APLD Surges 101% in a Year: Should You Buy, Sell or Hold the Stock?

APLD’s One-Year Price Performance

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APLD's Heavy Capital Needs Add Financial Risk

Applied Digital’s AI/HPC data-center strategy is highly capital-intensive. It requires substantial upfront expenditure on land, power infrastructure, buildings, cooling systems, electrical equipment and other facility developments — investments that must be made well before the facilities generate full revenues. The company spent approximately $3.04 billion on capital expenditures in fiscal 2026, of which nearly $2.99 billion was attributable to the HPC Hosting Business, compared with $976.5 million in the prior year. Management expects significant investments in property and equipment to continue through fiscal 2027 as construction progresses across its HPC campuses.

The scale of these investments means APLD must rely on external financing to support its expansion, including debt, equity and project-level funding. The company has stated that it has historically relied on equity and debt-based financing. As of May 31, 2026, APLD had $4.96 billion of net long-term debt, including $2.35 billion of 9.25% senior secured notes, $2.15 billion of 6.75% senior secured notes and $300 million of bridge financing. Its contractual obligations also included approximately $5.31 billion of debt principal and $1.78 billion of estimated interest payments. Although APLD has raised substantial project financing, management noted that quarterly CapEx was expected to reach roughly $600 million and increase as new campuses enter more advanced construction stages, highlighting the continuing need for financing.

From an investor perspective, the key concern is that future growth remains closely tied to APLD's ability to access capital continuously at reasonable costs. The company has already used multiple funding channels, including senior secured debt, preferred equity and its partnership with Macquarie, which had provided $1.8 billion under the HPC investment agreement by May 31, 2026. While these arrangements ease near-term funding pressure, a prolonged deterioration in debt or equity markets, higher interest rates, weaker cash generation or delays in project completion could make future financing more expensive or harder to obtain.

APLD's Expansion Faces Growing Competitive Pressure

Applied Digital faces intensifying competition in the AI and HPC data-center market as operators compete for power, interconnections, sites, hyperscale customers and capital. Established players such as Digital Realty Trust DLR and Equinix EQIX have significant infrastructure, customer relationships and financial resources, while IREN Limited IREN and other power-advantaged developers are expanding into HPC. Digital Realty Trust and Equinix could leverage their established footprints to compete aggressively for customers and strategic locations, while IREN and similar developers may intensify competition for power and sites.

The growing competitive landscape could raise development costs, pressure lease pricing and constrain returns on capital. The risk becomes more significant as APLD scales to 1.41 GW of contracted capacity across five campuses and markets another 1.7 GW. Although APLD views low-cost power and timely execution as competitive advantages, maintaining these strengths could become increasingly difficult as Digital Realty Trust, Equinix and IREN Limited pursue the same AI infrastructure opportunity. Ultimately, stronger competition could challenge APLD’s ability to sustain attractive economics while rapidly expanding its capital-intensive platform.

Applied Digital's trading below both the 50- and 200-day moving averages signals a bearish trend, potentially limiting near-term momentum for the stock.

APLD Trades Below 50 & 200 Day SMA

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APLD’s Earnings Estimates Trend Lower

The Zacks Consensus Estimate for Applied Digital’s first-quarter fiscal 2026 loss is currently pegged at 22 cents per share, compared with a loss of 11 cents reported in the year-ago quarter.

For fiscal 2027, the Zacks Consensus Estimate currently calls for a loss of $1.09 per share, with the estimate widening by 9 cents over the past 30 days. This compares with a loss of 91 cents reported for fiscal 2026, highlighting continued pressure on APLD’s earnings outlook.

Earnings Estimates Chart

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APLD Shares Are Overvalued

Applied Digital shares are currently overvalued, as suggested by its Value Score of F.

The stock currently trades at a 12-month price-to-sales (P/S) multiple of 9.01X, significantly above the industry average of 2.58X. Among peers, Digital Realty Trust and Equinix also trade at elevated P/S multiples of 9.43X and 9.30X, respectively. However, IREN Limited appears relatively more attractively valued, with a P/S multiple of 4.12X. APLD's elevated valuation could increase downside risk if growth slows or execution falters.

APLD’s P/S F12M Ratio

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Here’s Why You Should Stay Away From APLD Stock

APLD’s strong one-year rally does not outweigh its mounting risks. Heavy capital needs, high debt, competitive pressure, declining earnings estimates, bearish technical trends and an expensive valuation make the stock less attractive at current levels. Therefore, this Zacks Rank #4 (Sell) company is not a preferred investment right now, supporting the case for investors to stay away from the stock.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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