Applied Digital Set for Q3 Earnings: Analyst Expectations Rise

APLD's expected Q3 revenue growth showcases strong demand in cloud services but raises concerns about ongoing losses. As the company enters this earnings season, a mixed outlook presents both risks and opportunities for investors.

Date: 12-04-2025

AI Rating: 6

Earnings and Revenue Expectations: Applied Digital Corporation (APLD) is scheduled to report its Q3 fiscal 2025 results, with the Zacks Consensus Estimate projecting revenues of $63.57 million, indicating significant year-over-year growth of 46.63%. However, the company is still anticipated to report a loss of 11 cents per share, unchanged from previous estimates. This loss contrasts with the 52 cents loss reported in the same quarter last year. The ongoing underperformance in earnings relative to expectations reflects a concerning trend for investors.

Revenue Growth Drivers: APLD's growth in the cloud services business appears robust, bolstered by increased demand for high-performance computing (HPC) and the expansion of GPU clusters. A staggering 523% year-over-year revenue increase in this segment for the previous quarter speaks to APLD's positioning in an industry that continues to expand rapidly, largely fueled by AI applications. This momentum is expected to carry into the current earnings report, suggesting potential further revenue growth.

Profit Margins and Competitive Landscape: While the revenue growth is promising, investors must recognize the company’s challenges, including high operational costs and competitive pressure from established data center providers, such as Equinix. The investment from Macquarie Asset Management and notable players like NVIDIA enhances APLD’s liquidity and financial flexibility; however, rising expenses related to cloud business operations could dent profit margins moving forward.

Market Sentiment: Despite the expected growth on the revenue side, APLD shares have underperformed compared to the industry average, reflecting market sentiment that may be cautious due to its stretched valuation, indicated by a forward Price/Sales ratio of 3.29 against the industry’s average of 2.93. Such metrics can deter investors looking for value, but the company’s evolving partnerships and strong infrastructure could pave the way for long-term growth.

Overall, APLD’s mixed outlook, characterized by strong revenue growth alongside substantial losses, presents a nuanced picture for investors considering positions in the stock. A cautious approach may be warranted as investors wait for clearer signs of profitability and stability.

Stocks: APLD NVDA SMCI HPE