Applied Digital Corporation (NASDAQ: APLD) saw its stock price plummet by 18.25% in pre-market trading on Tuesday, following a disappointing fiscal third-quarter earnings report and subsequent analyst downgrades. The digital infrastructure provider's performance fell short of market expectations, triggering a wave of concern among investors.

The company reported Q3 revenue of $52.9 million, representing a 22% year-over-year increase but significantly missing the consensus estimate of $63.42 million. While Applied Digital's adjusted loss per share of $0.08 beat expectations, the focus remained on the revenue shortfall and other worrying metrics. The net loss widened to $36.1 million from $25.2 million in the prior year period, and both the Cloud Services and Data Center Hosting segments experienced revenue declines.

Adding to investor concerns, Applied Digital's debt levels surged to $689.1 million, up from $79.5 million at the end of May 2024. This substantial increase in leverage, combined with the revenue miss, prompted several analysts to lower their price targets. Cantor Fitzgerald cut its target to $7 from $14, while H.C. Wainwright reduced its target to $7 from $12, citing the need to adjust for reduced revenue from cloud services. Despite maintaining buy ratings, analysts warned that the lack of a new customer announcement for the Ellendale data center site could pressure Applied Digital's shares in the near term. The pre-market plunge extends the company's year-to-date stock decline, which stood at approximately 28% prior to this latest drop, reflecting growing skepticism about Applied Digital's near-term growth prospects and financial health.