Applied Digital stock skyrockets 13% on $5.00 billion investment

Key points

• Applied Digital is a data center operator.

• The company received $5 billion in funding from Macquarie Asset Management.

• Applied Digital reports its earnings on January 14 after the market closes.

Data center operator gets $5 billion investment from Macquarie.

Shares of Applied Digital (NASDAQ:APLD) were rising on Tuesday, up more than 13% on the day to roughly $8.80 per share.

The move comes on the day that the data center operator is set to release its fiscal second quarter earnings.

Earnings will be posted after the market closes on Tuesday. Analysts anticipate revenue of $61.6 million and a loss of 14 cents per share.

The catalyst Tuesday was a major investment in the company to bolster its data centers and high-performance computing (HPC) capabilities.

$5.00 billion investment

Applied Digital announced Tuesday that it had secured a $5.0 billion investment from Macquarie Asset Management (MAM) in the form of a perpetual preferred equity financing facility. That means the company has $5 billion it can tap into to invest in its growth.

Of that amount, $900 million will go toward the planned 400 MW build-out of Applied Digital’s Ellendale HPC data center campus. Part of it will also be used to pay off the bridge debt and other expenses. The other $4.1 billion will be available to invest in Applied Digital’s future HPC data center pipeline, as needed.

The company sees this as a transformative agreement that will allow Applied Digital to become a top-tier HPC data center designer and operator, building centers that can handle advanced AI workloads.

“We believe this expanded relationship with MAM positions Applied Digital for significant growth in the industry, establishing Applied Digital as one of the fastest-growing HPC data center owners, operators and developers in the United States,” Wes Cummins, chairman and CEO at Applied Digital, said.

Cummins said this agreement with Macquarie provides a significant portion of the equity needed to construct more than 2.0 GW of HPC data center capacity.

In the previous quarter, Cummins said the vision is to build and operate multiple HPC data centers.

“This starts with our Ellendale campus and continues with three additional campuses we are actively marketing totaling 1.4 GW,” he said in the Q1 earnings report. “We have added several industry veterans to our team and are already working on the design of our next two buildings, which will provide an additional 300 MW of capacity at our Ellendale HPC Campus.”

What is in store for Q2 earnings?

Applied Digital has been growing revenue at a robust pace as it moves toward profitability. In the first fiscal quarter ended August 31, the company increased revenue 67% year over year to $60.7 million and had a $4.2 million net loss, or 15 cents per share on an adjusted basis.

For Q2, analysts see a slight increase in revenue to $61.6 million and a slightly improved adjusted loss of 14 cents per share.

Analysts are likely waiting for Tuesday’s earnings to update their ratings and targets, but this news should be viewed as positive. Analysts are already bullish on Applied Digital stock, which is better positioned now to capitalize on the boom in AI and data centers.

Applied Digital has a median price target of $11 per share, which is 26% higher than the current price. While not yet profitable, the company is heading in that direction and this Macquarie funding will allow it to improve its balance sheet, as well as invest.

Interested investors should tune in for Tuesday’s afternoon’s earnings report. With its low entry price, this might be a grower to consider.