QS Research · Michael Burry's Scion Capital analyst template · 2006
Applied Digital Corp. (APLD)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $16.68 (close 2026-11-10)
Conclusion: LONG
Conviction low · base case +225% · downside -15% · upside +303%
The market is pricing APLD at 2.45x EV/Sales, cheap against a loss-making peer set, and gives little credit for $36.2B of 15-year take-or-pay leases because TTM EBIT is -$289.1M, FCF is -$4.46B and the share count is up 8.1% in a year. I use the independent peer-median EV/Sales anchor of 15.42x as the base: $872.3M TTM revenue x 15.42x = $13.45B EV + $2.90B net cash = $16.35B / 302.39M shares = about $54.14/share, +224.6%. The upside uses 20.0x, rerated on the dated 2026-10-07 Q1 FY2027 release's 300 MW end-CY2026 target and the 2026-10-01 Polaris Forge ready-for-service milestone: $872.3M x 20.0x = $17.45B EV + $2.90B net cash = $20.35B / 302.39M = about $67.29/share, +303.4%. The downside assumes revenue -25% to $654.2M and a compressed 2.08x EV/Sales: $1.36B EV + $2.90B net cash = $4.26B / 302.39M = about $14.11/share, -15.4%. The contracts are real, but no moat, negative FCF yield and rising interest keep this a low-conviction long until delivery and financing are proven.
Key numbers
- Share price: $16.68
- Market cap: $5.04B
- Latest financial period: TTM to Aug 31, 2026
- Revenue (TTM): $872.3M
- FCF yield: -88.3%
- Price / book: 3.15x
- Earnings-quality flags (TTM): Mark-to-market on the company's own stock (warrants) -$2.2M (0% of net income)
- Revenue growth (latest fiscal year): +167.5%
The 15 boxes
- ✓ 1. Long-form business notes
Applied Digital is an owner-operator of power-advantaged HPC/AI data centers that leases capacity to hyperscalers on 15-year take-or-pay contracts: as of May 31, 2026 it had 1,410 MW contracted across five campuses worth about $36.2B of base-term revenue, against only about 100 MW actually operating and revenue-generating. Reported revenue has gone $165.6M (FY2024) to $228.6M (FY2025) to $611.3M (FY2026) to $872.3M (TTM to 2026-08-31), while operating income stayed deeply negative (-$236.5M FY2026, -$289.1M TTM) and capex dwarfed operating cash flow ($2.87B vs $89.7M in FY2026; $4.69B vs $235.1M TTM). The business has changed completely since the FY2022 10-K, which described Bitcoin colocation with five crypto customers and a terminated mining operation; today HPC hosting is the growth engine, blockchain hosting is a one-customer legacy segment, and the cloud business sits in a ~97%-owned, separately listed subsidiary (ChronoScale).
- ✓ 2. Competitive advantage
APLD's stated edge is power-advantaged sites plus a standardized, repeatable AI-factory build (12-18 months per 100-150 MW) — not brand, licences or switching costs. The return record shows no pricing power yet: operating income was negative in FY2024, FY2025, FY2026 and TTM to 2026-08-31 (-$289.1M), and the sources give no gross margin after FY2023. The best evidence of advantage is ~1.4 GW of signed leases as of the 2026-07-29 10-K, but FY2026 revenue was 59% from one HPC customer, and it competes with Digital Realty, Equinix, self-building hyperscalers and a long list of power-advantaged crypto-to-HPC converters, so the position looks replicable and capital-dependent rather than durable.
- ✓ 3. 10-Q takeaways
Q1 FY2027 (three months ended 2026-08-31) revenue was $341.9 million, up 322% from $80.9 million, driven by $183.5 million of HPC tenant fit-out services plus the first $79.1 million of data center rental revenue. The GAAP result is still a loss — operating loss of $(62.4) million and net loss attributable to common stockholders of $(237.1) million including $(16.1) million from discontinued operations — with $(49.5) million derivative and $(11.4) million investment fair-value losses and $59.4 million of stock comp sitting between that and non-GAAP adjusted operating income of $37.8 million and adjusted EBITDA of $64.4 million (ChronoScale excluded). Interest expense jumped to $77.4 million from $8.0 million as the $1.59 billion 7.000% notes and other facilities came on. The 10-Q states no material change in risk factors versus the FY2026 10-K, and neither the 10-Q nor the earnings release gives numeric revenue or EPS guidance.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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