Applied Digital's AI Infrastructure Play: Why 2027 Revenue Ramps Matter

Applied Digital (APLD) is repositioning as an AI infrastructure powerhouse, pivoting from legacy data center operations toward high-performance compute hosting built on long-term contracts and innovative financing models. The company operates through two distinct business units: traditional data center hosting in North Dakota with ~286 MW of fully contracted capacity, and the growth-focused HPC segment designed specifically for power-dense AI workloads.

The Staged Revenue Acceleration Model

The real catalyst for APLD lies in its multi-year capacity deployment strategy across two flagship campuses. At Ellendale, Polaris Forge 1 is expanding to a fully leased 400 MW footprint with anchor tenant CoreWeave (CRWV). The lease ramp follows a deliberate schedule: 100 MW revenue recognition in late 2025, 150 MW mid-2026, and another 150 MW in 2027—transforming the earnings trajectory from installation-heavy near-term to recurring lease revenue by 2027.

Near Harwood, Polaris Forge 2 represents the next frontier. An initial 300 MW deployment is slated for 2026 with full capacity by 2027, anchored by a U.S. investment-grade hyperscaler that committed to 200 MW and secured preferential terms on an additional 800 MW. Combined, these projects underpin roughly $11 billion in contracted lease revenue from Polaris Forge 1 alone over ~15 years, with Polaris Forge 2 contributing approximately $5 billion under similar duration.

How the Business Model Shifts

Currently, revenues are compressed by one-time, lower-margin tenant buildout work tied to the initial 100 MW phase at Ellendale. Once facilities reach operational readiness, the narrative flips—revenue transforms into multi-year rental streams with substantially better unit economics. This transition is foundational to 2027’s significance: as staged ramps replace installation revenue with contracted recurring income, earnings visibility improves materially.

APLD is funding expansion through asset-level financing structures designed to minimize corporate dilution. In Q1 fiscal 2026, the company drew $112.5 million from a Macquarie preferred equity facility for Polaris Forge 1 and secured $50 million in equipment financing for Polaris Forge 2, with additional preferred equity raises following. Management targets 12-14 month build cycles and notes 700 MW currently under construction.

Technical Moat and Competitive Positioning

Design choices reinforce APLD’s differentiation in the AI infrastructure race. Direct-to-chip liquid cooling, a target PUE of 1.18, and near-zero water consumption—leveraging 200+ days of natural cooling in the Dakotas—enable rapid deployment of power-dense AI workloads. This efficiency matters as competition intensifies.

Equinix (EQIX) operates 260+ global data centers with its xScale portfolio targeting hyperscalers, while Riot Platforms (RIOT) is expanding beyond crypto mining, planning HPC facilities exceeding 1 GW for AI support. Yet APLD’s speed, liquid-cooling architecture, and long-duration customer relationships differentiate its value proposition.

What the Numbers Telegraphmonitor

Zacks projects fiscal 2026 revenues of $280.9 million (30.4% growth from fiscal 2025), with consensus expecting a 31-cent loss per share—an improvement from fiscal 2025’s 80-cent loss. APLD shares have surged 187.1% over the past year, outpacing the Finance sector’s 16.6% return.

The legacy hosting operations continue fully utilized, providing continuity as HPC lease revenue phases in. Once the 2026-2027 ramps materialize, the earnings profile should normalize as concentrated customer exposure is offset by long-duration, inflation-protected lease structures.

Applied Digital currently carries a Zacks Rank #3 (Hold).