Applied Digital (NASDAQ: APLD) has signed take-or-pay leases covering roughly 1,410 megawatts of capacity across five data center campuses, locking in what looks like a massive revenue base.
The total contracted rent across those 15-year leases amounts to approximately $36 billion, a figure that commands significant attention from investors scanning for long-term infrastructure plays.
The critical catch, however, is timing: Applied Digital only begins recognizing rental revenue when a property is ready for its intended use and the tenant formally takes possession.
That means a signed lease on an unfinished building generates zero rental income, regardless of how large the contracted figure appears on paper.
As of the company’s late-July update, only 175 megawatts of the total contracted capacity was live, leaving the vast majority of leased space still under construction.
The company’s own schedule of minimum lease payments illustrates just how gradually the contracted revenue materializes, with $451 million due in fiscal 2027 and $1.45 billion in fiscal 2028.
The figure rises to $2.25 billion in fiscal 2029, meaning less than $2 billion of the full $36 billion total, roughly 5%, arrives before that fiscal year.
Applied Digital’s annual report adds another layer of risk, warning that significant construction delays can, under certain circumstances, give tenants the right to terminate their leases entirely.
At a market capitalization of approximately $7.7 billion, the stock trades at more than 12 times fiscal 2026 sales and over three times the annual rent the completed portfolio is contracted to generate.
That valuation arguably prices in years of smooth, on-schedule construction, leaving little room for the kind of delays that infrastructure projects of this scale routinely encounter.
Management has delivered on schedule so far, and the take-or-pay lease structure does remove much of the demand-side risk that typically accompanies large development projects of this nature.
Still, most of the buildings do not yet exist, and lenders and preferred holders retain their position ahead of common shareholders in the capital structure.
Management expects Polaris Forge 2’s first buildings to begin coming online in calendar 2026, which would represent a meaningful step toward unlocking the broader contracted revenue stream.
For investors willing to wait, a clearer picture of construction progress and revenue recognition timelines may justify a closer look once more capacity comes online and the financial profile becomes easier to assess.
