Shares of Applied Digital hovered near $45.25 on Wednesday, following the announcement of a major 15-year lease agreement for its Polaris Forge 3 AI data center campus. The deal, valued at approximately $7.5 billion for the base term, pushes the company's total contracted capacity past the 1-gigawatt mark, underscoring its growing footprint in the AI infrastructure space.
Lease Details and Financial Impact
The lease, signed with an unnamed investment-grade hyperscaler, covers 300 megawatts of IT load at the company's fourth AI campus in a northern U.S. state. Including renewal options, the total potential value could reach $18.2 billion. This agreement brings Applied Digital's total contracted lease revenue to $31 billion across four AI Factory campuses, with a potential upside to $73 billion if all renewal options are exercised. The company now has 1,200 MW of contracted critical IT load, supported by roughly 1,670 MW of utility power.
Market Reaction and Analyst Sentiment
The stock traded at $45.25, up 0.24%, with intraday volume approaching 10 million shares. Wall Street has taken note of the momentum. Needham analyst John Todaro raised his price target to $66 from $51 on May 21, maintaining a Buy rating. Lake Street analyst Robert Brown increased his target to $70, citing strong demand. However, investors remain cautious about execution risks, including power procurement, construction timelines, and funding.
Operational and Financial Highlights
Applied Digital's fiscal third-quarter results, for the period ended February 28, showed revenue of $126.6 million, up 139% year-over-year. The company reported a net loss of $100.9 million to common stockholders, but adjusted EBITDA came in at $44.1 million. The company recently closed a $300 million senior secured bridge loan led by Goldman Sachs to fund its third AI data center at Polaris Forge 1. CFO Saidal Mohmand emphasized a focus on efficient capital procurement and long-term financing options.
Strategic Moves and Industry Context
The company completed the spin-off of its cloud division into ChronoScale, which now trades on Nasdaq under the ticker CHRN. Applied Digital retains approximately 97% ownership and invested $15.75 million at closing. CEO Wes Cummins highlighted the company's "disciplined, repeatable AI Factory model" and noted that momentum is building, with over 1.7 GW of grid-connected utility power now being marketed.
The broader AI data center market is becoming increasingly competitive. Digital Realty and Equinix have expanded their pipelines, while CoreWeave, a GPU cloud provider and tenant at Polaris Forge 1, remains a focal point in the race for AI-ready space.
Risks and Outlook
Despite the positive developments, risks remain. Trefis noted that Applied Digital's valuation of $44 still requires swift backlog conversion and flawless execution. Delays in power availability, rising costs, or softer AI leasing demand could pressure the company, which relies on its future campuses to generate cash flow. The stock has shown volatility in past selloffs, and investors are watching closely for execution milestones.
