Applied Digital secured $36 billion in contracted lease agreements, expanding capacity for AI data-center infrastructure.

Applied Digital (NASDAQ: APLD) has accumulated $36 billion in contracted lease value, though its shares remain well below their peak from the past year. The company's backlog rests heavily on a single $20 billion deal signed in the fourth quarter, representing more than half of total contracted capacity. Since that customer pays for space still under construction, Applied Digital's ability to deliver on schedule is central to the entire investment thesis.

The company has met two consecutive delivery milestones, shipping 100 megawatts on time last fall, followed by 75 megawatts at the same site—both at the Polaris Forge 1 campus. This early track record provides evidence that management can execute against its ambitious construction pipeline.

Revenue has grown at an average rate of 145% annually over three years, dwarfing the S&P 500's annualized revenue growth of 5.8% over the same period. Yet current sales reflect only the first 100 megawatts brought online during the most recent quarter, while the bulk of the 1.41 gigawatts under contract remains under construction and generating no rent.

Investors are pricing in future cash flows aggressively, with the stock trading at 14.2 times sales versus the S&P 500's 3.1 times multiple. The gap between contracted revenue and current earnings is stark: the company posted an operating margin of negative 35% over the past twelve months against the S&P 500 average of positive 18.6%. Management has accelerated its internal timeline dramatically, targeting $1 billion in net operating income run rate within one year—a goal previously expected to take five years.

A concentration of contracted revenue with a single investment-grade cloud provider offers credit quality but introduces substantial customer concentration risk. The stock's historical volatility underscores the downside exposure: shares fell 78% during the 2022 inflation shock and 65% during the 2025 tariff shock, both far exceeding broader market declines. A $10,000 position subjected to a repeat tariff-era decline would be worth approximately $3,500. Debt compounds the risk, with total debt equal to 62% of market value compared to 21% for the average S&P 500 constituent.

Management has identified power availability as the single largest constraint on growth. On the fiscal fourth quarter 2026 earnings call, it disclosed advanced talks with two potential customers for expansions of approximately 100 megawatts and 150 megawatts respectively. If both are signed, total contracted capacity would rise to 1.66 gigawatts and add more than $6 billion in contracted revenue at existing rates.

The investment case rests ultimately on three execution milestones: delivering campuses on schedule, securing utility interconnects in North Dakota, and converting base rent into sustained operating profit. Shareholders must judge whether current pricing adequately reflects the time, cost, and execution risk standing between the contracted backlog and actual earnings.