Can APLD Navigate Rising Interest Costs Amid Rapid Expansion Plans?

Applied Digital ramps AI data centers, but surging debt and rising interest costs outpace cash flows, pressuring margins and flexibility.

Applied Digital APLD is scaling its AI data center platform at a rapid pace, but the financial strain tied to this expansion is expected to intensify as interest costs rise alongside capital deployment. The company’s strategy of building large-scale pre-leased campuses backed by external financing is likely to keep funding needs elevated, translating into a structurally higher cost base.Interest expense is expected to remain on an upward trajectory following a 292% year-over-year increase to $11.5 million in the fiscal second quarter  of 2026, reflecting increased debt utilization. APLD’s $2.35 billion issuance of 9.25% senior secured notes due 2030 already embeds a relatively high financing cost, and the subsequent pricing of an additional $2.15 billion in senior secured notes at a 6.75% coupon due 2031 is likely to push total debt levels significantly higher. This expanding debt stack suggests that interest obligations will continue to scale ahead of cash flow realization.Earnings generation is expected to lag this rising cost structure in the near term.........

© Quartz