Core Insights - Applied Digital (APLD) shares closed at $38.26, 9.5% below the 52-week high of $42.27, with a 172.7% increase over the past six months, outperforming the Zacks Finance sector's 9.3% increase and the Financial – Miscellaneous Services industry's 23.4% decline [1][9] - The rally in APLD shares is primarily due to the company's success in securing substantial hyperscale data center leases, validating its business model transformation [2] Financial Performance - APLD's long-term revenue outlook is supported by $16 billion in prospective lease revenues secured across 600 megawatts with investment-grade hyperscalers, including CoreWeave [5] - The CoreWeave agreement includes 400 megawatts at Polaris Forge 1, representing $11 billion in committed revenue over 15 years, with the first 100-megawatt building operational and generating lease income [5][6] - APLD reported $12 million in recognized lease revenues during the second quarter as CoreWeave's lease commenced partway through the quarter [5] - The Zacks Consensus Estimate for APLD's fiscal 2026 loss is pegged at 36 cents per share, improving 55% from the loss reported in fiscal 2025 [7][9] Balance Sheet and Financing - APLD concluded the second quarter with $2.3 billion in cash and cash equivalents against $2.6 billion in debt, providing substantial liquidity for capital-intensive expansion plans [8] - The company has access to $4.1 billion in remaining preferred equity capacity through the Macquarie Asset Management financing framework, enabling large-scale project funding while retaining over 85% ownership at the site level [8] - APLD completed a $2.35 billion offering of 9.25% senior secured notes due 2030, minimizing near-term refinancing risk [10] - An additional $382.5 million was raised after the quarter end, further bolstering financial flexibility [11] Business Model and Valuation - APLD is transitioning from pure development to recurring revenue generation, with expectations for lease revenues to ramp substantially over the next 18 to 24 months as additional buildings achieve operational status [6] - APLD currently trades at a forward price-to-sales multiple of 22.94x, significantly above the sector average of 9.23x and the industry average of 2.82x, reflecting investor expectations for substantial revenue growth [12] - The premium valuation appears difficult to justify given the extended timeline for revenue conversion and ongoing profitability challenges, with a GAAP net loss of $31.2 million reported during the second quarter [13][15] Strategic Developments - The planned spinoff of Applied Digital Cloud into ChronoScale separates distinct business models with different capital requirements, allowing independent operations in the competitive GPU-as-a-service market [11] - APLD will retain over 80% ownership in ChronoScale post-spinoff, preserving strategic upside while allowing for independent operations [11]