Applied Digital Switches On More AI Capacity. Its Balance Sheet Tells a Riskier Story.
On October 2, Applied Digital announced that the second phase of "Building 2" at its Polaris Forge 1 campus in Ellendale, North Dakota, had reached "Ready for Service" across three 25-megawatt data halls — 75 MW of new capacity energized and, per the company, generating an immediate uptick in trading sentiment. It brings fully operational capacity at the site to 250 MW, with the full campus contracted to deliver 400 MW at buildout. The timing is not incidental: Applied Digital reports fiscal first-quarter results on October 7, and the milestone is the clearest signal yet of how much of that print will hinge on converting leased megawatts into actual cash flow.
Polaris Forge 1 exists because of one customer. CoreWeave signed on for 250 MW there in mid-2025 in a deal worth roughly $7 billion, then came back weeks later for another 150 MW, pushing the combined 15-year lease value to about $11 billion. That backlog transformed Applied Digital's income statement almost overnight: revenue that was $64.2 million in the quarter reported last October (up 84% year-over-year, with an adjusted loss of just 3 cents a share versus the 16-cent loss Wall Street had modeled) nearly doubled again by the following spring, hitting $126.6 million in the quarter reported in April, up 139% year-over-year. Shares that traded in single digits in early 2025 were up roughly 238% for the year by last October's earnings pop alone.
A debt-funded buildout for a single tenant
The growth has come with a financing bill. As of that April report, Applied Digital carried $2.7 billion in total debt against $2.1 billion in cash, after issuing $2.15 billion of 6.75% senior secured notes to fund the second Polaris Forge campus. Selling, general and administrative costs jumped 251% year-over-year to $79.7 million, driven by stock-based compensation and expansion overhead, even as adjusted EBITDA improved roughly sevenfold to $44.1 million. And of the company's roughly $16 billion contracted revenue backlog, about $11 billion — close to 69% — traces back to CoreWeave alone. Zacks assigned the stock its lowest rank, a "Strong Sell," citing a forward price-to-sales multiple above 11 times versus an industry average closer to 2.7 times, even as sell-side analysts following the stock have stayed almost uniformly bullish on price targets.
Financing the landlord, financing the tenant
That debt load kept growing through the summer. In June, Applied Digital closed a $350 million revolving credit facility — expandable to $550 million through an accordion feature — led by Goldman Sachs and five other banks, priced at SOFR plus 225 basis points and maturing in 2029. It stacked on top of a separate $300 million senior secured bridge loan, also arranged by Goldman a month earlier, specifically to fund a third data center building at Polaris Forge 1. Buried in the same announcement was a memorandum of understanding with CoreWeave permitting it to assign its lease at the campus — but only once Applied Digital hits certain credit-rating milestones it has not yet reached. In plain terms: the company financing a campus built almost entirely for one tenant is still borrowing at sub-investment-grade spreads, while that tenant has reserved the right to walk the lease to someone else once Applied Digital's credit improves.
The tenant isn't flush, either
CoreWeave's own books complicate the picture further. The company raised more than $20 billion in capital during 2026 alone — an $8.5 billion non-recourse investment-grade delayed-draw term loan, a $2 billion equity investment from Nvidia, and a $3.1 billion loan facility backed by GPUs and tied to customer contracts. Its debt climbed to $17.3 billion by the first quarter of 2026, up from $14.6 billion at the end of 2025, while capital expenditures of $7.7 billion in that same quarter dwarfed its $2.08 billion in revenue and produced a $740 million net loss and $4.71 billion in negative free cash flow.
Total liabilities against $4.759 billion in shareholders' equity leave little margin if a single anchor contract slips.
That is the structural tension investors will be pricing into Applied Digital's October 7 report: a landlord levering up to build capacity for a tenant that is itself levering up to pay for the compute it resells, with neither balance sheet carrying much cushion if growth merely slows rather than reverses. Each fresh megawatt coming online, like the 75 MW switched on this week, converts contracted backlog into recognizable base rent — the metric that will determine whether Applied Digital's cash flow is catching up to its debt service, or whether Ellendale's buildout still needs another round of financing before it pays for itself.
None of this is unique to Applied Digital and CoreWeave. It is a sharper, smaller-cap version of a question hanging over the entire AI infrastructure trade: how much of the buildout is being financed by end-customer demand, and how much by data-center operators and compute resellers extending credit to each other on the assumption that someone further down the chain eventually pays. For a stock that has returned well over 200% in a single year on the strength of one tenant's signature, that distinction is about to matter a great deal more than another ribbon-cutting at a North Dakota campus.