Applied Digital Shares Plunge 18% After Revenue Miss

Applied Digital, a Texas-based company specializing in bitcoin mining and data centers, experienced a significant drop in its share price on Tuesday. This decline followed the release of the company's quarterly results, which failed to meet the expectations set by analysts. The company reported revenue of $52.9 million for the quarter ending February 28, 2025, marking a 22% increase from the previous year. However, this figure fell short of the consensus estimate of $64.5 million, resulting in a nearly 18% miss.

Despite the revenue shortfall, Applied Digital reported a non-GAAP net loss of $0.08 per share, which was better than the expected $0.10 per-share loss. However, the adjusted EBITDA of $10 million was 41% lower than the anticipated $16.9 million, indicating ongoing margin pressure due to substantial infrastructure investments.

The company's Cloud Services unit was a significant contributor to the revenue miss, with a sharp sequential decline of 36% in revenue. This drop was attributed to a shift from single-tenant contracts to a multi-tenant, on-demand GPU model, which faced initial technical challenges. The company's board of directors approved a plan to sell the Cloud Services business entirely on April 10, aiming to refocus on its core high-performance computing (HPC) data center operations. This strategic move could potentially position Applied Digital as a real estate investment trust (REIT) in the future.

CEO Wes Cummins stated on the company’s earnings call that separating the Cloud Services business from its data center operations would better serve the long-term interests of shareholders. This decision reflects the company's commitment to streamlining its operations and focusing on areas with higher growth potential.