Shares of Applied Digital Corp (NASDAQ:APLD) fell 32% on Tuesday after the company reported weaker-than-expected quarterly results and announced plans to exit its cloud services business.
The cryptocurrency miner and data center operator posted third-quarter revenue of $52.9 million, missing analyst estimates of $63.4 million.
Cloud services revenue declined 36% from the previous quarter, contributing to the miss.
Adjusted EBITDA came in at $10 million, 41% below expectations due to ongoing margin pressure from infrastructure spending, though the company reported a narrower-than-expected non-GAAP net loss of $0.08 per share versus estimates of $0.10.
Applied Digital said it will sell its cloud computing business and focus exclusively on high-performance computing (HPC) data centers. The company is also exploring a conversion into a real estate investment trust (REIT), according to CoinDesk.
Several headwinds were cited during the earnings call, including friction with data center customers who viewed the cloud business as a competitor, high power costs, rising interest expenses, and slower-than-expected leasing at its Ellendale campus.
Capital expenditures remain high at $30 million to $50 million per month, and concerns were raised about underutilized capacity and the risk of non-renewal for bitcoin hosting contracts.
Following the report, several analysts cut their price targets: H.C. Wainwright to $7 from $12, Cantor Fitzgerald to $7 from $14, and Needham to $10 from $11.