Applied Digital (NASDAQ:APLD) shares have lost about 30% since 2026 began, even as the S&P 500 (SNPINDEX:^GSPC) gained 12%, and the Nasdaq Composite (NASDAQINDEX:^IXIC) added 10%. Still, it’s up by about 250% over the last three years — not bad. While the company had its beginnings in the crypto mining space, it found massive success after a pivot to running data centers for artificial intelligence (AI), and now has $36 billion in revenue lined up if it can deliver on its promises.
But most of the data center capacity it has leased out is still under construction; there’s no guarantee that it will come online on time and on budget. Here’s why I think 2027 will see Applied Digital stock trading lower than it is today.
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Applied Digital’s business model and revenue growth
You can think of Applied Digital as a sort of specialized developer and landlord. The company finds land, secures access to enough power, builds a data center, and then rents it out to a tenant. It doesn’t actually fill the data center with the GPUs that power AI. That’s the tenant’s responsibility.
AI facilities are not your average data centers, and there are really only so many companies capable of bringing everything they require together at scale. That puts Applied Digital in a good spot to take advantage of the AI boom, and it has. Sales have grown from $55 million in 2023 to $611 million in 2026.
In its most recent quarter, the company more than quadrupled its top-line year over year to $342 million. About $184 million came from getting space ready for tenants, while $66 million was base rent.
Applied Digital’s debt load and financing needs
As of its October earnings call, Applied Digital still needed to line up financing for three campuses that, together, represent more than $20 billion of the $36 billion it has under contract — all with the same investment-grade tenant.
That should help the company secure better terms for that debt, but Applied’s credit risk is still a concern, especially as it works to bring its facilities online prior to the cash flowing in meaningfully. At the moment, the company is spending considerably more on interest alone — $77.4 million last quarter — than it is collecting in base rent — $66 million.
