AI data-center developer Applied Digital beats expectations, but shares are sliding

Applied Digital, which builds data centers, saw its shares fall more than 6% in premarket trading on Thursday as rising losses overshadowed a strong revenue beat driven by robust demand for data center services, Reuters reports.

For the fiscal third quarter of 2026, ended February 28, Applied Digital reported revenue of $126.6 million, up 139% year over year, the company said on Wednesday evening. That figure was nearly 68% above Wall Street expectations, according to Barron’s data.

Despite the revenue beat, Applied Digital shares dropped more than 6% in premarket trading on Thursday to $27.97 per share, before paring losses.

The revenue outperformance was overshadowed by a widening net loss, Reuters notes. It nearly doubled to $70.6 million. The company recorded a $59.7 million loss related to its cloud services business.

Applied Digital had previously classified that unit as held for sale. In late December, it announced plans to spin off the business and combine it with Ekso Bionics, a developer of exoskeletons. The combined entity will be renamed ChronoScale and focus on accelerated computing. The transaction is expected to close in the next fiscal quarter.

Reuters also notes that in the reporting period Applied Digital’s costs nearly tripled to $212.3 million as the company ramped up investment in building and operating high-performance data centers. In January, the company began construction of its Delta Forge 1 campus in the southern U.S., with initial operations expected in mid-2027, according to the press release.

Applied Digital currently has four data center development sites. In addition to Delta Forge, one is located in North Dakota, where the company is building what it describes as one of the largest data centers in the world. Last year, the company also said capacity at the site would be leased to cloud platform CoreWeave. Investors in the campus include chipmaker Nvidia, funds managed by Macquarie Asset Management, and Japan’s SMBC banking group.

The locations of the remaining two sites have not been disclosed.

“We are seeing a clear acceleration in demand for high-performance AI data center capacity, with hyperscalers as aggressive as we have ever seen them,” CEO Wes Cummins said.

“Just three months ago, we referenced approximately $400 billion in annual capital expenditures from the largest U.S. hyperscalers. That figure has now been reported to have increased to nearly $700 billion. We believe these enormous investments highlight the intense pressure on power and infrastructure and that these trends will only increase the long-term value of our high-quality, lower-cost sites like those we operate today.”

Applied Digital shares are up 13% year to date. The stock has 14 Wall Street analyst ratings, all of them “buy.” The average target price is $49.40 per share, implying upside of nearly 78%.