An acceleration in data center demand should accelerate Applied Digital's impressive growth.
Applied Digital is a major beneficiary of the AI infrastructure boom Applied Digital is poised to benefit significantly from the surging demand for AI data centers. Predictions indicate a rapid increase in net data center capacity, from 15.6 GW last year to an estimated 25 GW in 2026 and accelerating to 51.2 GW in 2027. Applied Digital, a company that designs, builds, and operates AI factories and data centers, has demonstrated remarkable growth, with its revenue in Q1 fiscal 2027 soaring 322% year over year to $342 million. This growth is driven by the delivery of new data center capacity. The company aims to expand its total data center capacity to 3.5-4 GW by the end of 2030, a substantial increase from its current 250 MW active capacity. Applied Digital currently holds $36 billion in contracted lease revenue across its five data center campuses, with a potential to reach $86 billion if renewal options are exercised. Analysts forecast its top line to more than triple within the next two fiscal years, underscoring its strong position in the expanding AI infrastructure market. But what about the debt? Concerns regarding Applied Digital's debt, which reached $6.4 billion in fiscal Q1, are addressed by the company's long-term financial strategy. The majority of this debt is structured to mature in fiscal 2031 or later, providing ample time for the company to service its obligations. Applied Digital's revenue growth is expected to accelerate significantly through fiscal 2029 and beyond as it continues to expand its data center capacity. The company projects that most of its planned capacity will be operational by 2028, reaching 1.51 GW. Crucially, Applied Digital anticipates net operating income margins of over 80% from its existing data center campuses, which should generate sufficient profits from 2029 onward to cover interest expenses and facilitate debt repayment. Analysts maintain a bullish outlook, with a 12-month median price target of $69, suggesting a 255% upside. With 18 out of 20 analysts recommending a 'buy' and a current price-to-sales ratio of just 6.5, the stock appears undervalued. Should Applied Digital achieve its projected revenue of $3.03 billion in fiscal 2029 while maintaining its current valuation, its market cap could exceed $19.7 billion, making it a potential multibagger for investors who capitalize on its current pullback.
Applied Digital is a major beneficiary of the AI infrastructure boom
Applied Digital is poised to benefit significantly from the surging demand for AI data centers. Predictions indicate a rapid increase in net data center capacity, from 15.6 GW last year to an estimated 25 GW in 2026 and accelerating to 51.2 GW in 2027. Applied Digital, a company that designs, builds, and operates AI factories and data centers, has demonstrated remarkable growth, with its revenue in Q1 fiscal 2027 soaring 322% year over year to $342 million. This growth is driven by the delivery of new data center capacity. The company aims to expand its total data center capacity to 3.5-4 GW by the end of 2030, a substantial increase from its current 250 MW active capacity. Applied Digital currently holds $36 billion in contracted lease revenue across its five data center campuses, with a potential to reach $86 billion if renewal options are exercised. Analysts forecast its top line to more than triple within the next two fiscal years, underscoring its strong position in the expanding AI infrastructure market.
But what about the debt?
Concerns regarding Applied Digital's debt, which reached $6.4 billion in fiscal Q1, are addressed by the company's long-term financial strategy. The majority of this debt is structured to mature in fiscal 2031 or later, providing ample time for the company to service its obligations. Applied Digital's revenue growth is expected to accelerate significantly through fiscal 2029 and beyond as it continues to expand its data center capacity. The company projects that most of its planned capacity will be operational by 2028, reaching 1.51 GW. Crucially, Applied Digital anticipates net operating income margins of over 80% from its existing data center campuses, which should generate sufficient profits from 2029 onward to cover interest expenses and facilitate debt repayment. Analysts maintain a bullish outlook, with a 12-month median price target of $69, suggesting a 255% upside. With 18 out of 20 analysts recommending a 'buy' and a current price-to-sales ratio of just 6.5, the stock appears undervalued. Should Applied Digital achieve its projected revenue of $3.03 billion in fiscal 2029 while maintaining its current valuation, its market cap could exceed $19.7 billion, making it a potential multibagger for investors who capitalize on its current pullback.
