Applied Digital has demonstrated significant revenue growth, with a 51.4% year-over-year increase reported in Q2 2025 and a 22.2% year-over-year increase in Q3 2025. This growth is driven by the expansion of its cloud services business and the anticipation of revenue generation from its HPC data center segment, particularly the Ellendale campus. However, sequential revenue declines in some quarters and a reliance on a limited number of customers pose challenges to sustained growth.

The company's growth prospects are tied to its ability to secure and execute long-term lease agreements with hyperscalers for its HPC data centers. The $7 billion lease agreement with CoreWeave represents a significant revenue opportunity, but the actual realization of this revenue is spread over 15 years. Delays in securing leases for the Ellendale campus and the need to divest the Cloud Services business to reduce customer friction present challenges to near-term growth. The company's strategic shift towards HPC hosting, backed by substantial financial commitments from Macquarie and SMBC, underscores its commitment to positioning as a leader in the high-performance computing sector.

APLD's stock has experienced significant volatility, with periods of strong gains driven by positive news such as the CoreWeave deal and Nvidia's investment, followed by declines due to earnings misses and concerns about execution. The stock's quant rating has fluctuated between 'Hold' and 'Strong Buy,' reflecting the uncertainty surrounding the company's future prospects. The recent decline in stock price following CoreWeave selling its stake indicates market sensitivity to changes in key partnerships.

Applied Digital faces several risks, including delays in securing leases for its Ellendale campus, which could impact its ability to generate revenue and meet debt obligations. The company's high debt load and ongoing cash burn raise concerns about its financial sustainability. The potential impact of the Cloud Services Business sale on customer relationships and overall financial performance also presents a risk. Additionally, the company's reliance on a limited number of customers increases its vulnerability to customer churn.

Applied Digital is focusing on building AI-first data centers, which could provide a competitive edge in the HPC market. The company's partnership with Nvidia and its ability to offer liquid-cooled infrastructure demonstrate its commitment to innovation. However, the company faces competition from established players with greater resources and expertise.

The AI infrastructure and data center market is highly competitive, with established players like CoreWeave, Equinix, Digital Realty, Amazon, Microsoft, and Google. Applied Digital faces the challenge of differentiating itself and capturing market share in this crowded landscape. The company's success will depend on its ability to offer competitive pricing, superior technology, and strong customer relationships.

Macroeconomic factors, such as interest rate hikes and global trade tensions, could impact Applied Digital's business. Rising interest rates could increase the company's borrowing costs and make it more difficult to finance its expansion plans. Trade tensions could disrupt supply chains and increase the cost of equipment and materials.

The AI infrastructure market is experiencing exponential growth, driven by the increasing demand for AI and high-performance computing. Applied Digital is well-positioned to capitalize on this trend, but its success will depend on its ability to execute its growth strategy and capture market share. The company's focus on HPC data centers and its partnership with Nvidia provide a strong foundation for future growth.

The news articles do not mention any specific geopolitical or ownership risks for Applied Digital. However, as a company operating in the technology sector, it is subject to general geopolitical risks, such as trade wars and regulatory changes. The company's ownership structure appears to be diversified, with no single entity controlling a majority stake.