Why Applied Digital (APLD) Stock Is Trading Up Today

Applied Digital (APLD) shares surged nearly 50% after announcing two 15-year lease agreements with CoreWeave, an AI hyperscaler backed by Nvidia, to provide 250 MW of power for AI data centers in North Dakota. The deals are projected to generate approximately $7 billion in revenue for APLD over the contract term, signaling long-term financial stability and positioning the company favorably within the expanding AI-data-center market. Despite this positive news, investors should note APLD's historical volatility and recent weak Q1 2025 results, which revealed significant losses and uncertainty surrounding future growth.

Analysis

Applied Digital (APLD) shares surged significantly, closing up 48.5% at $10.10, after securing two 15-year lease agreements with Nvidia-backed AI hyperscaler CoreWeave. These contracts involve APLD providing 250 megawatts of power for CoreWeave's AI and high-performance computing infrastructure at its North Dakota data center campus and are anticipated to generate approximately $7 billion in revenue over the term, substantially enhancing long-term financial visibility and affirming APLD's position in the rapidly expanding AI data center sector. This positive development, however, is set against a backdrop of recent challenges, including weak first-quarter 2025 (fiscal Q3) results that significantly missed sales expectations, featured considerable cash burn due to poor profit margins, and disclosed plans to divest its Cloud Services unit alongside no definitive sales guidance. While fiscal Q3 revenue grew 22% year-over-year, driven by a more than 200% increase in cloud services sales, this segment shrank quarter-over-quarter, and hosting sales also declined. The stock's pronounced volatility, evidenced by 117 moves greater than 5% over the last year and a 30.8% drop following the recent weak earnings, remains a critical factor, even as the share price approaches its 52-week high. The CoreWeave deal represents a material positive catalyst, but its long-term benefits must be assessed in conjunction with these existing operational uncertainties and the company's ability to execute.

Key Decisions for Investors

• Investors should view the CoreWeave agreements as a significant positive catalyst, offering substantial long-term revenue visibility and validating Applied Digital's role in the AI infrastructure build-out.
• Despite the transformative potential of these contracts, careful consideration must be given to APLD's historical share price volatility, recent weak financial performance in fiscal Q3 2025, including high cash burn, and the strategic uncertainties related to the planned divestiture of its Cloud Services unit.
• Monitor the company's execution on the CoreWeave deployment, upcoming financial reports for improvements in profit margins and cash flow, and clarity on future sales guidance post-divestiture to assess if the current positive market re-rating is sustainable.