Applied Digital (NASDAQ: APLD) has dropped 44.3% over the past three months, while the S&P 500 returned just 1.4% over the same period.
At roughly $24.90 per share, APLD sits approximately 50% below its 52-week high, making it one of the more dramatic pullbacks in the data center space.
Yet the stock still trades at 12.4 times sales, compared to 3.2 times for the broader S&P 500, which raises an obvious question about what investors are actually paying for.
The answer lies less in the current income statement and more in the contracted backlog, which stands at $36 billion in long-term lease value, up sharply from $7 billion just one year earlier.
Trailing twelve-month revenue was $0.6 billion, and fiscal Q4 2026 financials primarily reflect only the initial 100 megawatts online at Polaris Forge 1, with 75 megawatts more delivered at that site since.
Total contracted critical IT load across the company’s campuses is 1.41 gigawatts, meaning the visible revenue today represents only a fraction of what has already been signed and committed.
Management has identified two key constraints on delivery: when utility power arrives, and the company’s own supply chain capacity, which it estimates at roughly 700 megawatts of critical IT load per year.
That internal limit sits below the 1.5 gigawatts the company has contracted to deliver within a couple of years, a gap management acknowledges but argues its construction track record justifies confidence.
The first building at Polaris Forge 1 took approximately 24 months from the start of construction to come online, while the second was completed in under 12 months, suggesting meaningful efficiency gains.
Power supply for the next wave of capacity remains further out, with the company’s work with Base Electron covering roughly 1.2 gigawatts of natural gas-fired generation in the Dakotas, with that initial capacity arriving in 2029 and 2030.
The financial picture during this construction phase is challenging, with the operating margin running at -35.1%, compared to 18.5% for the S&P 500, meaning the company still loses money on its operations.
Debt stands at 71.6% of market value against 19.8% for the broader market, though cash represents 16.0% of total assets, compared to 6.6% for the market overall.
Questions have also surfaced around lease pricing, with analysts flagging whether the three most recent leases, covering 810 megawatts, reflected lower yields than peers.
Management has stated that its lease rates sit toward the higher end of the band for comparable deals and have increased since those discussions took place.
Roughly $20 billion of the $36 billion backlog came from those three leases, all signed with the same high investment-grade hyperscaler, creating meaningful concentration in the contracted revenue base.
The next concrete test of pricing strength will come when two expansion leases currently in negotiation, covering approximately 100 and 150 megawatts, are finalized at the materially higher rates management expects.
What investors are ultimately buying is a large contracted revenue stream, a build program running slightly ahead of the company’s own stated capacity limits, and an income statement that will not resolve the outcome for another year or two.
After a 63.2% twelve-month return followed by a 44.3% three-month fall, this is not a stock that fits comfortably into a passive or low-attention portfolio strategy.
