What Could Derail Applied Digital Stock? Trefis Team Mon, October 12, 2026 at 6:32 PM EDT 4 min read APLD ^GSPC MARA RIOT CLSK Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
If investors holding Applied Digital (APLD) have a primary worry, it is likely not demand. The company generated $341.9 million in revenue during the fiscal first quarter of 2027, representing a 322% increase from a year earlier. Yet the stock still lost 23% over three months, while the S&P 500 gained 2.8%. The fundamental issue is that every data center must be built before a tenant pays rent on it. So where will the money to build them come from?
Applied Digital Is Building With Borrowed Money
Much of that funding is borrowed. Applied Digital ended the quarter carrying about $6.4 billion of debt. Against that liability, the company held roughly $2.9 billion in cash and $0.7 billion of restricted cash. The company sold $1.59 billion of senior secured notes, and management stated that these proceeds funded the third building at its Polaris Forge 1 campus.
The threat is a debt market that becomes less willing to lend. This subject surfaced during the October 7 earnings call, when an analyst described the bond market as "challenging to say the least" in a question to management. Executives responded by outlining options beyond high-yield bonds, including project finance backed by tenants with strong credit ratings. The overall funding framework begins with preferred equity from Macquarie Asset Management, followed by project-level debt.
If lenders pulled back, Applied Digital would face a stark choice: pay more to keep building, or build more slowly.
AI Data Centers Were Three-Quarters Of Fiscal Q1 Sales
The segment that builds and rents out data centers for AI computing brought in $262.6 million in the fiscal first quarter, representing about 77% of total revenue. Construction is also speeding up. Management expects to place over 600 megawatts into service in the next twelve months, against 250 megawatts in the past twelve.
The company is financing this expansion with debt that already equals 94.3% of its market value, against 20.6% for the S&P 500.
Although the share price has fallen significantly, current valuations still appear to assume the growth arrives. The stock sits 52% below its 52-week high. Because Applied Digital lost money over the past twelve months, its P/E is not meaningful. Instead, the stock sells for 8.1 times sales, against 3.1 for the S&P 500.
Is Applied Digital's Debt A Problem Today?
Not today. Management noted that more than 80% of the debt's principal does not come due until fiscal 2031 or later. Furthermore, the analyst's worry has not yet materialized in what Applied Digital pays to borrow. The company priced its new notes at 7%, against 9.25% on notes it placed last year. The funding risk is real, but it is moving slowly.
Applied Digital still has more money to raise, and how lenders will treat those future efforts is not yet known. History does show how the shares behave when markets turn: the stock has fallen much further than the market in past shocks. It lost 78% during the 2022 inflation shock, when the S&P 500 fell 24%. It also lost 62% in the 2023 yield shock, against a 9.5% drop for the index.
The next milestone to watch is the end of 2026. Management expects to sign about 250 megawatts of expansion leases by then, securing materially higher prices than earlier leases. If Applied Digital signs those leases and prices new project debt near the 7% of its latest notes, the market will know lenders are still willing to fund construction.
Does This Mean You Should Act On APLD?
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