So, Applied Digital just landed an $11 billion deal and everyone on Wall Street is popping champagne. The stock is a rocket ship, the revenue charts are pointing to the moon, and the CEO is out there talking about being a "trusted strategic partner."
Give me a break.
I’ve seen this movie before. A company, riding the absolute peak of a hype cycle—in this case, the AI gold rush—announces a number so gargantuan it short-circuits the part of the brain that does actual math. Eleven. Billion. Dollars. It sounds incredible, doesn't it? It’s the kind of number that makes you feel like you’re missing out, like you should be mortgaging your house to buy APLD stock. And that's exactly what they want you to feel. But let's do what nobody else seems to be doing: let's actually read the fine print.
I'll give them this: the top-line numbers are gorgeous. Revenue is up 84% year-over-year. The stock has gone completely vertical, up over 300% in a year. They signed a monster deal with CoreWeave to fully lease out their massive 400-megawatt data center in North Dakota, a deal detailed in Applied Digital Stock Surges In After-Hours Trading Amid Strong Q1 Earnings, $11 Billion Lease Deal - Applied Digital (NASDAQ:APLD). It's the perfect story for a market that has the attention span of a goldfish and a desperate hunger for anything with "AI" stamped on it.
This whole thing is like watching someone build a palace on a credit card. From the street, it's breathtaking. Marble columns, gold fixtures, a ten-car garage. You see the press release about the "$11 Billion Palace" and think, "Wow, that guy must be loaded." But you don't see the mountain of debt statements piling up on the kitchen table inside. You don't see that the owner is actually losing money every single month just to keep the lights on.
That's Applied Digital right now. They’re building the palaces for the AI kings like CoreWeave, and the scale is undeniably impressive. But who is footing the bill for construction? And when does the cash register actually start ringing with profit, not just revenue? Are we just supposed to pretend that revenue and profit are the same thing now?
Okay, let's get into the weeds. That $11 billion in revenue sounds amazing until you realize it’s spread out over 15 years. That's not a jackpot, it's an annuity. A very, very long one. What will the AI landscape even look like in 2039? Will CoreWeave even be the same company? Betting your entire future on one tenant for a decade and a half seems... bold. No, 'bold' isn't the right word—it's borderline reckless.
While they were busy celebrating that 84% revenue jump to $64.2 million, the company also posted a net loss of $27.8 million for the quarter. Let me repeat that. They lost nearly $28 million. Their operating margin actually got worse. This isn't a bug; it's a feature of the "growth at all costs" model. They are burning cash to build these massive, power-hungry concrete boxes, and they're financing it all with a dizzying amount of debt and equity deals.
As of August 31, they were sitting on $687.3 million in debt. And that was before they took on another $362.5 million in financing to keep the bulldozers moving on their next project, such as the recently announced Applied Digital Stock Pops on Massive 150-Megawatt AI Data Center Expansion. It's an endless cycle of borrow and build, borrow and build. Offcourse, the hope is that one day the lease payments will finally overtake the debt payments and operational costs, but that day ain't today.
When CEO Wes Cummins says this deal "validates our platform and execution," what I hear is, "Thank God someone is willing to pay us to build this stuff because we sure can't afford it ourselves." It’s pure PR-speak designed to distract from the sea of red ink on the balance sheet. It’s honestly exhausting. Every press release is just a game of hiding the bad news behind one big, shiny number.
Then again, maybe I'm the one who's crazy. The market loves it. The stock is flying. Maybe losing tens of millions of dollars a quarter is the new definition of success and I just missed the memo.
Look, I'm not saying this is a guaranteed failure. Applied Digital is making a massive, leveraged bet on the idea that the demand for AI computing power is basically infinite. They might be right. But don't let the headlines fool you into thinking this is a sure thing. This isn't a company printing money; it's a construction company taking out massive loans, hoping its one big tenant pays rent on time for the next 15 years. It’s a high-wire act, and while the view is spectacular, the fall is a long way down.
