Applied Digital price target chopped at Roth

Roth has lowered it price target for Applied Digital Corporation (Applied Digital Corporation Stock Quote, Chart, News, Analysts, Financials TSXV:APLD) from $13 to $8.50 while maintaining its “Buy” rating based on revised financial estimates and company developments like technical issues, changes in business model and the planned sale of its Cloud Services business.

Darren Aftahi, Roth Managing Director and Senior Research Analyst, said APLD fell short of its third-quarter expectations mainly because it shifted its GPU use from dedicated contracts to a more flexible, on-demand setup and ran into technical problems. Those issues were resolved by mid-March. As expected, APLD’s board approved a plan to sell its Cloud Services business (AIC), which Mr. Aftahi sees as a positive step.

APLD’s Cloud Services business supplies high-performance computing for AI and machine learning. In an April 14 press release on its Q3 2025 results, the company said in the three months ending Feb. 28, 2025, it earned $17.8-million from this segment, up 220% from $5.6 million a year earlier. However, revenue dropped by $9.9-million from the previous quarter’s $27.7-million because the company shifted some GPU capacity from dedicated contracts to a more flexible, on-demand model.

Aftahi said Roth has adjusted its model going forward based on two major factors.

“(One) is the assumption that its AIC business does not grow any clusters based on its plan to sell that segment and that it remains fairly steady in the low $20Ms per Q going forward,” Aftahi said. “And (two) we now model for FY25/FY26 ending MW for HPC at 0MW/100 MW, respectively, down from 50MW/200MW prior. The combination has a material impact on our model with, for example, our FY’26 (May) revenue/AEBITDA falling by ~37%/46%, respectively.”

Aftahi thinks APLD will do $70.6-million in Adjusted EBITDA on revenue of $234.4-million in fiscal 2025. He said he expects those numbers will improve to $80.4-million on revenue of $275.5-million in fiscal 2026.

APLD Chairman and CEO Wes Cummins said, “We are confident in the progress we are making and remain committed to delivering sustainable, long-term value for our investors.”