Applied Digital Corporation - Common Stock

Business quality has improved as long-term, take-or-pay leases with investment-grade hyperscalers including Oracle replaced earlier single-customer CoreWeave concentration, and project financing costs declined from 9.25% for PF1 to 6.75% for PF2. However, the capital stack severely limits common-equity residual value: each 100 MW project layers roughly 80% loan-to-cost debt, Macquarie perpetual preferred equity at a 12.75% PIK return, and a 15% noncontrolling interest, meaning Site NOI is far from distributable free cash flow.

Financial and cash-flow quality remain immature; FY2026 Q3 GAAP revenue of $126.6 million included substantial tenant-improvement revenue, a $59.65 million asset-classification loss, and $50.15 million of stock-based compensation, while nine-month operating cash flow was negative $42.86 million against $1.577 billion of growth CapEx. The base sum-of-the-parts valuation yields approximately $25 per share using 370 million fully diluted shares, close to the current market price, implying the market already prices in successful development without a deep discount.

Material risks include construction delays across multiple simultaneous campuses, parent-company completion guarantees, potential dilution from $2.0 billion of Series G capacity and convertible notes, and a distorted quoted market value for the ChronoScale stake. Near-term catalysts include the July 27, 2026 FY2026 Q4 earnings release, subsequent PF1 and PF2 delivery milestones, and CHRN monetization progress, with the greatest alpha coming from converting contracted MW into stabilized, refinanced rent rather than signing new contracts.