Applied Digital Corporation (NASDAQ: APLD) Has a 0.83x Interest Test

Posted by Donna Armstrong on Oct 8th, 2026

What happened

Applied Digital Corporation (NASDAQ: APLD) reported $341.9 million of fiscal first-quarter revenue, up 322% from a year earlier. The cleaner operating figures were $64.4 million of adjusted EBITDA and $46.8 million of combined profit from its HPC-hosting and data-center-hosting segments.

The financing bill grew even faster. Interest expense reached $77.4 million, up from $8.0 million a year earlier as Applied Digital Corporation (NASDAQ: APLD) added debt to fund its AI data-center buildout.

Read more: Applied Digital (APLD) stock analysis and investment case

Why it matters

The direct answer is not yet on a gross basis. Divide $64.4 million of adjusted EBITDA by $77.4 million of interest expense and coverage was 0.83 times. In plain English, the company's preferred operating-earnings measure fell about $13.0 million short of the quarter's interest bill before capital spending or taxes.

A stricter segment-profit comparison is 0.60 times: $46.8 million divided by $77.4 million. The distinction matters because adjusted EBITDA excludes stock compensation and several transaction, legal and fair-value items. Neither ratio proves insolvency, but both show that new capacity still has to produce more recurring earnings.

There is a real countercase. Applied Digital Corporation (NASDAQ: APLD) earned $35.8 million of interest income, reducing net interest to about $41.6 million. Adjusted EBITDA covered that net figure 1.55 times, operating cash flow was positive $63.9 million, and cash, cash equivalents and restricted cash totaled $3.7 billion.

That cushion is not the same as durable coverage. About $728.0 million of the cash total was restricted, while investing outflow reached $2.1 billion during the quarter. Only $65.8 million of revenue was base rent. Another $183.5 million came from tenant fit-out services, so the 322% headline growth is not all recurring rent.

What's next

Applied Digital Corporation (NASDAQ: APLD) brought another 75 megawatts online after quarter-end and expects 300 megawatts of delivered capacity by year-end. The next report should show whether base rent and segment profit rise faster than interest expense.

The investment case strengthens if gross coverage moves above one without depending on interest income or drawing down construction reserves. Another sub-one reading, rising debt or weaker operating cash flow would keep financing, not demand, as the binding risk.

Sources

Applied Digital Corporation (NASDAQ: APLD) fiscal first-quarter 2027 results — Published October 7, 2026. Revenue, adjusted EBITDA, capacity, segment revenue and profit, interest expense, interest income and liquidity.
Applied Digital Corporation (NASDAQ: APLD) Form 10-Q — Filed October 7, 2026. Financial statements, segment profit, cash flow, restricted cash, security identity and non-GAAP reconciliation.
Photo: Racks Amravati Data Center by PiDatacenters — Stock photo taken August 17, 2021, at Pi Data Centers in Amravati, India. It does not depict an Applied Digital facility or the October 2026 earnings event.
Photo license: CC BY-SA 4.0 — PiDatacenters licensed the photograph under Creative Commons Attribution-ShareAlike 4.0. The original file is used without alteration. Responsive display may crop.

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Originally published on OptimistFi, evidence-first equity research. More at optimistfi.com.