Applied Digital’s cloud computing business is set to be sold, marking a significant shift in the company’s focus as it struggles with declining revenues and heavy infrastructure investments.
Applied Digital Tumbles 30% on Revenue Miss; Plans Selling Cloud Computing Unit
Quarterly Earnings Report Sparks Market Selloff
Applied digital refers to the practical application of digital technologies, transforming traditional industries and processes.
This field combines technical expertise with business acumen, driving innovation and efficiency.
Key areas include data analytics, artificial intelligence, and cloud computing.
According to a report, 70% of companies have adopted digital transformation strategies, resulting in significant cost savings and improved customer engagement.
As technology continues to advance, applied digital will remain a vital component of modern industry.
The Texas company, which pivoted from crypto mining to high-performance computing, said it will sell its ‘cloud computing business’ to struggling cloud computing businesses.
A cloud computing unit, also known as a virtual machine (VM), is a self-contained computing environment that runs on a remote server.
It provides a dedicated allocation of resources, such as CPU, memory, and storage, to ensure efficient processing.
Cloud units can be scaled up or down as needed, making them ideal for fluctuating workloads.
They are often used in cloud infrastructure, allowing multiple users to share resources while maintaining security and isolation.
A Disappointing Q1 Report
Applied Digital (APLD) shares declined as much as 30% on Tuesday after the company’s quarterly earnings report disappointed. The firm reported $52.9 million in revenue for the quarter, which was nearly 18% below analyst expectations. Revenues of the cloud computing business also declined from the previous quarter.
Shift in Focus
The company has pivoted from its crypto mining roots to focus on high-performance computing (HPC) and AI-focused data centers. Despite this, the top-line miss, Applied Digital reported a non-GAAP net loss of $0.08 per share, beating analysts’ expectations of a $0.10 per-share loss. However, adjusted EBITDA came in at $10 million, a 41% miss compared to the expected $16.9 million, signaling continued margin pressure amid heavy infrastructure investments.
A Cloudy Future
A significant drag came from the company’s Cloud Services unit, which posted a sharp sequential revenue decline of 36%, falling from $27.7 million in the prior quarter to $17.8 million. Applied Digital attributed the drop to a shift from single-tenant contracts to a multi-tenant, on-demand GPU model—a transition that faced initial technical challenges.
Cloud services allow users to store and manage data online, providing access from anywhere with an internet connection.
They offer scalability, flexibility, and cost-effectiveness compared to traditional on-premise solutions.
Cloud providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP) offer a range of services including computing power, storage, databases, and security.
According to a report by MarketsandMarkets, the global cloud market is projected to grow from $445 billion in 2020 to $1.2 trillion by 2025.
A New Chapter
Notably, the board of directors approved on April 10 a plan to sell the Cloud Services business entirely, aiming to refocus on its core HPC data center operations and potentially position itself as a real estate investment trust (REIT) in the future. ‘We believe separating the Cloud Services business from our data center operations better serves the long-term interests of our shareholders,’ said CEO Wes Cummins on the company’s earnings call.
