Applied Digital's Strategic Repositioning: How 2026-2027 Lease Ramp Transforms the Growth Narrative

Applied Digital APLD is executing a significant strategic repositioning, transitioning from traditional data center hosting toward AI-focused infrastructure with multi-year contracted leases. The company operates through two distinct business units: its established North Dakota data center operations providing 286 megawatts of fully contracted capacity, and the High-Performance Compute Hosting division—the real growth driver—which designs, builds, and operates next-generation AI facilities.

The Lease Ramp Timeline: Revenue Recognition Across Two Major Campuses

At the Ellendale location, Polaris Forge 1 represents the company’s flagship AI campus, fully leased to CoreWeave with a committed 400 MW capacity. The revenue recognition follows a staged schedule: the initial 100 MW phases to revenue in late 2025, 150 MW comes online mid-2026, and the final 150 MW in 2027. This staggered approach creates multiple revenue inflection points for investors tracking pivot trading opportunities across the sector.

Polaris Forge 2, under development near Harwood, targets 300 MW of operational capacity by 2026, scaling to full deployment in 2027. A tier-one U.S. investment-grade hyperscaler has committed to 200 MW with expansion rights on 800 additional MW across the planned 1 GW campus development—a structural arrangement that de-risks buildout decisions.

APLD’s capital structure for these projects reflects a disciplined approach: the company drew $112.5 million in preferred equity from Macquarie in Q1 fiscal 2026 for Polaris Forge 1, secured $50 million of equipment financing for the second campus, and subsequently raised additional equity tranches. Management targets a 12-to-14-month build cycle, with 700 MW currently under active construction across both campuses. This asset-level financing framework is designed to minimize corporate dilution while maintaining aggressive growth velocity.

Infrastructure Differentiation Through Liquid Cooling and Efficiency

The technical foundation centers on direct-to-chip liquid cooling deployment, achieving a design Power Usage Effectiveness (PUE) target of 1.18 and near-zero water consumption. These specifications are optimized for power-dense AI workloads, with the Dakota locations leveraging over 200 consecutive days of natural cooling annually to accelerate deployment timelines. This infrastructure advantage differentiates APLD from competitors managing higher thermal and water pressures in less optimal geographic locations.

Earnings Transformation: From Installation Revenue to Durable Rental Streams

The near-term earnings picture remains influenced by lower-margin tenant build-out activities tied to the initial 100 MW phase at Ellendale. However, as facilities transition to “Ready for Service” status and ramp fully online, the revenue composition shifts fundamentally. Multi-year lease income replaces installation work, bringing superior unit economics and greater earnings predictability.

APLD projects approximately $11 billion in contracted lease revenues from Polaris Forge 1 over a 15-year period, with Polaris Forge 2 representing approximately $5 billion across its contractual term. While customer concentration is material, the extended duration and contractual locks on these rental streams establish more sustainable earnings architecture once staged lease activation begins. The legacy North Dakota operations remain fully utilized, providing earnings continuity during the transition.

Consensus expectations peg fiscal 2026 revenues at $280.9 million, implying 30.4% year-over-year growth from fiscal 2025 results. The consensus loss estimate stands at 31 cents per share for fiscal 2026, compared to actual losses of 80 cents in fiscal 2025—a meaningful margin improvement trajectory. This earnings bridge reflects the operating leverage embedded in the transition from construction services to recurring lease income.

Competitive Pressure and Market Share Dynamics

APLD operates within an increasingly competitive landscape where established data center operators are repositioning for AI infrastructure demand. Equinix operates more than 260 data centers globally and deploys its xScale portfolio specifically targeting hyperscalers seeking power-dense infrastructure solutions. Simultaneously, Riot Platforms is expanding beyond its legacy crypto mining operations, with new HPC facilities planned to exceed 1 gigawatt of capacity dedicated to AI workload support. This competitive intensity underscores how APLD’s execution speed and thermal efficiency design function as key differentiators.

The quality of lease depth and tenant quality will likely determine competitive winners in this crowded field pursuing similar demand curves.

Stock Performance and Valuation Context

Applied Digital shares have appreciated 187.1% over the trailing 12-month period, significantly outpacing the broader financial sector’s 16.6% return. The stock currently holds a Zacks Rank #3 (Hold) rating, reflecting balanced risk-reward positioning as the company navigates the critical 2026-2027 revenue inflection period.

The strategic lease ramp across Polaris Forge 1 and 2 represents the critical juncture where APLD’s repositioning either validates its infrastructure advantage or faces execution risks common to high-growth infrastructure buildouts. Investors monitoring this space should track quarterly progress on lease activation, tenant utilization rates, and management commentary on build cycle adherence.