Key Takeaways
- Applied Digital’s fiscal fourth quarter delivered the headline numbers investors wanted: revenue up 407% to $258.7 million, adjusted EBITDA swinging to $42.4 million from $1 million, and contracted lease value tripling to $36 billion.
- Total debt quadrupled from $700 million to $5.1 billion in nine months, while free cash flow burn hit $1.16 billion in that same record quarter, the worst single quarter on record and the fourth straight quarter of accelerating losses.
- APLD stock has lost roughly a quarter of its value from an early-May peak near $50, with most of that decline happening before the July 27 earnings call, not after it.
- Management has guided to roughly $600 million of capital spending for the next quarter alone, even as only a fraction of the company’s 1.41 gigawatts of contracted capacity is actually generating revenue today.
- Nearly $20 billion of the $36 billion total backlog, added in this single quarter, is tied to one hyperscaler counterparty.
A $36 Billion Backlog Built on a $5 Billion Debt Bill
Applied Digital’s (APLD) Chairman and CEO Wes Cummins called the quarter “transformational,” and the numbers back that framing up on paper. Total contracted lease value jumped from roughly $16 billion to $36 billion in three months, spread across five campuses and 1.41 gigawatts of contracted critical IT load. Three of those leases, worth close to $20 billion combined, were signed with what the company describes only as “the same high investment-grade hyperscaler.”
Behind that backlog sits an aggressive financing push. In the space of about four months, Applied Digital closed $2.15 billion of 6.75% senior secured notes for its Polaris Forge 2 campus, a $300 million bridge facility led by Goldman Sachs, a revolving credit line of up to $550 million, and $1.59 billion of 7% senior secured notes for a fourth building at Polaris Forge 1. CFO Saidal Mohmand said the newest notes priced 225 basis points inside the company’s first placement, which came at roughly 9.25%.
That falling cost of capital is a genuine achievement. It does not change what TIKR’s own financial data shows sitting underneath it.
Applied Digital’s total debt stood at $700 million as of August 2025. By May 2026 it had reached $5.1 billion, a more than sevenfold increase in nine months.
See Applied Digital’s full debt and capital structure history on TIKR.
Why a Positive EBITDA Print Still Leaves the Cash Math Unresolved
Here is the disconnect worth sitting with. Even as total debt climbed past $5 billion, Applied Digital’s reported interest expense barely moved, coming in at just $10.7 million for the quarter that included the bulk of this year’s borrowing.
That gap is consistent with standard accounting treatment for a company mid-construction. Interest on debt used to build qualifying long-lived assets typically gets capitalized into the cost of those assets rather than expensed through the income statement until the asset is placed in service.
That treatment is not improper. It does mean the adjusted EBITDA and adjusted net income figures management highlighted are being compared against an interest expense line that does not yet reflect the full economic cost of $5 billion in debt.
Free cash flow does not have that blind spot, and it tells a starker story. Applied Digital burned $191 million in the quarter ended May 2025. That burn widened to $331 million, then $568 million, then $720 million, and reached $1.16 billion in the quarter just reported. Cash burn has worsened every single quarter for a full year, even as revenue and EBITDA both inflected higher.
Applied Digital ended the quarter with $4.2 billion in cash against that $5 billion in debt, so the near-term liquidity cushion is real. At the current burn rate, though, that cushion covers roughly three to four quarters before the company needs another round of financing, on top of the roughly $600 million in capital spending management has already guided for the next quarter alone.
APLD Stock Started Falling Before the Earnings Did
Applied Digital shares peaked near $50 in early May 2026, driven by a run of hyperscaler lease announcements including the Polaris Forge 2 deal and a 15-year agreement that reportedly pushed the stock up almost 24% in a single session. By late June, before the July 27 earnings call, the stock had fallen back toward $28, giving up most of that spring rally on its own.
The blowout fourth-quarter print produced only a brief bounce. Shares rallied again in mid-August alongside a broader AI-infrastructure rally that also lifted CoreWeave and Super Micro Computer, touching the low $30s around the same week a company director sold 75,000 shares at $31.15. That rally faded too. APLD closed at $26.42 on September 11, down 7% over six months even as revenue, EBITDA, and the contracted backlog all moved sharply higher.
Sell-side price targets have not moved with the stock. B. Riley raised its target to $75 following the quarter, nearly three times where shares now trade, underscoring how far apart Wall Street’s read on the backlog and the market’s actual pricing of the stock have drifted.
Part of that gap may reflect concentration risk the backlog figure obscures. Close to $20 billion of the $36 billion in total contracted value, added in this one quarter, sits with a single hyperscaler customer. Management calls that customer high investment-grade, and the credit quality is a genuine mitigant, but the durability of more than half the company’s backlog now rests on the continued build-out appetite of one counterparty.
The Real Test Isn’t the Backlog. It’s Whether Cash Burn Peaks Before the Balance Sheet Runs Thin
Applied Digital’s accounting inflection is real. Revenue is growing fast, EBITDA has turned positive, and management’s track record of delivering campuses on time gives its construction guidance more credibility than most infrastructure peers can claim.
None of that yet makes this a self-funding business. Free cash flow burn has widened every quarter for a year and hit a record in the same quarter the company points to as proof its model works, because revenue recognition is running well behind the capital already committed to five campuses under construction. Only a fraction of the 1.41 gigawatts under contract is actually online and earning rent today.
The unresolved question for shareholders is whether the net operating income ramping up from newly delivered capacity, roughly 175 megawatts live so far against more than a gigawatt still being built, starts closing that cash gap before the $4.2 billion cash buffer and Applied Digital’s continued access to debt and joint-venture equity markets get tested. A slowdown in hyperscaler capital spending, a widening in credit spreads, or a stumble from the single counterparty behind $20 billion of this year’s new leases would each pressure that timeline in a different way.
The next disclosure that will matter most is not another lease announcement. It is whether free cash flow burn decelerates in the quarters ahead as this year’s newly delivered megawatts start contributing revenue, and how much of the next $600 million in guided capital spending gets funded from the existing cash pile rather than another trip to the debt markets.
Should You Invest in Applied Digital Corporation?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
