Applied Digital Corporation (APLD) saw its shares climb approximately 17% in Thursday morning trading following the announcement of a substantial $7.5 billion, 15-year lease agreement for its Polaris Forge 3 AI data center campus. The stock reached $46.42, up $6.90 on the session, with trading volume surging to roughly 18.7 million shares. The company's market capitalization stood near $13.1 billion, according to market data. This upward movement contrasted with a broader market decline, as the SPY and QQQ ETFs tracking the S&P 500 and Nasdaq-100 both traded lower in morning activity.
Lease Details and Financial Impact
The new "take-or-pay" lease, where the customer commits to paying for agreed capacity regardless of usage, covers the Polaris Forge 3 campus—the company's fourth AI Factory site. The facility is designed for 300 megawatts of critical IT load and approximately 430 megawatts of grid-connected utility power. Applied Digital did not disclose the customer's identity but described it as a "hyperscaler," a term typically referring to major cloud computing providers such as Amazon, Google, Meta, Microsoft, and Oracle.
The company stated that this agreement brings total contracted baseline revenue to $31 billion across its four AI campuses, with the potential to reach $73 billion if all renewal options are exercised. The new campus, located in an unnamed northern state, is expected to begin initial operations in August 2027.
Strategic Context and Market Reaction
Wes Cummins, Applied Digital's Chairman and CEO, emphasized that Polaris Forge 3 follows a "disciplined, repeatable AI Factory model" and noted that "momentum continues to build" as the company markets more than 1.7 gigawatts of grid-connected utility power across its existing and newly added sites. This lease follows a similar $7.5 billion agreement in April for the Delta Forge 1 campus, underscoring the growing demand for AI infrastructure.
Wall Street analysts quickly responded to the news. Citizens raised its price target on Applied Digital to $60 from $40, maintaining an Outperform rating and stating that the company has "rapidly strengthened its position as an AI infrastructure provider." Lake Street increased its target to $70, and Needham lifted its target to $66, both with Buy ratings. Needham analyst John Todaro noted that the new lease partially addresses concerns about the timing of lease signings, which had been a risk factor for the stock.
Financial Performance and Risks
Applied Digital's latest quarterly report provided some positive numbers for investors. The company reported fiscal third-quarter revenue of $126.6 million, representing a 139% year-over-year increase, and adjusted EBITDA of $44.1 million. As of February 28, it held $2.1 billion in cash, cash equivalents, and restricted cash, against $2.7 billion in debt.
However, analysts also highlighted several risks. The company faces significant execution challenges, including building and energizing large campuses, securing project financing, managing power and equipment risks, and avoiding over-dependence on a small number of large customers. The company's risk disclosures mention construction timing, access to capital, customer concentration, and power disruptions as potential factors that could impact outcomes.
Funding remains a key component of the story. Earlier this month, Applied Digital closed a $300 million senior secured bridge facility led by Goldman Sachs to support work at its Polaris Forge 1 campus, with expectations of seeking additional financing to complete construction.
For now, investors view the Polaris Forge 3 lease as evidence of sustained demand for AI infrastructure. The next major test will be the company's ability to deliver on its promises—bringing power online, controlling costs, and converting these multibillion-dollar contracts into steady cash flow.
