Is Applied Digital (APLD) Stock a Buy in 2026 Amid a Major Business Restructuring?

Applied Digital (APLD) has emerged as a focal point in the AI infrastructure sector, driven by its aggressive expansion in high-density data centers and a strategic pivot to spin off its cloud computing business. As the company navigates a transformative 2026, investors must weigh its lofty valuation, the implications of the ChronoScale merger, and its positioning in a rapidly growing AI data center market.

Valuation: A Premium for Long-Term Visibility

APLD's current valuation, while steep, reflects its unique access to long-term contracted revenue. The company's price-to-sales (P/S) ratio stands at 42x as of January 2026 according to its financial report, far exceeding the industry average of 3.35x and even outpacing peers like Riot Platforms (7.79x) and Equinix (7.37x) as reported by financial analysts. This premium is justified by its $7 billion in contracted revenue from a 15-year lease with CoreWeave, a major AI hyperscaler according to earnings call transcripts, and a projected $16 billion in AI-related backlog as cited by market reports.

However, APLD's financials remain unprofitable. Q4 2025 results showed a net loss of $26.6 million, or $0.12 per share, despite 41% year-over-year revenue growth to $38.0 million. Adjusted EBITDA of $1.0 million highlights operational challenges, though the company outperformed earnings expectations by reporting an adjusted net loss of just $0.03 per share versus a forecasted $0.14. Analysts project APLD's fiscal 2026 revenue to grow 37.9% to $297.3 million as projected by market analysis, but profitability remains elusive. The question for investors is whether the market's optimism about long-term cash flows is warranted.

Strategic Spin-Off: ChronoScale and the AI Infrastructure Play

The most significant development in APLD's 2025-2026 restructuring is the proposed merger of its cloud business with EKSO Bionics to form ChronoScale Corporation. This new entity, expected to close in H1 2026, will focus on GPU-accelerated infrastructure for AI training and inference, leveraging APLD's existing deployment of NVIDIA H100 GPUs as announced in the company's press release. Applied Digital will retain 97% ownership of ChronoScale, ensuring it captures upside from the spin-off while allowing both businesses to scale independently as detailed in market analysis.

The strategic rationale is compelling. By separating its core data center operations from the cloud business, APLD can streamline its focus on developing and leasing high-density AI campuses. ChronoScale, meanwhile, will target a niche market with high margins, capitalizing on the growing demand for specialized AI infrastructure as stated in company documents. As of August 2025, the cloud business had generated $75.2 million in twelve-month revenue according to financial disclosures, suggesting strong foundational metrics. The merger also aligns with broader industry trends, as hyperscalers increasingly seek purpose-built solutions rather than generic cloud offerings as reported by industry analysts.

Long-Term Growth: A $219 GW Market and APLD's Position

The AI data center market is poised for explosive growth. By 2030, global data center capacity is projected to reach 219 gigawatts (GW), with AI workloads accounting for 44 GW in 2026 alone as projected by market research. Hyperscalers like Microsoft, Amazon, and Meta are expected to invest over $500 billion in AI-related capital expenditures by 2026 according to industry forecasts, creating a fertile environment for APLD's high-density, custom-built facilities.

APLD's Polaris Forge 2 campus in North Dakota, a $3 billion project expected to add 280 MW of capacity, underscores its ambition to capture this growth. Once fully operational, the campus could generate $500 million in annual net operating income as projected by market analysts, a figure that could justify its 33x forward P/S ratio. Additionally, the company's existing $11 billion lease with CoreWeave for 400 MW of capacity as reported by financial data sources provides a stable revenue stream, reducing execution risk in a capital-intensive industry.

Risks and Considerations

While APLD's prospects are bright, risks persist. Its high valuation hinges on the successful execution of multi-year projects and the assumption that AI demand will continue to outpace supply. Delays in Polaris Forge 2's development or a slowdown in hyperscaler spending could pressure the stock. Furthermore, the spin-off of ChronoScale introduces complexity, as the new entity must establish its own brand identity and operational efficiency.

Conclusion: A High-Risk, High-Reward Proposition

For investors with a long-term horizon, APLD presents an intriguing case. Its strategic restructuring via ChronoScale, combined with a dominant position in the AI data center market, positions it to benefit from secular trends. However, the stock's valuation demands precision in execution. If APLD can deliver on its contracted revenue and profitability timelines, the 42x P/S ratio may prove justified. For now, it remains a speculative buy, best suited for those comfortable with volatility in pursuit of outsized gains.