Investment Thesis
Applied Digital is experiencing severe cash burn with negative operating cash flow of -$97.9M and massive negative free cash flow of -$899.4M, driven by extraordinarily high capital expenditure relative to revenue. Despite 5.5% revenue growth and a strong cash position of $1.9B, the company's negative profitability across all metrics (gross margin 5.8%, operating margin -27.9%, net margin -16.4%) indicates an unsustainable business model that is consuming capital at an alarming rate.
Strengths
- Strong liquidity position with $1.9B in cash and 4.82x current ratio providing runway for operations
- Revenue growth of 5.5% YoY shows top-line traction despite profitability challenges
- Low leverage with 0.00x debt-to-equity ratio and only $7.2M long-term debt minimizing financial distress risk
Risks
- Massive capital burn: -$899.4M free cash flow with CapEx at $801.5M suggests unsustainable investment cycle relative to $190.8M revenue
- Severe profitability deficit: negative operating margin of -27.9% and negative net margin of -16.4% indicate the business is unprofitable at all levels
- Cash runway concern: at current burn rate of ~$900M annually, the $1.9B cash position provides less than 2.5 years of runway without profitability inflection
Key Metrics to Watch
- Operating cash flow trend and path to positive cash generation
- Capital expenditure as percentage of revenue and CapEx efficiency metrics
- Gross margin expansion and operating leverage as revenue scales
- Cash balance depletion rate and timeline to cash flow breakeven
Financial Metrics
Revenue
190.8M
Net Income
-31.4M
EPS (Diluted)
$-0.14
Free Cash Flow
-899.4M
Total Assets
5.2B
Cash
1.9B
Profitability Ratios
Gross Margin
5.8%
Operating Margin
-27.9%
Net Margin
-16.4%
ROE
-2.2%
ROA
-0.6%
FCF Margin
-471.3%
Balance Sheet & Liquidity
Current Ratio
4.82x
Quick Ratio
4.82x
Debt/Equity
0.00x
Debt/Assets
60.4%
Interest Coverage
-1.98x
Long-term Debt
7.2M
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-03-20T00:58:11.103001 |
Data as of: 2025-11-30 |
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