Applied Digital Q3 results crush estimates

Applied Digital delivered Q3 results far better than expected, but the stock is running into some overhead resistance.

For its fiscal Q3, the data center operator reported:

• Revenue of $126.6 million (estimate: $76.5 million).

• Adjusted EBITDA of $44.1 million (estimate: $20.8 million).

The stock had risen double digits during regular trading on Wednesday, with enthusiasm for risk assets returning as the US and Iran agreed to a two-week ceasefire. It was up another 3% after-hours, briefly breaching $30, before reversing to trade slightly negative as of 7:17 a.m. ET.

That $30 level is noteworthy, as it’s the strike with by far the most call open interest among options expiring this Friday. So if the shares are unable to breach that level, that will likely fuel some mechanical selling pressure as the contracts become less likely to be money-good following this catalyst.

“We are also starting to see the earnings power of our platform come through, with a full quarter of revenue from our first building now recognized,” Chairman and CEO Wes Cummins said in a press release. “That initial 100 MW represents approximately one-sixth of our contracted capacity and one-tenth of what is operating or under construction, but we believe it begins to show what’s possible from here as we continue to bring additional capacity online in the coming quarters.”

During the conference call that followed Q2 results three months ago, Cummins said that the company was in “advanced discussions” on three sites that represent 900 megawatts in total with “another investment-grade hyperscaler across multiple regions.”

When asked about the status of talks during the Q3 earnings call on Wednesday, Cummins said, “We have still three sites in exclusivity with hyperscaler, and we'll see how all of that plays out, but we feel really good, again, about those assets and getting those leases signed, at a minimum, I would say during this year, but I'm more optimistic that it will be more near-term.”

This looks poised to break a recent streak in which earnings reactions had been incredibly strong for APLD, with the shares gaining 8%, 16%, and 31% the session after dropping its three most recent sets of results.

“We continue to await the next lease(s) as APLD is now actively marketing 4 sites and has exclusivities in place with more than one hyperscaler,” wrote Needham analyst John Todaro. “Demand remains robust, but mgmt. emphasized new utilities and new counterparties is adding to longer time to lease signing than initially hoped.”