Applied Digital (APLD) drew fresh attention after reporting fiscal fourth quarter and full year 2026 results that paired very large revenue growth with continued losses, reflecting its rapid push into AI focused data center infrastructure.

The earnings release was followed by a sharp pullback, with a 1 day share price return of down 12.77% and a 30 day share price return of down 38.52%, even though the 1 year total shareholder return is 131.51%. This pattern points to cooling short term momentum in Applied Digital after very strong longer term gains as investors reassess the balance between rapid AI infrastructure growth and ongoing losses.

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Applied Digital now sits at the crossroads of fast growing AI infrastructure contracts and ongoing losses, after a steep pullback from earlier highs. Does that mix leave the stock looking overstretched, or still reasonably priced?

Most Popular Narrative: 68.3% Undervalued

Applied Digital closed at $23.22 compared to a most popular narrative fair value of $73.36, which frames the recent share price pullback very differently.

The company has recently secured long-term (15-year) leasing agreements with CoreWeave, a major AI hyperscaler, for its purpose-built AI/HPC data center campus, Polaris Forge 1, representing a total of $7 billion in contracted revenue and a multi-year, recurring, and predictable revenue stream that directly supports future revenue growth and cash flow stability.

Want to understand why this contracted revenue base supports such a high fair value for Applied Digital? The narrative leans heavily on rapid expansion, rising margins and a punchy earnings multiple that only makes sense with aggressive growth baked in.

Result: Fair Value of $73.36 (UNDERVALUED)

However, investors also need to weigh Applied Digital's reliance on a few large hyperscaler customers and its sizeable debt-funded buildout, which could quickly challenge this upbeat narrative.

Another View: Applied Digital and High Revenue Multiples

The community fair value of $73.36 for Applied Digital leans heavily on long duration AI data center contracts. A simple P/S cross check tells a more demanding story. Applied Digital trades on a P/S of 10.9x compared to 7.3x for peers and 1.8x for the broader US IT industry, even though the internal fair ratio is 12x. That gap suggests investors are already paying a premium for growth, so the key question is whether future execution will justify staying above peer levels or push the stock closer to the fair ratio over time.

Next Steps

With sentiment on Applied Digital split between concern and optimism, it makes sense to review the underlying data yourself and decide quickly where you stand. To frame that view, start by weighing the 1 key reward and 4 important warning signs.

Looking for more investment ideas beyond Applied Digital?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.