Digital infrastructure provider Applied Digital NASDAQ:APLD reported Q2 CY2026 results beating Wall Street’s revenue expectations, with sales up 581% year on year to $258.7 million. Its non-GAAP profit of $0.04 per share was significantly above analysts’ consensus estimates. The Company's HPC Hosting Business commenced operations at its first HPC data center at our Polaris Forge 1 campus resulting in the recognition of approximately $270.6 million related to tenant fit-out services.
Applied Digital (APLD) Q2 CY2026 Highlights:
- Revenue: $258.7 million vs analyst estimates of $104.3 million (581% year-on-year growth, 148% beat)
- Adjusted EPS: $0.04 vs analyst estimates of -$0.19 (significant beat)
- Adjusted EBITDA: $42.35 million vs analyst estimates of $29.78 million (16.4% margin, 42.2% beat)
- Operating Margin: -48.2%, up from -54.5% in the same quarter last year
- Free Cash Flow was -$1.16 billion compared to -$191.4 million in the same quarter last year
- Market Capitalization: $7.77 billion
“Nearly three years ago, we made a deliberate decision to build a company that scales, not just a company that builds data centers,” said Wes Cummins, Chairman and Chief Executive Officer of Applied Digital.
Company Overview
Pivoting from its origins in cryptocurrency mining to become a key player in the AI infrastructure boom, Applied Digital NASDAQ:APLD designs and operates specialized data centers that provide high-performance computing infrastructure for artificial intelligence and blockchain applications.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $576.2 million in revenue over the past 12 months, Applied Digital is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.
As you can see below, Applied Digital’s 172% annualized revenue growth over the last four years was incredible. This shows it had high demand, a useful starting point for our analysis.
Long-term growth is the most important, but within business services, a stretched historical view may miss new innovations or demand cycles. Applied Digital’s annualized revenue growth of 96.8% over the last two years is below its four-year trend, but we still think the results suggest healthy demand.
This quarter, Applied Digital reported magnificent year-on-year revenue growth of 581%, and its $258.7 million of revenue beat Wall Street’s estimates by 148%.
Looking ahead, sell-side analysts expect revenue to grow 59.2% over the next 12 months, a deceleration versus the last two years. Still, this projection is healthy and indicates the market sees success for its products and services.
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Adjusted Operating Margin
Adjusted operating margin is a key measure of profitability. Think of it as net income (the bottom line) excluding the impact of non-recurring expenses, taxes, and interest on debt - metrics less connected to business fundamentals.
Applied Digital was roughly breakeven when averaging the last five years of quarterly operating profits, one of the worst outcomes in the business services sector.
On the plus side, Applied Digital’s adjusted operating margin rose by 66.8 percentage points over the last five years, as its sales growth gave it operating leverage.
This quarter, Applied Digital generated an adjusted operating margin profit margin of 1.2%, up 9.3 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth — for example, a company could inflate its sales through excessive spending on advertising and promotions.
Applied Digital’s full-year EPS flipped from negative to positive over the last four years. This is a good sign and shows it’s at an inflection point.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For Applied Digital, its two-year annual EPS growth of 46.8% was higher than its four-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q2, Applied Digital reported adjusted EPS of $0.04, up from negative $0.03 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Applied Digital to perform poorly. Analysts forecast its full-year EPS will invert from $0.10 to negative $1.29.
Key Takeaways from Applied Digital’s Q2 Results
It was good to see Applied Digital beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The stock remained flat at $26.91 immediately following the results.
Sure, Applied Digital had a solid quarter, but if we look at the bigger picture, is this stock a buy? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. .