Applied Digital Corporation (APLD) has signed a landmark 15-year lease agreement for its Polaris Forge 3 campus, marking the company's fourth major artificial intelligence data-center contract. The deal, valued at $7.5 billion in base-term revenue, brings Applied Digital's total contracted baseline revenue to an impressive $31 billion, underscoring its transformation from a speculative data-center developer into a key player in the AI infrastructure space.
Deal Details and Strategic Importance
The lease covers 300 megawatts of critical IT load at a new campus located in a northern U.S. state. The counterparty is a U.S.-based investment-grade hyperscaler—the same client that signed for the Delta Forge 1 lease in April. This take-or-pay agreement ensures that Applied Digital receives payment for reserved capacity regardless of usage, providing a stable revenue stream. Including potential renewals, the total value of the lease could reach up to $18.2 billion.
With this latest contract, Applied Digital's four AI Factory campuses now boast 1,200 megawatts of contracted IT load. CEO Wes Cummins highlighted the company's momentum, noting that it is currently marketing over 1.7 gigawatts of grid-connected utility power across its portfolio.
Market Reaction and Analyst Upgrades
Shares of Applied Digital were expected to open near $45.87 on Tuesday, continuing a strong rally driven by investor enthusiasm for companies capable of powering AI workloads. Wall Street analysts have responded with rapid price target increases. Lake Street's Rob Brown raised his target to $70 from $55, calling the company a 'premium platform position.' Needham lifted its target to $66 from $51, citing the speed at which the customer took additional capacity. Citizens Bank also boosted its target to $60 from $40, emphasizing Applied Digital's improved standing after securing a fourth 300-megawatt deal with a top-credit client. The average analyst target now stands at $58.60, with 10 analysts maintaining a 'Strong Buy' rating.
Financial Performance and Challenges
Applied Digital reported fiscal third-quarter revenue of $126.6 million, a 139% year-over-year increase, though the net loss attributable to common shareholders widened to $100.9 million. The company ended the quarter with $2.1 billion in cash and equivalents against $2.7 billion in debt. To support ongoing construction at Polaris Forge 1 in Ellendale, North Dakota, Applied Digital recently secured a $300 million senior secured bridge facility led by Goldman Sachs. CFO Saidal Mohmand stated that the goal is to align funding with project timelines while maintaining the flexibility to transition to longer-term financing later.
In a strategic move to sharpen its focus, Applied Digital spun off its cloud business as ChronoScale (ticker: CHRN) on May 5, retaining approximately 97% ownership. The separation highlights the different risk profiles between long-term data-center hosting contracts and shorter-cycle cloud compute operations.
Risks and Valuation Concerns
Despite the positive news, significant risks remain. Execution is paramount: the company must complete large-scale campus builds, secure sufficient power, raise or refinance capital, and retain key hyperscaler clients through the AI cycle. Potential delays in construction, financing issues, power supply challenges, or shifts in AI infrastructure demand could materially affect outcomes. The company's own forward-looking statements caution that actual results may differ materially from expectations.
Valuation adds another layer of pressure. As of May 25, Applied Digital's shares had surged 87.07% year-to-date and 513.24% over the past twelve months, trading at 37.34 times trailing sales—well above the sector median. While the contracted backlog is substantial, investors are paying a premium for future growth, leaving little room for error in execution.
