APLD Stock Surge: How CoreWeave Lease Amendments and Delta Forge 1 Milestones De-risk the Bull Case

Applied Digital has experienced a tumultuous year; however, it has consistently outperformed many data center companies during periods when investors shifted their focus to AI infrastructure-related bottlenecks or lease visibility. The stock has experienced large swings in price due to catalysts related to project execution, clarity in financing, and broader risk-off moves, as well as interest rate concerns and company-specific issues regarding dilution or debt. The stock's movement within the five days through April 16th is indicative of the various cross-currents influencing APLD’s stock price: excitement from amended terms of leases to CoreWeave (CRWV) and the anticipated completion of the build-out of the CoreWeave facility was somewhat offset by concerns about near-term financing and obligations to complete other lease agreements. Given the nature of APLD as a company, such volatility is not unexpected; however, the fundamental drivers of APLD’s stock price movement remain the same: positive trends in power, equipment, and tenant timing reaffirm the bull case for APLD; negative trends in any of the same areas will exacerbate APLD’s downside risks.

The third quarter was significant for two reasons: it provided a full quarter of leasing revenue from the HPC hosting business segment, which has produced operating margins of 24.7% right out of the gate. And management has reaffirmed its long-term goal of generating $1 billion in NOI within five years, which it plans to achieve by activating additional capacity at the Polaris Forge 1, Polaris Forge 2, and the Delta Forge 1 campus (300 MW).

Based on non-GAAP metrics, we expect earnings at the company to improve as additional facilities are converted from construction into revenue-generating status—and as stock compensation declines post the heavy construction phase.

Currently, the company is developing approximately 900 MW of IT load and is in the process of leasing another three sites, which will likely keep stock-based compensation elevated for the foreseeable future. However, Q3 has established that the long-term economics of the underlying leases will enable the company to reach its NOI target if management continues to execute effectively.

The biggest development since the last quarter is that CoreWeave’s lease agreements were amended to convert its tenant at Polaris Forge 1 from a non-investment-grade parent to an investment-grade rated special-purpose vehicle (SPV). This change will enable Applied Digital to achieve significant savings on financing through the completion of the final tranche of debt associated with the third building currently under development at Polaris Forge 1 and provide a more effective method of refinancing existing higher-cost campus debt under more favorable terms. As well, the company can benefit from parent-level guarantees and a $50 million letter of credit related to the SPV, reducing its overall counterparty risk profile even further. As a result of lower financing costs and greater covenant support, Applied Digital will be able to demonstrate to prospective hyperscaler tenants the ability to structure their lease cash flows to represent bankable, investment-grade cash flows rather than being rated based on the financial strength of non-investment grade entities.

The Delta Forge 1 leasing agreement is important because it is the next major milestone. Management anticipates the build-out of the first 150 MW (megawatt) building will happen in the middle of 2027, with an anticipated service date in FQ1 2028. They also anticipate the build-out of the second 150 MW building to be ready by the end of FQ4 2028. If the lease on the first building is finalized with a recognized investment-grade hyperscaler in the next months, it will provide an opportunity to diversify their existing tenant mix and validate pricing for the additional 300 MWs available at Delta Forge 1; moreover, the lease will help mitigate the financing risk related to construction timelines. Based on modeling using internal assumptions consistent with management's commentary, a 15-year lease structure on either building could add significant revenue starting in FY 2028, but only if the initial first building has been completed and operational for essentially the whole of FY 2028.

There is a near‑term timing risk: missing a lease milestone could trigger acceleration provisions on a Macquarie facility, introducing a liquidity challenge. Conversely, securing the lease on schedule could flip that risk into a positive catalyst by locking in long‑dated cash flows and facilitating more favorable refinancing.

Applied Digital exhibits edge on execution through various means. Due to global supply shortages of key electrical equipment (such as transformers, switchgear, and batteries) and insufficient available grid power to meet new demands for power within many geographic regions, data center construction start and finish dates have all been pushed back.

Also, Applied Digital had anticipated some of the constraints previously noted and began placing orders for MEP equipment in 2026, including even purchasing production capacity from manufacturers. By doing so, they have secured roughly 600-700 MW of MEP equipment per year, which is an unusual amount for a company of their size and provides them with credibility for timely delivery.

The divergent effect of this strategy was clearly shown this past year when a major, Texas-based AI campus reportedly experienced delays getting its first cluster operational while Applied Digital was able to deliver the first (100 MW) building constructed at their Polaris Forge 1 facility, on schedule, to CoreWeave.

Additionally, Applied Digital is in the process of commissioning the medium-voltage switchgear for a second building at Polaris Forge 1. Execution within an environment of scarce resources provides real competitive advantages, and increases in importance as hyperscalers continue to race against time to deploy their GPU environments at scale.

The projected timing of Polaris Forge 1 is on track to be fully built out with the anticipated 3rd 150 megawatt building being in service sometime in the first half of 2027, enabling Applied Digital to capitalize on all of their long-term leases.

On Polaris Forge 2, Applied Digital expects the 150 megawatt building to be built both in the 2nd half of 2026 and again in the 1st half of 2027 respectively. Applied has stated that they expect to lease the remaining 100 megawatt building at Polaris Forge 2 within the near future, and that Oracle has the first right of refusal on their entire 800 megawatt expansion opportunities.

Delta Forge 1 has 300 megawatts (MW) of capacity and is a swing factor for lease momentum and financing flexibility in the near term. Additionally, Applied Digital is currently developing and/or controlling sites with approximately 3.87 gigawatts (GW) of utility power across eight additional locations, three of which are actively being marketed. Recent comments speculate that two of these sites are under exclusive contract with the same hyperscaler who is negotiating a lease for Delta Forge 1, and Applied Digital expects that the agreements for those sites will be made by the end of the year.

Included in the company's project pipeline is a strategy to create independent power generation through a company called Base Electron, which has been formed by Applied Digital’s executives and directors. Base Electron entered into a $2.4 billion agreement with Babcock & Wilcox (BW) for four, 300 MW natural gas-fired boiler and turbine systems. This initial agreement will generate approximately 1.2 GW starting in 2028, with the option to expand by an additional 1.2 GW.

Applied Digital provided the guarantee for Base Electron's obligations in exchange for a 10% ownership stake in Base Electron. The covenants allow for the guarantee to be terminated upon Base Electron's IPO; when Base Electron raises at least $50 million; or for a termination fee, with different amounts depending on the date of termination relative to August 1, 2026. If Base Electron successfully executes on its agreements, Applied Digital not only benefits from the ownership stake with future upside, but they also will have a strategic power backstop for their future campus sites.

It’s possible for share prices of APLD to see a 100% increase over the next five years, although there are many factors that could cause this rise not necessarily to happen.

There are some elements of this potential increase already established; the presence of the lease agreements for the additional building construction for Polaris Forge sites one & two, likely future leases in Delta Forge with an investment-grade tenant, the ability to design & build/fast-track buildings when equipment is scarce, and finally a power supply strategy to mitigate a major bottleneck in the industry.

If Applied Digital succeeds with the above plans, they can use their new CoreWeave credit structure to refinance at lower rates (reducing cost of capital) and reduce the dilution of existing equity. If all of this holds true, then the calculation for reaching $1 billion of net operating income (NOI) by fiscal year end 2028 can be made with an increase to the equity value of APLD stock.

The entry point in 2026 depends on several milestones. Ideally, a positive setup would be the availability of the Delta Forge 1 lease with an executed lease agreement, the remaining funding for build-outs confirmed, and reassurance that Oracle's timeline is on track. As long as these things happen before the timing of deliveries slips and when financing becomes tight, waiting for confirmation may be more prudent than investing immediately.

At present, the investment opportunity is directly related to how well the company executes against existing bottlenecks. Applied Digital is taking a different approach from its competitors due to established lead times for equipment delivery and its present focus on working closely with tenants who need to increase their capacity quickly.

If these significant differences remain valid, Applied Digital has a viable strategy for delivering superior returns over the next five years which could result in an increase in value by 200%. Investors will continue monitoring metrics such as lease signings, available power, and capital structure discipline to evaluate potential future increases in value.