Applied Digital’s Shares Drop 30% After Disappointing Earnings; Announces Sale of Cloud Computing Unit

Shares of Applied Digital (APLD), a Texas-based company that has shifted from cryptocurrency mining to high-performance computing (HPC), took a significant hit on Tuesday after the company reported quarterly results that fell short of Wall Street expectations.

For the quarter ending February 28, 2025, Applied Digital posted revenue of $52.9 million, a 22% increase year-over-year but still below analysts’ consensus estimate of $64.5 million, marking an 18% miss. As a result, the company’s stock dropped by as much as 30%, trading around $3.90 per share in the early hours of the session.

Despite the revenue miss, the company managed to report a non-GAAP net loss of $0.08 per share, beating analysts’ expectations of a $0.10 loss. However, adjusted EBITDA came in at $10 million, falling short of the anticipated $16.9 million by 41%, indicating ongoing pressure on margins despite continued investments in infrastructure.

A key contributor to the disappointing results was the company’s Cloud Services unit, which saw a sharp 36% sequential decline in revenue, dropping from $27.7 million in the previous quarter to $17.8 million. This decline was attributed to the company’s transition from single-tenant contracts to a multi-tenant, on-demand GPU model, a move that encountered technical challenges.

In response to these setbacks, Applied Digital’s board of directors approved a plan on April 10 to sell the Cloud Services business. The sale is part of the company’s strategy to refocus on its core HPC data center operations and to explore the possibility of positioning itself as a real estate investment trust (REIT) in the future.

“We believe that spinning off the Cloud Services business will enable us to better align with our long-term strategy and create more value for our shareholders,” said CEO Wes Cummins during the company’s earnings call.