Shares of Applied Digital Corporation advanced sharply on Monday following the disclosure of new long-term performance incentives for top executives. The equity awards are contingent on the company securing significant data-center leasing agreements with major cloud providers and achieving specific profitability benchmarks.
Performance-Linked Compensation Structure
According to a recent SEC filing, President and co-founder Jason Zhang was granted 1.5 million performance stock units. These units vest based on signing long-term contracts with investment-grade hyperscalers, with thresholds starting at 600 megawatts and reaching up to 1.6 gigawatts. Additionally, 500,000 restricted stock units were awarded. Chief Financial Officer Saidal Mohmand received 750,000 performance units tied to net operating income targets of $1 billion and $2 billion by February 2031.
The company stated these awards serve in place of other equity grants for the next five years. The board indicated the potential dilution from both restricted and performance units would remain below 1% of shares outstanding at the time of the grant.
Strategic Shift and Analyst Outlook
Applied Digital is emphasizing its transition toward high-performance computing infrastructure tailored for artificial intelligence and cloud clients. The filing noted its 400-megawatt Ellendale, North Dakota campus is fully leased, with an additional 200-megawatt agreement for a second location in the state. The company anticipates revenue growth in 2026 as new facilities become operational.
Northland analyst Mike Grondahl responded to the filing by raising his price target for Applied Digital to $56. He highlighted potential leasing activity tied to a new investment-grade hyperscaler and designated the stock as his top pick for 2026.
Execution Risks and Investor Focus
Meeting these targets will require substantial capital and flawless execution. The company faces risks including construction delays, grid connection issues, rising borrowing costs, or failure to secure anticipated large-scale leases. Investors are now closely monitoring the timing of the next major lease signing and updates on facility readiness. The company's next earnings report is scheduled for May 8.
