 MW of IT load under contract, representing approximately $11 billion of base term contracts over about 15 years. The next phase is focusing on the construction and delivery of the remaining 150 MW of already-contracted IT load. The next phase will demonstrate the conversion of contracted IT Load to operational and recurring EBITDA.

The Contracted Portfolio Provides Exceptional Visibility

Applied Digital’s contracted portfolio includes about 5 AI Factory campuses with a total of around 1.4 GW of critical IT load. Polaris Forge 1 accounts for 400 MW and approximately $11 billion of base-term contracted revenue, Polaris Forge 2 accounts for 200 MW and approximately $5 billion, Delta Forge 1 accounts for 300 MW and approximately $7.5 billion, and Delta Forge 2 accounts for 210 MW and approximately $5.2 billion. Polaris Forge 3 accounts for 300 MW and approximately $7.5 billion, bringing total base-term contracted revenue to approximately $36.2 billion across five campuses.

The take-or-pay leases have approximately 15-year base terms, with renewal options. About 70% of the contracted revenue is supported by U.S.-based investment-grade hyperscalers, and CoreWeave remains the primary customer at Polaris Forge 1. Including all renewal options, management has stated that the total portfolio could generate approximately $86 billion of revenue.

Because of the concentration with CoreWeave, customer concentration was previously one of the largest risks to the company, especially considering the company must finance and construct the campuses for the leases. The addition of leases with investment-grade hyperscalers improves the quality of the contracted backlog, even though the company must build the campuses.

Q4 Showed How Fast the Financial Profile Is Changing

Applied Digital reported fiscal Q4 2026 revenue of $258.7 million, a 407% increase from the year prior. The company stated that adjusted revenue was $240.4 million, adjusted EBITDA was $42.4 million, and Q4 net operating income was $39.9 million. Revenue for the full fiscal year increased 167% to $611.3 million and adjusted EBITDA increased to $107.2 million.

In the fiscal year, Applied Digital ramped up its cloud and data center business, and according to the company data, the majority of Q4 revenue was from tenant fit-out work. For Applied Digital, the most important revenue is from data center rental. The quarterly data from fit-out work creates a volatile revenue stream.

When thinking about fiscal Q1, the company is growing its data center capacity, which means that data center rental revenue should increase. A lower headline revenue number for fiscal Q1 compared to fiscal Q4 would not imply weakening demand if the mix shift was from fit-out revenue to data center rental revenue.

October 7 Earnings Will Test the Operating Model

Results for Applied Digital's fiscal Q1 2027 will be released on October 7 after market close. Management will host a call at 5:00 p.m. ET to discuss the results. Current estimates for the quarter are approximately $116 million in revenue and a loss of about $0.30 per share. I don't think these should be considered the most important figures for the quarter.

Rental revenues and NOI will be important, as will operational megawatts and delivery schedules. I expect the newly activated 75 MW at Polaris Forge 1 will improve recurring economics, but it is management's obligation to keep the remaining 150 MW on schedule.

I expect management to address Polaris Forge 2 and Delta Forge 1, as well as provide and update on the funding and timing of the construction of the projects. Because the model is so capital intensive, it is best to look at the operating results and funding/construction schedule in unison.

Financing Remains the Biggest Fundamental Risk

Applied Digital has a large market opportunity, but large capital requirements. Management has previously estimated that anticipated capital expenditures would be between $11 million and $13 million per MW of a major AI campus. Each campus would require multiple billions of dollars in investment before long-term lease cash flows can fully develop.

As a result, the company has relied on a variety of project financing, preferred equity, and secured debt. Large financing facilities and senior secured notes have been used to fund campus development. Revolving credit capacity provides additional flexibility.

This model can produce significant equity value if long-term contracted rental income exceeds financing and construction costs. The risk is that delays, cost overruns, refinancing pressure, and higher interest expense reduce project returns before the revenue base fully ramps.

Site-Level NOI Is the Metric That Could Transform APLD

Insight into why investors underwrite large projects is available in Applied Digital’s (APLD) investor materials. Management has previously stated expected site NOI margins of about 88% plus or minus 3% at Polaris Forge 1, about 86% at Polaris Forge 2, and about 85% at Delta Forge 1. Those are non-GAAP management assumptions as opposed to realized consolidated margins.

Positive cash flow and strong site level NOI, together with long-term take-or-pay contracts, create the potential for excellent cash generation once the campuses are fully developed. The challenge is in transforming the future billions of dollars of contracted lease value into cash flow.

Management’s focus on contracted megawatts as opposed to EPS is appropriate. Each hall that is ready to serve reduces execution risk. As more halls come online, the long-term revenue backlog will be more fully realized.

Applied Digital Technical Analysis: APLD Holds $24 Support but Trend Remains Under Pressure

Applied Digital closed at around $24.70 on October 5, down from its October 2 high of $26.85. I am interested in this stock as it is attempting to stabilize above the $24 region, but the daily trend is still down as the stock is trading below its 20, 50 and 200 day moving averages. Because of this, the daily trend is still down and the current setup is more of a consolidation than a confirmed bullish reversal.

Applied Digital Stock Price Chart - Source: Tradingview

Relative Strength Index (RSI) is around 48, which is neutral, and shows that the oversold conditions have improved, but momentum is still with the sellers. First support is between $24.07 and $23.42. A break below this area would bring the next support zone down around $22.66 and increase the risk of a move lower to the bottom of the recent trading range.

The first resistance is between $25.48 and $26.26. A move above this area would improve the short term outlook and bring $26.89 and the $27.50 area into range. Until that happens, I would consider upside moves as part of the larger, more-bearish, daily trend.

My base case is neutral-to-bearish while APLD trades below $26.26, especially with the October 7th earnings report.

Key Levels

• Latest completed close: $24.70

• Major support levels: $24.07, $23.42, then $22.66

• Major resistance levels: $25.48, $26.26, then $26.89 to $27.50

• RSI: approximately 48, neutral

• Recovery trigger: sustained move above $26.26

• Breakdown trigger: sustained break below $23.42

Why is Applied Digital stock in focus now?

Another 75 MW reached Ready for Service at Polaris Forge 1 on October 2, bringing the total to 250 MW just a few days before the release of fiscal Q1 2027 results. The company has approximately 1.4 GW of contracted critical IT load and approximately $36.2 billion of base-term contracted lease revenue from five AI campuses.

What level confirms a stronger APLD recovery?

A move above $26.26 would reflect that the trend has turned in favor of the bulls. A close below $23.42, however, would maintain the bearish trend and expand the possible downside to $22.66.

Bottom Line

Unlike last year, Applied Digital will report October 2026 earnings with more concrete AI infrastructure. Polaris Forge 1 has 250 MW, the contracted portfolio is approximately 1.4 GW, and the long-term base-term lease revenue is approximately $36.2 billion. The investment case is hinging more on execution.

The largest risk remains execution. While construction of the infrastructure may be funded, Applied Digital still needs to construct a large amount of the contracted AI Infrastructure to turn most of the contracted revenue into recurring cash flow. Technically, APLD remains under pressure below $26.26, but the next earnings report could improve the case if newly constructed capacity starts to produce rental income and NOI without a deterioration in leverage or project timeline.

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