Investing№ 78Nasdaq: APLD
Applied Digital
Applied Digital builds data centres and leases them for 15 years to CoreWeave and hyperscalers; $35.7B of rent is contracted, but debt and Macquarie’s preferred stock stand ahead of the shares.
Updated Fiscal year ends 31 May37 min readPedrum Shokouhi
Can be disrupted
Research, not investment advice. Figures as of .
Key numbers
- Revenue$872M (calculated)TTM to 31 Aug 2026; $342M in the latest quarter, $184M of it fit-out billings [2][3]
- Rent contracted$35.7B (reported)Minimum payments over the 15-year base terms, 1,410 MW [2]
- Earning rent250 MW (reported)Live at 1 October 2026, of 1,410 MW leased [4]
- Debt$6.7B (reported)Face value at 31 Aug 2026, plus $2.0B of Macquarie preferred [2]
- Stock pay$271M (calculated)TTM; $66.5M in the latest quarter [2][3]
- Share price−64% (calculated)From the $49.65 close on 28 May to $17.82 [1]
The answer
- Applied Digital builds data centres in North Dakota, Louisiana and Alabama and leases them for 15 years to CoreWeave and to hyperscalers, with $35.7B of rent contracted; it has spent most of the last year raising money, taking on $6.4B of debt and $2.0B of Macquarie preferred stock, and in the twelve months to August it made $872M of revenue and an operating loss of $289M (calculated).235
- I value the common at $1.50 a share, in a range of $0 to $8.34, because after the lenders, the Macquarie preferred and the cost of finishing the buildings the shareholders get only a thin slice of the rent, and most of what they get arrives after 2040 (estimate).26
- At $17.82 the price is 1,084% above my base value, and it fits a different reading: that the finished campuses are worth about 7.1% of their income after overhead, which is higher than any of my three cases allows; my bear value is zero, so I set no margin-of-safety price above $0 (estimate).1
Six questions, one line each
- Why
- Hyperscalers and CoreWeave need powered, built space faster than they can build it, and Applied Digital has signed 1,410 MW of 15-year, take-or-pay, non-cancellable leases in under 18 months.34 →
- The moat
- Thin: power, land and speed are what it sells, and its newest leases pay about 9% less rent per megawatt than the first.3 →
- The advantage
- A repeatable 150 MW design built in 14 to 18 months, with equipment bought early, and a spread of about 11% rent income on cost against a 7% to 9% cost of lending (calculated).362 →
- Management
- Wes Cummins, the founder and chief executive, was reported $189M of pay for FY2026, mostly stock awards tied to share-price hurdles of $50 to $100, owns 7.8% and has 17.6M of his shares pledged for a bank credit line.7 →
The business
Applied Digital owns buildings full of electrical and cooling equipment, and rents them to companies that fill them with computers. The tenants pay per megawatt of power the building can deliver to the computers, for 15 years, whether or not they use it. The company calls the buildings AI factories. It designs them, builds them, owns the land and operates them, from Dallas, Texas.3 Fiscal years end on 31 May, so “FY2026” means June 2025 to May 2026.
It began as a bitcoin-hosting business, Applied Blockchain, in 2021.9 It still runs two such sites in North Dakota, 106 MW at Jamestown and 180 MW at Ellendale, for one customer whose contract had about a year and a half left in May 2026.3 Its April investor deck names that customer as Marathon Digital.6 In the first quarter of FY2027 the sites earned a segment profit of $13.3M on $37.8M of revenue.2 Everything else it has done since 2023 points the other way. A second business, the cloud service, rented out graphics processors; in May 2026 it was merged into a listed shell called ChronoScale, in which Applied Digital kept about 96%.2
What it has signed
As of 31 August it had leases for about 1,410 MW across five campuses, worth about $36B of rent over the 15-year base terms, or about $86B if every renewal option were used.4 The leases are take-or-pay: the tenant owes the rent whether it uses the space, and ending early means paying the full remaining value.3 The 10-Q gives a schedule of minimum payments: $468M in FY2027, $1,580M in FY2028, then $2,361M and $2,371M a year from FY2029, and $26.6B after FY2031, in total $35.7B (reported).2
The five leased campuses
Megawatts are critical IT load, the power available to the tenant’s computers.
| Campus | Tenant | Megawatts | Contracted rent, 15-year base term | Rent per megawatt-year | Delivery |
|---|---|---|---|---|---|
| Polaris Forge 1, North Dakota (reported) | CoreWeave | 400 | $11.0B | $1.83M | Oct 2025 to mid-2027 |
| Polaris Forge 2, North Dakota (reported) | Investment-grade hyperscaler | 200 | $5.0B | $1.67M | Late 2026 to early 2027 |
| Polaris Forge 3, North Dakota (reported) | High investment-grade hyperscaler | 300 | $7.5B | $1.67M | Late 2027 to late 2028 |
| Delta Forge 1, Louisiana (reported) | High investment-grade hyperscaler | 300 | $7.5B | $1.67M | First half 2027 to early 2028 |
| Delta Forge 2, Alabama (reported) | High investment-grade hyperscaler | 210 | $5.2B | $1.65M | First half 2028 |
| Total (calculated) | 1,410 | $36.2B | $1.71M |
Only the first campus has a named tenant. Polaris Forge 1, 400 MW, is leased to CoreWeave in three buildings. The first 100 MW opened in October 2025. A second building of 150 MW was handed over in two halves, on 1 July and 1 October 2026, so 250 MW is live.4 The third, 150 MW, is under construction. In March 2026, CoreWeave restructured two of the leases: the term on two of the four data halls in one lease was suspended and re-let to a new CoreWeave subsidiary on the same terms, and the other building’s lease was assigned to that subsidiary. CoreWeave added springing guarantees and agreed to post a $50M letter of credit.3 The company describes this as an improvement in credit quality following a rating of A3 on a CoreWeave refinancing.10 I could not tell what makes the guarantees “spring”, because the exhibits set that out and I did not read them.
What the first quarter looked like
Revenue for the quarter to 31 August was $341.9M, up 322%. Only $65.8M of it was base rent. $183.5M was tenant fit-out work that Applied Digital organises and bills to the tenant, against $176.1M of cost, and $13.3M was costs passed back to the tenant.2 The company’s own measure of the rental business, net operating income, was $58.8M, an 89% margin. Adjusted EBITDA was $64.4M. The reported operating loss was $62.4M, after $66.5M of stock pay and $41.9M of depreciation.2 So this is a business that has just started to earn rent, and for now most of its revenue is pass-through.
Revenue and operating loss
US$ millions, fiscal years ending 31 May
- Revenue, TTM $872M
- Operating loss, TTM −$289M
Show the numbers
| FY22 | FY23 | FY24 | FY25 | FY26 | TTM Aug 2026 | |
|---|---|---|---|---|---|---|
| Revenue (reported) | $9M | $55M | $166M | $229M | $611M | $872M |
| Operating income (reported) | −$21M | −$43M | −$98M | −$72M | −$236M | −$289M |
What is still to build
About 1,160 MW are not yet earning rent (calculated).4 The campuses are in two groups. Polaris Forge 1 and 2, 600 MW, sit inside a subsidiary, TopCo 2, which carries $5.9B of debt and $2.0B of Macquarie preferred stock, and held $2.9B of cash and $0.5B of restricted cash at 31 August.2 Delta Forge 1 and 2 and Polaris Forge 3, 810 MW, sit outside it, and I found no project financing yet for them in the filings. Management’s deck puts the cost at $11M to $13M a megawatt.6 Applied Digital also reports an active pipeline of over 3 GW and a further 5 GW of earlier discussions.3 In October it signed an agreement for up to about 1 GW of potential power in Finland, its first site outside the United States.4
Power, and a related company
On 4 October 2026 it signed a 15-year power purchase agreement with Base Electron for the output of a planned 1,200 MW gas plant in North Dakota, to supply Polaris Forge 3. It pays fixed monthly amounts based on contract capacity, with a credit support agreement, and Base Electron can cancel it if the plant has not reached financial close by 31 March 2027.2 Base Electron is a related party. The proxy says it is owned and managed by certain officers and directors of Applied Digital, including Wes Cummins, Jason Zhang and Richard Nottenburg, acting in their own right, and Applied Digital owns about 10%.7 Applied Digital has also lent it $59M. The board set up a committee of directors to review the transaction.27
The moat
I ask two questions. Could a rival take the tenant at the same price, and would the tenant bother? For a landlord whose tenants are among the largest companies in the world, the second matters more than the first.
What is hard to copy
Power. The company says getting power and a grid connection ahead of demand is the main limit on new capacity, and that this is where it differs from most rivals.3 I can check part of this. It holds sites in North Dakota, where the deck says electricity costs about 24% less than the national average and there is surplus generation, and it has a gas plant in prospect through a company its leaders partly own.62 A tenant that needs 300 MW by 2028 cannot easily get that anywhere. That is real.
Speed and procurement are the second item. It says it can build about 150 MW in 14 to 18 months, and that it bought electrical equipment from ABB, cooling from BASX and generators from Caterpillar in bulk before shortages.3 The chief executive said on a podcast in January that locking in the supply chain 18 to 24 months earlier was a major advantage.12 The record so far supports him: the first 100 MW opened in October 2025, the 150 MW building in two steps in 2026, against the 2H 2025 and 2H 2026 windows given a year earlier.34 Three buildings is a short record.
What is not
The rent. The first campus pays $1.83M per megawatt-year. The three newest campuses pay $1.67M, and the latest, Delta Forge 2, $1.65M (calculated).3 That is about 9% less, in a year when the company says power is the gating factor.4 A seller with a scarce product usually raises the price. The tenants are few and large: three customers in the first quarter were 56%, 21% and 11% of revenue.2 The 10-K lists IREN, Cipher, TeraWulf, Hut 8, Riot, CleanSpark, Core Scientific, Galaxy and others as rivals, as well as Digital Realty and Equinix and the hyperscalers building their own.3 Several of the bitcoin hosts on that list are trying to do what Applied Digital did.
The fall since 28 May, against others
Percent change in closing price, 28 May to 30 October 2026, shown from worst to best
- Applied Digital −64%
Show the numbers
| 28 May close | 30 Oct close | Change | |
|---|---|---|---|
| Cipher Digital (reported) | $24.59 | $7.29 | −70.4% |
| Applied Digital (reported) | $49.65 | $17.82 | −64.1% |
| IREN (reported) | $64.05 | $23.95 | −62.6% |
| TeraWulf (reported) | $26.39 | $11.73 | −55.6% |
| Core Scientific (reported) | $27.76 | $13.25 | −52.3% |
| CoreWeave (reported) | $106.86 | $54.87 | −48.7% |
| Oracle (reported) | $203.70 | $130.67 | −35.9% |
| Nebius (reported) | $226.34 | $154.14 | −31.9% |
| Bloom Energy (reported) | $290.01 | $203.17 | −29.9% |
| Vertiv (reported) | $314.18 | $232.50 | −26.0% |
| Amazon (reported) | $274.00 | $240.35 | −12.3% |
| NVIDIA (reported) | $214.25 | $204.64 | −4.5% |
| Microsoft (reported) | $426.99 | $521.91 | +22.2% |
The shares moved with the group
Between 28 May and 30 October Applied Digital’s share price fell 64%. CoreWeave fell 49%, IREN 63%, Cipher 70%, TeraWulf 56% and Core Scientific 52%. Oracle fell 36% and Vertiv 26%. NVIDIA fell 4% and Microsoft rose 22%.18 The fall was shared with the companies that are financed with debt to build AI capacity, not with the companies that sell chips or own the software. A news search found no single cause. One press account points to the debt, rising yields, a falling bitcoin price and debt-funded builders going out of favour, after a record quarter.13 I do not claim to know the reason.
My judgement: it has a good position in a scarce thing, power and a quick build, and a short record of using it. What would make this a wall instead of a position is evidence that tenants pay more for it, and the rents so far point the other way.
The competitive advantage
The advantage is the spread. A megawatt costs about $12.5M to build and earns about $1.46M a year of net operating income, so on my base numbers it earns about 11.7% on cost for 15 years (estimate).63 Money to build it costs about 7% to 9% from lenders and 12.75% or more from Macquarie.2 The deck’s own figures give a range: net income over cost runs from 11% to about 15%, and 15% needs the lowest cost and the highest rent together.6 A press account says management expects new lease rates to rise by more than 15%; I come back to it in Section VII.13
What a megawatt earns and costs
All numbers are per megawatt of critical IT load, my arithmetic from the company’s figures.
| Per megawatt | |
|---|---|
| Rent, a year, the first campus (reported) | $1.83M |
| Rent, a year, the next four campuses (reported) | $1.65M to $1.67M |
| Net operating income, 87% of rent, on $1.68M (estimate) | $1.46M a year |
| Building cost, management’s range (reported) | $11M to $13M |
| Building cost, my base, including borrowing costs (estimate) | $12.5M |
| Net income on cost, my base (calculated) | 11.7% a year |
| Net income on cost, if cost is $15.5M, as TopCo 2’s balance sheet suggests (calculated) | 9.4% a year |
| Debt at 75% of cost, base, about (estimate) | $9.4M |
| Interest on it, at 7.0% (estimate) | $0.66M a year |
Against the alternatives
The honest comparison is with a landlord who finances the same building with long debt. Applied Digital’s project debt on the first campuses cost 9.25%, 6.75% and 7.0%, and the notes have traded below par for the newer two: the 10-Q gives fair values of about $2.0B for $2.15B of 6.75% notes and about $1.5B for $1.59B of 7.0% notes, which I read as yields of roughly 8% to 9%, with the usual caution that the filing rounds to $0.1B.2 The tenant is the credit. For the three newest leases the tenant is investment grade by the company’s account, and for the first it is CoreWeave, which had $35.6B of debt and lost $626M in the second quarter of calendar 2026.14 Lenders therefore see a rent stream from a very good credit on three campuses and a leveraged one on the first.
The second part of the advantage is the structure. Macquarie put $1.825B into TopCo 2 as preferred stock that accrues 12.75% a year and carries a 1.8 times minimum payout, together with 13.5% of the common equity of that subsidiary.3 That bought the company time and cash. It is also the most expensive money in the structure, and it ranks ahead of the shares.
Here is how I see it. The assets are good: powered land, a design the tenants have qualified, and long contracts with credits that are mostly strong. The question is how much of the value goes to the lenders and to Macquarie before it reaches the common shares. Valuation, below, takes this apart.
Management
Wes Cummins, 49, is the chairman and chief executive and a co-founder. He came from technology investing, at Nokomis Capital, and founded an investment firm, 272 Capital.6 Jason Zhang, the other co-founder, became president in January; Saidal Mohmand is the finance chief and Laura Laltrello the operating chief.37 The company had about 256 employees on 31 May 2026.3 I judge a management by how it is paid, what it owns, and what it did with other people’s money.
How they are paid
The proxy reports Cummins’ total pay for FY2026 at $189.2M. Of that, $185.9M is the grant-date value of stock awards. Cash pay was $2.1M, a salary of $875,000 and a $1.2M bonus, and other pay of $1.2M included $1.1M of personal use of the company aircraft. For FY2025 it was $27.7M and for FY2024 $1.2M.7 Zhang’s was $100.0M and Mohmand’s $40.5M.7
What the stock awards reward is clear. In January 2026 Cummins was granted 1.5M restricted stock units worth $45.4M and 4.5M performance units worth $122.1M. The performance units vest in thirds if the average price over any 90 days reaches $50, $75 and $100 within five years, while the price at the grant was $30.26.7 Today’s $17.82 is below all three. The board’s own arithmetic is that at the full $100, he would realise $450M against about $21B of added market value, a share of 2.15%, which it calls below the 25th percentile of the awards it compared.7 Zhang’s units vest on signing leases and getting buildings into service on time; Mohmand’s on net operating income.7
That pays them for the share price, for leases signed, and for megawatts delivered. It does not pay anyone for return on the money put in, for rent per megawatt, for dilution or for keeping debt low. A building that is leased at a thin spread and delivered on time earns the award in full. I note too that the company paid $99.4M in cash in one quarter to cover taxes on vested stock, so stock pay is not free to the other shareholders.2
What they own, and what they sold
Cummins beneficially owns 23.36M shares, 7.8%. Of those, 17.59M are held by a family company and are pledged against a line of credit with JPMorgan; at $17.82 that block is about $313M (calculated).7 I do not know the loan size or terms, so I cannot say how close it is to a margin call. Directors and officers as a group hold 9.5%. The two largest outside holders listed are Hood River Capital at 7.4% and Jane Street at 7.0%, the latter including 15.96M warrants.7
Insider trades in the year to 30 October tell two stories. Between October 2025 and October 2026, Cummins and four directors sold 534,368 shares for about $18.3M, at $21.84 to $38.57, 165,000 of them Cummins’ at $36.42 on 16 January. On 16 October 2026 Cummins bought 55,803 shares at $18.04 and Zhang bought 300,000 at $18.86, about $6.7M in all (calculated).15 A purchase at $18 after sales at $36 is a signal. It is also small beside the $313M of pledged stock.
What they did with capital
The cycle is short: five years as a listed company. Weighted shares were 57M in FY2022 and 292M in the first quarter of FY2027, and 302M at 6 October (calculated).52 The company has sold stock through the market and through a Series G preferred line that converts at 95% of the recent low price, which it can draw down in $150M amounts every seven days, and which it raised to $2.0B in June.32 It has 28.1M warrants outstanding at an average $8.61, 21.5M of them issued to CoreWeave with its leases and since assigned to banks and trading firms.23 In FY2025 it sold $450M of 2.75% convertible notes and paid $51.8M for a capped call and $52.7M for a prepaid forward.11
The record of strategy is mixed. A shareholder class action filed in August 2023 alleges the company overstated the profit of its hosting business and its ability to become a cloud provider; the court stayed the case in September 2025 while a motion to dismiss is pending, and the company cannot estimate a loss.2 The cloud business it pushed was split off in 2026. The buildings pivot has worked on delivery so far.
Related-party dealings need more care than usual. Applied Digital paid $37M in May 2026 to end a guarantee it had given on a roughly $2.4B Babcock & Wilcox contract for Base Electron, in return for Base Electron shares; it lent Base Electron $59M, and it holds B&W warrants whose fair value fell from $90.8M to $34.7M in a quarter, a $56.1M loss.72 Six family members of Cummins are employees, paid $3.3M since 1 June 2025.7 The four top executives were also granted 5.25% of ChronoScale’s shares in units.7 None of this is hidden, and each is approved by a board committee. It does mean that the people running a tenant-funded landlord also have personal stakes in the power company it depends on for its next campus.
Following the incentives, then: the leaders are paid in large amounts of stock for price and growth, they own a lot, and a good part of what they own is borrowed against. That pays them to build more and to keep the share price up. It does not stop them issuing shares at a discount to fund more. The delivery record is good. The capital record is of a company that has raised every kind of money it can find.
Financials
The company went public in 2021 and moved to the Nasdaq in 2022, so there are five fiscal years of operating results, not ten, and the first three are a different business: bitcoin hosting. Revenue rose 72 times from $8.5M to $611M in FY2026 and the company has had an operating loss in every year (calculated).3115 Figures are the latest as recast; FY2024 revenue was $136.6M when first reported and $165.6M in the FY2026 10-K, because of how the cloud business is now shown.3
Applied Digital, five fiscal years and the latest twelve months
US dollars, fiscal years ending 31 May. TTM is the four quarters to 31 August 2026.
| FY22 | FY23 | FY24 | FY25 | FY26 | TTM Aug 2026 | |
|---|---|---|---|---|---|---|
| Revenue (reported) | $9M | $55M | $166M | $229M | $611M | $872M |
| Revenue growth (calculated) | – | 547.9% | 198.9% | 38.0% | 167.4% | – |
| Operating income (reported) | −$21M | −$43M | −$98M | −$72M | −$236M | −$289M |
| Net income (reported) | −$24M | −$46M | −$150M | −$231M | −$184M | −$351M |
| Operating cash flow (reported) | −$1M | $59M | $14M | −$115M | $90M | $235M |
| Capital spending (reported) | $58M | $131M | $142M | $682M | $2,866M | $4,691M |
| Stock pay (reported) | $12M | $32M | $17M | $23M | $220M | $271M |
| Stock pay, share of revenue (calculated) | 144.7% | 57.9% | 10.5% | 9.9% | 36.0% | 31.1% |
| Operating cash less capital spending less stock pay (calculated) | −$72M | −$105M | −$145M | −$820M | −$2,996M | −$4,727M |
| Weighted shares, millions (reported) | 57.1 | 94.0 | 114.1 | 201.2 | 275.2 | 291.6 |
What an owner could really take out
Nothing. In the twelve months to August, operations produced $235M of cash, the company spent $4,691M on buildings and equipment, and it paid its people $271M in stock, so the owners’ cash after stock pay and spending was −$4,727M (calculated).23 That is not a fair measure of the business, since most of the $4.7B went into campuses that are not yet earning, but it is the plain fact: every dollar came from lenders, Macquarie and new shares. Reported net loss over the same period was $351M. The gap is the building programme.
A better question is what the finished campuses leave for owners. The whole of Valuation answers it. In short, rent at full build is about $2.4B a year, net operating income about $2.1B, and before the owner sees anything come interest of about $1.0B, debt repayment, overhead of about $0.3B including stock pay, and the Macquarie claim. The finished business is a thin slice.
Quality of earnings
The company’s adjusted measures exclude ChronoScale, stock pay ($59.4M in the first quarter), deal costs and the non-cash write-down of customer incentives. Adjusted EBITDA of $64.4M compares with a GAAP operating loss of $62.4M.2 The adjusted net loss was $4.1M against a reported $221M loss to common after continuing operations. Three items make up the gap that I cannot dismiss as one-off: stock pay of $66.5M a quarter, 42% of revenue other than fit-out billings (calculated); a net $49.5M loss on the Babcock & Wilcox warrants and Macquarie derivatives; and interest of $77.4M, with another $35.7M capitalised into buildings.2 Interest will rise as buildings open and capitalised interest stops.
Debt and preferred stock
The claims that come before the common shares. Face values are principal outstanding.
| Rate | Due | Face | Fair value | |
|---|---|---|---|---|
| 2030 senior secured notes, Polaris Forge 1 (reported) | 9.25% | Dec 2030 | $2,350M | about $2.5B |
| 2031 senior secured notes, Polaris Forge 2 (reported) | 6.75% | Mar 2031 | $2,150M | about $2.0B |
| 2031 senior secured notes, Polaris Forge 1, third building (reported) | 7.00% | Jun 2031 | $1,590M | about $1.5B |
| Convertible notes, unsecured (reported) | 2.75% | Jun 2030 | $450M | $399M |
| Revolving credit, drawn (reported) | SOFR + 2.25% | May 2029 | $82M | $82M |
| Other loans (reported) | 7.3% average | to 2031 | $99M | about $99M |
| Total debt (calculated) | $6,722M | |||
| Macquarie preferred in TopCo 2, carrying value (reported) | 12.75%, in kind | Perpetual | $2,011M | – |
| Series E-1 preferred (reported) | Dividend | Redeemable | $56M | – |
The balance sheet
At 31 August the company had $2.95B of unrestricted cash and $0.73B restricted, and $6.4B of debt on the balance sheet net of costs.2 Most of the cash sits in TopCo 2, which held $2.9B of unrestricted cash and $0.5B restricted; it is tied to Polaris Forge 1 and 2.2 Total assets were $11.7B, of which property and equipment $6.3B, $3.7B of it still under construction. The Macquarie preferred stock is shown outside equity at $2.0B, and shareholders’ equity was $1.6B (reported).2 The company says it has enough liquidity for the next twelve months and all its known plans.2 I read that as covering the plans it has financed, which do not include the 810 MW outside TopCo 2.
The share price since the Nasdaq listing
Last close of each calendar quarter, log scale
- Close, Q4 2026 $17.82
Valuation
First, how this goes badly wrong
Before any numbers I ask what would most likely hurt the business or the investment, and work back from there. Here are three, and they feed each other.
The financing does not hold. About $11.5B has still to be spent to finish the 1,410 MW (estimate). The 600 MW in TopCo 2 are mostly funded, but the 810 MW outside it are not, and the company has no project loans for them in the filings I read. The cheapest source it has is a preferred-stock line that turns into shares at 95% of the recent low price, and the shares have fallen 64%.23 A $58.5M Texas Capital loan requires the market value of the shares to stay above $2.0B at every close, against about $5.4B now.2 If the lenders will not fund the unfinished campuses at 70% to 75% of cost at 7%, the shareholders face dilution that may not stop.
A tenant fails, or the contract is restructured. Polaris Forge 1 is $11.0B of the $36.2B, and its tenant is CoreWeave, which had $35.6B of debt, $103.7B of contracted revenue still to deliver and a loss of $626M in its latest quarter.14 The leases were already restructured in March.3 If that tenant struggled, Applied Digital would hold a building worth much less than the debt on it.
The price paid for money. Macquarie’s preferred accrues 12.75% a year in kind and has to be repaid at 1.8 times its $1.825B, about $3.3B, with rate step-ups after October 2030 and a right to force a sale after October 2032.3 Add $6.1B of notes at 6.75% to 9.25% and the project loans to come. The interest on all of that is a large part of the rent. Of the three, I think the third is the most likely to cost the shareholders, because it takes effect even if everything else works.
What an owner gets today, and later
Today, nothing: owner cash after stock pay and spending was −$4.7B over twelve months (calculated).2 On my base, the first cash to the shares arrives in FY2032, from the 2030 to 2031 notes’ refinancing and the Macquarie payout, and over FY2032 to FY2039 it totals about $0.57B, or $1.83 a share before discounting, then the shareholders are asked for money for three years while the buildings are refitted (estimate). Most of the cash comes in FY2045 and later, when the loans are repaid. That is the shape of a lease: the rent pays the lenders first, then the owner of the preferred, and then the shareholders.
Rent the leases pay, year by year
US$ millions a year, base case, fiscal years ending 31 May
- Rent at full build $2.37B a year
Show the numbers
| FY27 | FY28 | FY29 | FY30 | FY31 | FY32 | FY33 | FY34 | FY35 | FY36 | FY37 | FY38 | FY39 | FY40 | FY41 | FY42 | FY43 | FY44 | FY45 | FY46 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Rent (estimate) | $326M | $1,580M | $2,361M | $2,371M | $2,371M | $2,371M | $2,371M | $2,371M | $2,371M | $2,371M | $2,371M | $2,371M | $2,371M | $2,371M | $2,371M | $2,473M | $2,664M | $2,823M | $2,846M | $2,846M |
What I can’t judge
Three inputs decide the answer and I cannot know any of them. The first is what each megawatt really costs. The company says $11M to $13M; the balance sheet of TopCo 2, which carries $10.3B of assets for 600 MW, $3.4B of it cash, points higher.62 I use $12.5M and show the range. The second is what happens after the leases end. The company says renewals would take total contracted revenue to $86B from $36B, which implies rent about 1.4 times higher if every option is used.4 I do not know who decides: the tenant holds the option. The third is the rate at which buyers will value finished campuses; I have no sourced private-market figure for a data centre leased to a hyperscaler, so I show a table instead of a number.
How I value it
I build the cash that reaches the shareholders year by year to fiscal 2062, in US dollars, from the contracted rent in the 10-Q, a net operating margin, overhead and stock pay, the cost still to be spent, the interest and repayments on the debt, the payout to Macquarie and the loans for the unfinished campuses, and then discount it at a rate for equity.2 Stock pay is a cost, because it is paid with shares that are not available to anyone else. Equity calls, the cash shareholders would have to add if the model runs short, are subtracted at a cost of 8% for the discount on the preferred-stock line. Per-share values use 302.4M shares at 6 October, 7.8M restricted units and 3.0M performance units, plus warrants and converts when the value is above their strikes of $8.61 and $9.75. The chief executive’s 4.5M performance units, with hurdles of $50, $75 and $100, are left out, since the price is under all three.
The rent for FY2027 to FY2031 is the 10-Q schedule; my base contract rent after FY2031 totals $26.6B against the 10-Q’s $26.6B, within 0.1% (calculated).2 The convert is $450M of debt repaid in June 2030 if the value is below $9.75 and becomes shares above it, reduced by the capped call that covers the gap to $14.72.11
The discount rate. I take it from the company’s own securities. The 2031 notes were worth about 93 to 94 cents on the dollar, a yield of roughly 8% to 9%; the most junior outside money, Macquarie’s, costs 12.75% and rises; the common stock ranks below both.23 A rate under 13% for shares behind that much senior claim would not be honest, so I use 13% in the base, 16% in the bear and 12.5% in the bull, which is a little under my own floor because the bull case also assumes cheaper money. I show 9% to 16% below.
Bear, base and bull
My estimates. Each case’s assumptions are in the rows.
| Bear | Base | Bull | |
|---|---|---|---|
| Building cost per megawatt, all in (estimate) | $15.5M | $12.5M | $11.5M |
| Cost still to spend on the 1,410 MW, including TopCo 2’s remaining work (estimate) | $15.8B | $11.5B | $10.1B |
| Net operating income as a share of rent (estimate) | 85% | 87% | 88% |
| CoreWeave pays on Polaris Forge 1 through the term (estimate) | No: stops in FY2031, re-let after two years | Yes | Yes |
| Rent after each lease ends, as a multiple of today’s, and for how long (estimate) | 0.55 times, 5 years | 1.2 times, 15 years | 1.4 times, 20 years |
| Refit before re-letting, per megawatt (estimate) | $3.0M | $2.0M | $1.5M |
| Crypto hosting after its contract ends (estimate) | Ends | Renews at 60% of profit to FY2035 | Renews at today’s profit to FY2035 |
| New leases beyond 1,410 MW (estimate) | None | None | 1,500 MW, same rent and cost |
| Loans on unfinished campuses (estimate) | 70% of cost at 8.0% | 75% at 7.0% | 75% at 6.75% |
| Interest on loans after 2030 (estimate) | 9.5% | 7.5% | 6.75% |
| Overhead and stock pay, a year (estimate) | $340M | $300M | $300M |
| Rate I discount the shareholders’ cash at (estimate) | 16% | 13% | 12.5% |
| First year the shares get cash (estimate) | None | FY32 | FY33 |
| Value per share (estimate) | $0 | $1.50 | $8.34 |
| Return a year from the price, to October 2036 (estimate) | −100% | −13% | 7% |
The base path
My base case, selected fiscal years, US dollars.
| FY27 | FY28 | FY29 | FY30 | FY31 | FY32 | FY35 | FY40 | FY42 | FY45 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Rent (estimate) | $326M | $1.6B | $2.4B | $2.4B | $2.4B | $2.4B | $2.4B | $2.4B | $2.5B | $2.8B |
| Net operating income (estimate) | $283M | $1.4B | $2.1B | $2.1B | $2.1B | $2.1B | $2.1B | $2.1B | $2.2B | $2.5B |
| Spent on building (estimate) | $3.3B | $5.9B | $2.3B | $0M | $0M | $0M | $0M | $0M | $0M | $0M |
| Interest paid (estimate) | $285M | $485M | $467M | $441M | $929M | $1.0B | $935M | $691M | $567M | $346M |
| Debt repaid (estimate) | $60M | $222M | $342M | $354M | $293M | $479M | $589M | $833M | $957M | $1.2B |
| Paid to Macquarie to retire the preferred (estimate) | – | – | – | – | $3.5B | – | – | – | – | – |
| Cash to the shares, net of calls on them (estimate) | – | – | – | – | – | $129M | $94M | −$12M | −$1.3B | $163M |
| Debt at year end (estimate) | $7.9B | $11.6B | $13.0B | $12.7B | $14.4B | $13.9B | $12.3B | $8.6B | $6.8B | $3.5B |
What reaches an owner of the shares, base case
US$ millions, base case, fiscal years ending 31 May
- Owner cash, FY32 to FY39 $0.7B in total
Show the numbers
| FY27 | FY28 | FY29 | FY30 | FY31 | FY32 | FY33 | FY34 | FY35 | FY36 | FY37 | FY38 | FY39 | FY40 | FY41 | FY42 | FY43 | FY44 | FY45 | FY46 | FY47 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Owner cash (estimate) | $0M | $0M | $0M | $0M | $0M | $129M | $118M | $106M | $94M | $52M | $39M | $25M | $11M | −$12M | −$39M | −$1,289M | −$1,177M | −$248M | $163M | $887M | $865M |
The price and what it needs
Turn it round. At $17.82, with the converts and warrants it brings, the market values the common at about $6.4B and the whole enterprise at about $10.9B, 31% of the $35.7B of rent contracted (calculated).2 That sounds cheap. But the buildings are not finished: another $11.5B has to be spent, and by completion the claims ahead of the shares are about $15.1B (estimate). Allowing for 3.6 years until then at 13%, the price needs the finished campuses to be worth about $25B, which is 7.1% of their net operating income after overhead. My base is worth about 11% on the same figure.
What the price needs
Reverse discounted cash flow at my rates.
| Share count at the price, with the converts and warrants it brings (calculated) | 361M shares: 302.4M outstanding, 10.7M employee awards, 14.5M from warrants, 33.2M from converts after the capped call |
|---|---|
| Market value at the price (calculated) | $6.4B |
| Add: debt $6.3B, Macquarie preferred $2.0B, other preferred $0.1B; less cash $3.7B and other assets $0.1B (calculated) | $10.9B enterprise value now |
| Rent contracted over the base terms (reported) | $35.7B, of which the enterprise value is 31% |
| Still to spend to finish, my base (estimate) | $11.5B |
| At completion: debt, Macquarie payout and other claims, less cash (estimate) | $15.1B |
| Net operating income after overhead, FY2030 (estimate) | $1.77B |
| Value of the finished campuses the price needs, after allowing for 3.6 years at 13% (calculated) | $25.1B, a rate of 7.1% on that income |
| The same figure from my base case (calculated) | $15.9B, a rate of 11.2% |
| Discount rate on shareholders’ cash needed to reach the price on my base cash (calculated) | Below 2%, which I could not reach |
| Building cost needed to reach the price on my base (calculated) | Below $3M a megawatt |
A rate of 7.1% is a rate for a building that will be rented for ever at rising rents. The rent in these leases is flat for 15 years, then depends on renewal. If you think a hyperscaler campus deserves a 7% to 8% rate because tenants will keep renewing and rents will rise, the price is about right. If you think a flat 15-year contract and a refit deserve 10% or more, the common is worth little. The table shows how quickly that choice moves the answer.
What the price needs, as a rate on finished income
Value of the finished campuses at a given rate on net operating income after overhead of $1.77B, less $15.1B of claims, then back 3.6 years at 13%.
| Rate the buyer takes on income after overhead | Value of the campuses when finished | Left for the common after claims | Per share today |
|---|---|---|---|
| 6% (estimate) | $29.6B | $14.4B | $25.21 |
| 7% (price needs about 7.1%) (estimate) | $25.3B | $10.2B | $18.19 |
| 8% (estimate) | $22.2B | $7.0B | $12.68 |
| 9% (estimate) | $19.7B | $4.6B | $9.35 |
| 10% (estimate) | $17.7B | $2.6B | $5.37 |
| 12% (estimate) | $14.8B | $0 | $0 |
How much the answers move
The base value is a thin slice and it moves a lot. The move is not even. A cost $1M a megawatt lower adds about $1.90 a share, taking the base from $1.50 to $3.43 at $11.5M; a cost $0.5M higher takes it to zero at $13M (estimate). The re-letting assumption moves it from zero, if tenants leave and the buildings sit empty, to $3.00 if rents stay at 1.4 times for 20 years.
Base value by cost
Value per share, my base, changing building cost and what happens after the leases.
| Cost per megawatt | No re-letting | 0.55 times, 5 years | 1.0 times, 10 years | 1.2 times, 15 years (my base) | 1.4 times, 20 years |
|---|---|---|---|---|---|
| $11.0M (estimate) | $0 | $0 | $2.68 | $4.31 | $5.82 |
| $12.0M (estimate) | $0 | $0 | $0.86 | $2.50 | $4.02 |
| $12.5M, my base (estimate) | $0 | $0 | $0 | $1.50 | $3.03 |
| $13.0M (estimate) | $0 | $0 | $0 | $0 | $1.25 |
| $14.0M (estimate) | $0 | $0 | $0 | $0 | $0 |
| $15.5M (estimate) | $0 | $0 | $0 | $0 | $0 |
Base value by discount rate
Value per share, my base, changing the discount rate and what happens after the leases.
| Rate on shareholders’ cash | No re-letting | 0.55 times, 5 years | 1.0 times, 10 years | 1.2 times, 15 years (my base) | 1.4 times, 20 years |
|---|---|---|---|---|---|
| 9% (estimate) | $0 | $0 | $0 | $3.43 | $7.27 |
| 10% (estimate) | $0 | $0 | $0 | $2.76 | $5.78 |
| 11% (estimate) | $0 | $0 | $0 | $2.24 | $4.63 |
| 12% (estimate) | $0 | $0 | $0 | $1.83 | $3.73 |
| 13%, my base (estimate) | $0 | $0 | $0 | $1.50 | $3.03 |
| 14% (estimate) | $0 | $0 | $0 | $1.25 | $2.48 |
| 16% (estimate) | $0 | $0 | $0 | $0.89 | $1.70 |
A few other changes, one at a time on the base: no stock pay, $4.86; overhead at $100M, $2.78; margin of 90%, $2.76; no maintenance spending, $3.06; interest at 9.5% when notes are refinanced, $0.10; CoreWeave stops paying, zero; and adding 1,500 MW of new leases at today’s cost and rent, zero, because new buildings at $12.5M a megawatt earn about what the money costs (estimate). New buildings only help if they cost less than $11.5M a megawatt or rent for more.
The price against the range
The price is 1,084% above my base and 2.1 times my bull. Measured to October 2036 as in the table above, my base returns −13% a year from $17.82, and even the bull returns 7% a year (estimate). I find it hard to write a value this far below a quoted price, so I say what could be wrong. I may be too harsh on the discount rate: 13% for a leveraged claim on investment-grade rent may be high. I may be too harsh on the tail, as the tenants’ renewal options carry rents about 40% higher by my arithmetic from the company’s totals. And a market that pays 7% for finished buildings would be right. What I cannot do is produce a cash flow to shareholders that gets to $17.82 unless the buildings are valued like infrastructure, and I would rather say that than move the numbers to meet the price.
What it is worth, against the price
Value per share, my estimates, against the close in Q4 2026
- Bear to bull $0 to $8.34
- Base $1.50
- Price $17.82
Against the alternative
A Treasury bond pays a fixed amount and needs none of this. Within this site, the closest case is Oracle, which also builds capacity for AI tenants with debt: its price is 7% above my base value. The supplier side is Vertiv, at 89% above. Applied Digital’s price sits much further above its base value, because its shareholders sit behind more money.1
Quality and price, separately
How good is the business? Better than the stock suggests: delivered buildings, long contracts, strong tenants, and a rent that is paid whether the tenant uses the space. How good is the price? On my numbers, poor, because the claims ahead of the shares absorb almost all of the rent. This looks like a good set of assets with a poor claim on them, at a price that already assumes the assets are worth an infrastructure rate.
How the odds multiply
The price needs several things together. My guesses are in the table. They are not independent, but each is far from certain, and the product is about 9%.
How the odds multiply
Each step is my estimate; the product assumes they are independent.
| Step | My odds |
|---|---|
| All 810 MW outside TopCo 2 financed and built on schedule at or below $12.5M a megawatt (estimate) | 70% |
| CoreWeave pays through the term on Polaris Forge 1 (estimate) | 85% |
| Tenants use their renewals at 1.2 times the rent or better (estimate) | 65% |
| The 2030 and 2031 notes and the Macquarie preferred are refinanced without new equity (estimate) | 70% |
| Buyers value the finished campuses at a rate of 7.1% or lower (estimate) | 35% |
| All five together (calculated) | 9% |
Where this could be in 5 and 10 years
These are my values for the common at two later dates: the present value, at that date, of the owner cash that comes after it, per share on today’s count of 313M plus warrants and converts where the value is above their strikes, after interest, debt repayment, the Macquarie preferred and stock pay, in each year’s dollars. “Owner cash” is cash paid out less money the shareholders would have to add.
Where this could be in 5 and 10 years
Value per share at each date, my three cases.
| Value per share, to October 2031 | Value per share, to October 2036 | Owner cash paid per share, to October 2036 | Return a year from today’s price to October 2036 | |
|---|---|---|---|---|
| Bear (estimate) | $0 | $0 | $0 | −100% |
| Base (estimate) | $2.77 | $2.70 | $1.59 | −13% |
| Bull (estimate) | $29.85 | $35.28 | −$1.05 | 7% |
For the base to hold at five years, all 1,410 MW must be running by 2028, the Macquarie preferred must be paid off around October 2030 without new equity, and the loans must amortise on schedule. Its value then grows at about the 13% rate I discount at, because only small payouts are made before FY2040. At ten years the base has paid out about $1.59 a share and holds about $2.70, because the shareholders’ cash arrives mostly after FY2045.
The bear differs on cost, $15.5M a megawatt, and on CoreWeave, which stops paying on Polaris Forge 1. The bull differs on rent and life after the leases: 1.4 times for 20 years, 1,500 MW of new leases, and money at 6.75%. The numbers that drive all three are cost per megawatt, rent after the leases end, and the discount rate. The most likely way my base is wrong is cost: $0.5M a megawatt more takes today’s value to zero, and $1M less adds about $1.90 a share.
These are estimates of value, not forecasts of the share price. The market price can sit above or below value for years.
The case for the price
What most people miss
Three facts cut in the company’s favour and are not the usual talking points. First, the enterprise value at $17.82 is about $10.9B, 31% of the $35.7B of rent contracted in the leases, and about $2.4B a year of that rent is flat and take-or-pay from FY2029 to FY2042 (calculated).2 Second, the renewal options are worth more than the first terms: the company puts contracted revenue at $86B if all are used against $36B for the base terms, which by my arithmetic means rent about 1.4 times higher on the renewal years (calculated).4 Third, the chief executive and the president bought shares on 16 October at $18.04 and $18.86, after the chief executive had sold 165,000 at $36.42 in January.15 I do not read intent into it. It is a fact.
The bull case
In plain words: AI computing is short of powered, finished buildings, hyperscalers want them fast, and few people can supply them. Applied Digital has leases for 1,410 MW with large tenants, a repeatable design, a queue of more than 3 GW and a gas plant in prospect. If it builds on time, finances at about 7% and renews its tenants, the leases are worth more than the stock.
Who says so, and what I could verify:
Management. Wes Cummins told The Data Center Frontier Show on 27 January 2026 that 2026 and 2027 are “execution years,” that many announced projects will not become operating facilities, and that Applied Digital had secured its electrical and mechanical supply 18 to 24 months earlier, which he called a big advantage, in my words.12 The show’s write-up says the company is focused on six customers, five hyperscalers and CoreWeave. The filings name only CoreWeave and describe the rest as investment-grade hyperscalers, so I cannot check the write-up’s list. On 29 June 2026 he gave a 6:32 interview on CNBC’s Squawk on the Street; the page has no transcript, so I cannot say what he said and do not characterise it.16 A press account of the October results says management expects about 250 MW of expansion leases by the end of 2026 with lease rates up by more than 15%.13 I could not find the call transcript, so I do not know who said it or what the 15% is measured against. The newest leases pay $1.65M to $1.67M per megawatt-year, so 15% more would be about $1.9M, and no such lease is in the filings yet. I have no time-coded transcripts, so I give episode dates, not timestamps.
Analysts. As reported by 24/7 Wall St. on 26 October, Rob Brown at Lake Street has a $90 target, Jones Trading $70, Wells Fargo $55, Morgan Stanley $41 and Rothschild Redburn $22, the last citing execution, power and pipeline risk, against an average target of $62.44 across 15 analysts.13 I did not open the notes. A $62 price would put the common at about $23B, which is 3.5 times today’s price (calculated).
Holders. Situational Awareness LP, Leopold Aschenbrenner’s fund, listed 15,384,616 Applied Digital shares in its 13F-HR for 30 June 2026, filed 14 August, with a reported value of $469.0M, 2.3% of its $20.24B of reported holdings.17 That value works out to $30.49 a share, 18% below the 30 June close of $37.30. It is not a different quarter-end price: the fund’s 31 March filing divides to $23.74, the close on that day, and for six other holdings in the 30 June table (Micron, CoreWeave, Core Scientific, IREN, Riot and CleanSpark) value divided by shares equals the 30 June close to the cent.171 I could not reconcile this one line and found no 13D or 13G for Applied Digital that explains it. At the 30 June close the shares would be worth about $574M (calculated). I use the filing as filed. The 13F does not show short positions or holdings outside the United States, and I do not know what the fund holds now. This is a dated fact, not a view. The proxy lists Hood River Capital at 7.4% and Jane Street at 7.0%, the latter including 15.96M warrants.7
Not found. I looked for what Chamath Palihapitiya, Jason Calacanis, David Sacks and David Friedberg of the All-In podcast, Gavin Baker and Brad Gerstner have said about Applied Digital and about AI data-centre hosting. A search of the web and of the shows’ listings turned up no episode, clip or transcript that discusses the company, so I cite none. If one exists, I did not find it.
Against reality
If Applied Digital builds the 810 MW outside TopCo 2 for about $12.5M a megawatt and finances them at 75% of cost at 7%, if CoreWeave keeps paying, if tenants use their renewals, and if buyers of finished campuses pay a rate near 7%, the price is possible. Today the first condition is unproven: no financing is in the filings for those campuses. On my base the shares are worth $1.50; the gap is the distance between a 13% required return on a flat, finite contract and a 7% rate for a campus that never stops earning.
What a 10x would take. Ten times $17.82 is $178, or about $64B of market value on today’s share count, which would grow. At a 7% rate on finished income, that needs campuses worth about $79B and income after overhead of about $5.6B, 3.1 times the $1.77B my base reaches in FY2030 (calculated). That is roughly 4,420 MW of leased campuses at today’s rents, against 1,410 MW signed, or about $38B more to build at $12.5M a megawatt, with no fall in rents and no rise in rates. It is also 3.6 times the May high. For a company with this much debt ahead of its shares, tenfold is close to impossible. I would not build a case on it.
What they have to hit
Six numbers on a fixed schedule. Thresholds come from my base case and agree with the signposts below.
| Indicator | Today | What the case needs | Where to track it | Next check |
|---|---|---|---|---|
| Megawatts earning rent | 250 MW live at 1 October 2026; 300 MW expected across North Dakota by end of 20264 | About 1,410 MW by the second half of 2028, on the company’s dates (estimate) | Quarterly release, HPC Hosting update; 10-Q MD&A, Business Update | Q2 FY2027 results, expected January 2027 |
| Base rent | $65.8M in Q1 FY20272 | $468M for FY2027 and $1,580M for FY2028, as in the minimum-payment schedule | 10-Q, Note 17, minimum contracted payments; segment table | Q2 FY2027 10-Q, expected January 2027 |
| Financing for the 810 MW outside TopCo 2 | None found in the filings2 | Project loans of 70% to 75% of cost at 7.5% or less before May 2027 (estimate) | 8-K Item 1.01 or 2.03; 10-Q Note 9, Debt | Any 8-K; 10-K for FY2027, expected July 2027 |
| Building cost per megawatt | Company range $11M to $13M6 | No more than about $12.5M a megawatt all in (estimate) | 10-Q cash flow, purchases of property and equipment, divided by megawatts delivered | Q2 FY2027 10-Q, expected January 2027 |
| Share count | 302.4M at 6 October 2026; Series G sold $275M in Q12 | No more than about 340M by May 2028 (estimate) | 10-Q cover page; Note 16, Temporary Equity | Q2 FY2027 10-Q, expected January 2027 |
| New leases beyond 1,410 MW | None since 5 June 20262 | A new lease at $1.65M or more per megawatt-year; the press-reported goal of rates up 15% would be about $1.9M. A tenant exercising a renewal at a higher rent (estimate) | 8-K and quarterly release, lease announcements; 10-Q Note 17 | Any 8-K; Q2 FY2027 release |
Where I come down
The delivery record and the strength of the tenants on the newer campuses moved me; the leases are better than the stock’s fall implies. The price did not move me, because it needs finished buildings valued at about 7.1% of their income, and the shareholders sit behind $6.3B of debt, $2.0B of Macquarie preferred stock and a further $11.5B to be spent. What would raise my values most is a loan on the 810 MW at a rate and cost like the first campuses, a cost per megawatt under $11.5M, a tenant using a renewal early at a higher rent, or a sale of a finished campus at a rate near 8% or lower. Any of those would show me what a buyer pays.
Risks, and what would change my view
The three ways this goes badly wrong are at the start of Valuation. These are the rest.
- Customer concentration. Three tenants were 88% of first-quarter revenue.2 One is CoreWeave, which lost $626M in its latest quarter and had $35.6B of debt.14 A change at either would show up quickly.
- A lease is only as good as the delivery. Rent starts when buildings are ready for service. Delays in transformers, switchgear and generators were a theme of the January podcast, and the company says dates are subject to construction, permitting and interconnection risk.123
- Regulation and local opposition. The 10-Q says several states have passed moratoriums on new AI data centres and others are considering them.2
- Power for the next campus. Polaris Forge 3 depends on a gas plant from a company the chief executive and others own and run, and the agreement can be cancelled if it does not reach financial close by 31 March 2027.2
- Dilution. The preferred-stock line converts at 95% of the recent low price, above a floor price the board can lower; 128,750 Series G shares became 5.2M common shares after the quarter.2 A lower price means more shares for the same money.
- Pledged shares. 17.6M of the chief executive’s shares secure a bank credit line.7
- Lawsuits. A securities class action and a derivative claim are pending; the company cannot estimate a loss.2
- Key people. Cummins and Zhang hold both the company’s top jobs and stakes in Base Electron.7
- Legacy hosting. One crypto customer provides $154M a year and its contract ends in about a year.3
Geopolitical risk, and what it means for the value
Applied Digital has little direct exposure to other countries. The buildings are in North Dakota, Louisiana and Alabama, the tenants are American, and the tenants buy the chips. The one foreign step is Finland: an agreement for up to about 1 GW of potential power, nothing built.4 I rerun my base for four routes, one at a time.
CoreWeave. It is the tenant on 400 MW, $11.0B of the $36.2B. If its subsidiary stopped paying on Polaris Forge 1 from FY2031, my base goes to zero. I put that at about one in seven, from my odds table and CoreWeave’s $35.6B of debt and $626M quarterly loss.14
North Dakota and US power policy. Tenants pay for their own power, so a higher power price is their cost.3 The exposure is permission and delay. A North Dakota legislative committee on data centres met at the end of August, and a candidate for the Public Service Commission called in May for a halt on new data centres until the 2027 session.1819 The legislature and the commission decide; I found no law or order that stops a leased campus. The nearer risk is Polaris Forge 3, whose gas plant has a 31 March 2027 financial-close deadline. I put a miss at about one in three, because the filings show no financing with five months left.2 A year’s delay takes the base to $0.60.
Tariffs on equipment. The 10-K says tariffs have affected power and cooling gear and that the company cannot predict trade policy.3 A May 2026 analysis says copper has carried a 50% duty since 1 August 2025, and that switchgear and large generators were left off the April 2026 list of derivative products.20 The company says it bought early; I cannot tell how much of the gear for the 810 MW outside TopCo 2 is covered. Rents are fixed, so extra cost falls on the shareholders.
GPU export controls. They bind the tenants, not the landlord. In January 2026 the US moved some chip sales to China to case-by-case review, while Blackwell-class chips stayed under a presumption of denial.21 Contracted rent is take-or-pay and does not move. What moves is demand for the next lease: with none, my bull falls from $8.34 to $7.11.
What is in the price? At $17.82 the price needs a 7.1% rate on finished income, and it sits above my bull, so I see no sign it has priced any of these. The rows are one at a time and do not add up.
Geopolitical scenarios
Value per share after each, one at a time. My base is $1.50.
| Scenario | Who decides | My odds | Value per share after |
|---|---|---|---|
| CoreWeave stops paying on Polaris Forge 1 from FY2031 (estimate) | CoreWeave and its lenders | About 1 in 7: my odds table, and its $35.6B of debt | $0 |
| The gas plant misses financial close, Polaris Forge 3 a year late (estimate) | Base Electron and its lenders | About 1 in 3: no financing in the filings, five months left | $0.60 |
| Tariffs add $0.3M a megawatt (2.4%) to the cost still to spend (estimate) | US government | No odds; some duties already apply | $0.51 |
| Renewals at 1.0 times today’s rent, not 1.2 times, after state rules or power costs (estimate) | Tenants; the state | No odds | $0.48 |
| No new leases beyond 1,410 MW after chip supply curbs (bull case) (estimate) | US Commerce Department, Congress | No odds | Bull $7.11 |
What would change my view
Signals that move my values, in either direction.
| Signal | Today | Raises my value | Lowers my value |
|---|---|---|---|
| Financing for the 810 MW | None found2 | Loans of 75% of cost at 7% or less | Equity or preferred stock used instead, or rates above 8% |
| Cost per megawatt | $11M to $13M claimed6 | Below $11.5M | Above $14M |
| Renewals | None yet; options imply 1.4 times rent4 | A tenant exercising early at a higher rent | Tenants signalling they will not renew |
| CoreWeave | Leases restructured in March; guarantees and a $50M letter of credit3 | Rated debt, steady rent payments | Late rent, a further amendment or a failed refinancing |
| Share count | 302.4M2 | Flat after the 810 MW are financed | Above 340M before the campuses open |
| Market value of the shares | About $5.4B1 | Above $2.0B with room | Near the $2.0B covenant on the Texas Capital loan |
Sources
- 1APLD daily closes, Nasdaq.com historical API, 1 April 2022 to 30 October 2026 (opens in a new tab)
- 2Applied Digital Form 10-Q, quarter ended 31 August 2026 (opens in a new tab)
- 3Applied Digital Form 10-K, fiscal year ended 31 May 2026 (opens in a new tab)
- 4Applied Digital press release, fiscal first quarter 2027 results (Ex. 99.1 to 8-K) (opens in a new tab)
- 5Applied Digital company facts (XBRL), SEC EDGAR (opens in a new tab)
- 6Applied Digital investor presentation, April 2026 (Ex. 99.2 to 8-K) (opens in a new tab)
- 7Applied Digital proxy statement (DEF 14A) for the 2026 annual meeting (opens in a new tab)
- 8Daily closes for CRWV, IREN, CIFR, WULF, CORZ, NBIS, ORCL, VRT, BE, NVDA, AMZN, MSFT, Nasdaq.com historical API (opens in a new tab)
- 9Applied Digital filing index and former names, SEC EDGAR submissions (opens in a new tab)
- 10Applied Digital press release, fiscal fourth quarter and full year 2026 results (Ex. 99.1 to 8-K) (opens in a new tab)
- 11Applied Digital Form 10-K, fiscal year ended 31 May 2025 (opens in a new tab)
- 12Applied Digital CEO Wes Cummins on the hard part of the AI boom: execution, The Data Center Frontier Show (opens in a new tab)
- 13Applied Digital keeps cratering: this analyst keeps insisting it’s going to jump by 390% (opens in a new tab)
- 14CoreWeave Form 10-Q, quarter ended 30 June 2026 (opens in a new tab)
- 15Applied Digital Forms 3 and 4 (insider transactions), 29 October 2025 to 16 October 2026 (opens in a new tab)
- 16Watch CNBC’s full interview with Applied Digital CEO Wes Cummins, Squawk on the Street (opens in a new tab)
- 17Situational Awareness LP Form 13F-HR, period 30 June 2026 (opens in a new tab)
- 18North Dakota committee reviews data center impacts, zoning, and state policy (opens in a new tab)
- 19Republican candidate for Public Service Commission calls for moratorium on data center development (opens in a new tab)
- 20The Impact of Tariffs on the AI Data Center Buildout (opens in a new tab)
- 21BIS opens the door to increasing AI chip exports to China (opens in a new tab)
How the figures are labelled
(reported)Reported: taken from a filing or a price feed, as printed.
(calculated)Calculated: arithmetic on reported figures, such as a margin or a growth rate.
(estimate)Estimate: my judgement, such as a case value or an assumption.
The price
Close in Q4 2026: $17.82, from Nasdaq [1], equal to the Yahoo Finance chart feed. Retrieved in Q4 2026. The fiscal year ends on 31 May. The balance sheet is that of 31 August 2026 and the share count that of 6 October 2026; the second-quarter report, due in January 2027, comes after the price date. Per-share values use 302.4M shares at 6 October, 7.8M restricted units and 3.0M performance units, warrants by the treasury method (28.1M at an average $8.61), and the convertible notes (46.1M shares at about $9.75, reduced by the capped call to $14.72) when the value is above their strike. The chief executive’s 4.5M performance units are left out.
The valuation
Cash to the shareholders year by year from 30 October 2026 to fiscal 2062, discounted at 13% (16% bear, 12.5% bull) from the price date, each year at its midpoint. Rent is the 10-Q schedule of minimum payments for FY2027 to FY2031 and the contracted terms after, split by campus. Net operating income is 87% of rent (85% bear, 88% bull), less overhead of $150M and stock pay of $150M a year, growing 4% and 3%, less maintenance of 0.5% of cost a year, and refit at lease end. Cost still to spend is the cost per megawatt times 1,410 MW less $6.1B I estimate is already spent, split between TopCo 2 (600 MW) and the other campuses (810 MW). Loans on the unfinished campuses cover 75% of cost at 7.0% and amortise 60% over 15 years. The existing notes follow the 10-Q principal schedule to FY2030, with the $4.26B due in FY2031 refinanced at 7.5% over 20 years, 60% amortised. Macquarie’s preferred accrues 12.75% in kind and is paid at the greater of 1.8 times $1.825B and the accreted amount in October 2030; its 13.5% share of TopCo 2’s common is bought out at 112.5% as a deduction from cash paid out. Cash and the other assets I count are $3.68B of cash and restricted cash less $0.35B kept as reserves, plus $0.12B of investments and the Base Electron loan. ChronoScale’s cloud business, 96% owned, is given no value because I could not value it and it is small; the Ekso business was sold on 30 September. Tax is 21% on taxable income from FY2033, with depreciation over 20 years. Calls on the shareholders cost 8% more. The odds in Section VI are my guesses and are not used in the values.
The model is in my scratch folder and reproduces the 10-Q schedule of rent to within 0.1% after FY2031. There is no margin-of-safety price above $0, because the bear value is zero. No rating: the page states a range and the price, and leaves the decision to the reader.
Research, not investment advice. Figures as of .
Legal information and disclosures
These are my own views as of the update shown on this page. They can change without notice, and I have no duty to update them. Past performance does not indicate future results, and any investment can lose money.
This is for education only. It is not investment, legal, tax or accounting advice, and it is not an offer to sell or a solicitation to buy any security in any jurisdiction. It does not consider your goals or circumstances.
Figures from company filings and other third parties are believed to be reliable, but I have not independently verified them and cannot guarantee them. Bear, base and bull values, and anything marked as an estimate, are my own and rest on assumptions that may prove wrong.
Please do not copy or republish this material without my written consent.