Why Applied Digital Stock Popped (Then Dropped) Today

What happened

Shares of Applied Digital (APLD -2.00%) briefly soared as much as 19% early Monday, then gave up its gains to trade down modestly as of 11:00 a.m. ET after the company announced mixed quarterly results for its first quarter of fiscal 2024 ended August 31, 2023.

So what

Applied Digital's quarterly revenue soared 425% year over year to $36.3 million, translating to a net loss of $9.6 million, or $0.10 per share (widening from $0.05 per share in the same year-ago period). Analysts, on average, were expecting a narrower net loss of $0.04 per share, but on lower revenue of $33.8 million.

It's not terribly surprising to see yet-to-be-profitable businesses in their early growth stages generating outsized losses on higher-than-expected revenue.

Meanwhile, the company credited its top-line beat to a combination of its operations in Jamestown, North Dakota, as well as an increase in energized megawatt (MW) capacity at its Ellendale, North Dakota facility.

Management added that the company has ordered 34,000 GPUs for its digital cloud service business, which provides high-performance computing power for AI and machine-learning applications. Applied Digital received and deployed an initial production cluster of 1,024 GPUs during the quarter, so it began recognizing revenue on its first cloud services contract.

Now what

Despite its quarterly revenue beat -- and this could explain the pullback after today's initial pop -- the company reiterated its previous guidance for full fiscal-year 2024 revenue of $385 million to $405 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $195 million to $205 million. The implication, in this case, is that Applied Digital expected the incremental revenue from its cloud-computing segment to arrive later during the fiscal year, regardless.

Putting aside the initial cloud-computing services revenue recognition, there were no big surprises this quarter that might otherwise merit this morning's brief rise. Applied Digital stock is simply responding as such.