Is Applied Digital (APLD) Poised for a Buy Opportunity Ahead of Q4 Earnings?

The global AI and high-performance computing (HPC) infrastructure market is undergoing a seismic shift. With demand for AI workloads surging and traditional data centers struggling to keep pace, companies like Applied Digital (APLD) are redefining the landscape. As the firm prepares to report its Q4 2025 earnings, investors are scrutinizing whether its strategic pivot, operational momentum, and market positioning justify a long-term buy case.

Strategic Shift: From Crypto Hosting to AI-First Infrastructure

Applied Digital's transformation from a crypto hosting provider to an AI-focused infrastructure leader is central to its value proposition. In 2024, the company began decommissioning legacy crypto assets and repurposing its Ellendale, North Dakota campus into a purpose-built HPC hub. This 400 MW facility, now rebranded as Polaris Forge 01, is a cornerstone of APLD's vision.

The 15-year, $7 billion lease agreement with CoreWeave—a leading AI hyperscaler—has anchored this transition. CoreWeave's access to 250 MW of critical IT load at Ellendale, with options for an additional 150 MW, ensures APLD's revenue runway is robust. This partnership locks in $467 million in annualized revenue, a critical tailwind in a capital-intensive sector.

Meanwhile, a $5 billion equity facility with Macquarie Asset Management (MAM) has provided APLD with the financial flexibility to scale. MAM's investment includes up to $900 million for the Ellendale campus and $4.1 billion for future HPC projects, allowing APLD to retain 85% ownership in its assets. This structure minimizes shareholder dilution while accelerating development timelines.

Operational Momentum: Execution on the Ground

APLD's Q3 2025 results underscore its accelerating progress. The company reported $52.9 million in revenue, a 22% year-over-year increase, driven by its Cloud Services and HPC Hosting segments. Notably, the Cloud Services Business—which supports AI and machine learning—generated $17.8 million in Q3, a 220% surge from 2024.

Key operational milestones include:
- Energization of the Ellendale main substation transformer, a critical step in enabling high-density AI workloads.
- Construction of the first 100 MW facility, with a second 150 MW building under development and a third 150 MW unit in planning.
- Successful negotiations with multiple hyperscalers, with 400 MW of capacity under active lease discussions.

The appointment of Laura Laltrello as COO further strengthens leadership, signaling APLD's commitment to operational excellence.

Market Positioning: Navigating a $87.31B Opportunity

The HPC market is projected to grow at a 7.2% CAGR, reaching $87.31 billion by 2030, driven by AI's insatiable demand for compute power. APLD's Ellendale campus, with its liquid-cooled infrastructure and rack densities exceeding 100 kW, is uniquely positioned to meet this demand.

Competitive advantages include:
- Cost efficiency: Liquid cooling reduces energy consumption, a critical edge as power costs rise.
- Strategic partnerships: Collaborations with CoreWeave, NVIDIA, and Macquarie validate APLD's infrastructure.
- Scalability: The campus's potential to expand to 1 gigawatt aligns with hyperscalers' multiyear growth plans.

However, APLD faces stiff competition. CoreWeave (CRWV), a direct rival, operates 33 AI data centers and has a $25.9 billion backlog, including a $11.2 billion contract with OpenAI. Yet, APLD's institutional backing and proprietary technology (e.g., liquid cooling) give it a differentiated edge.

Risks and Realities

APLD's path to profitability is not without hurdles. The company reported a $36.1 million net loss in Q3 2025, driven by interest expenses and debt restructuring costs. Its $689.1 million debt load and 42.8 net debt-to-EBITDA ratio raise concerns about liquidity.

Moreover, the self-amortizing model—where capex is funded by multiyear leases—requires flawless execution. Delays in Ellendale's construction or tenant defaults could derail timelines. The broader AI market's volatility, driven by algorithmic efficiency gains and regulatory shifts, adds another layer of uncertainty.

Investment Thesis: A Buy for the Patient Investor

APLD's forward sales multiple of 8.37 suggests the market is pricing in its AI infrastructure potential. While the stock remains unprofitable, the $7 billion CoreWeave lease and $5 billion Macquarie financing provide a clear path to cash flow breakeven by mid-2026.

For investors with a 3–5 year horizon, APLD represents a compelling long-term play. The company's ability to secure high-margin AI contracts, coupled with its strategic location in low-cost energy regions, positions it to outperform as the HPC/AI market consolidates.

However, near-term volatility is inevitable. APLD's debt-heavy balance sheet and competition from CoreWeave and traditional REITs mean the stock will likely remain range-bound until Q4 2025 earnings confirm progress on key metrics:
1. Ellendale's construction timeline
2. Cloud Services revenue growth
3. Debt reduction initiatives

Conclusion

Applied Digital's transformation is well underway, but execution will make or break its long-term prospects. The Q4 2025 earnings report will be a pivotal moment, offering insights into whether the company can deliver on its AI infrastructure vision. For those willing to navigate the risks, APLD's strategic shift and market positioning in a $87.31 billion HPC/AI sector warrant serious consideration.