What happened

Shares of Applied Digital (NASDAQ: APLD) are making gains in today’s trading. The company’s share price was up 14.6% as of noon Friday, according to data from S&P Global Market Intelligence.

Applied Digital published a press release this morning announcing that its wholly owned subsidiary Sai Computing had secured a second customer for its artificial intelligence (AI) cloud service platform. The contract is worth $460 million over a three-year period and represents a significant win for Sai Computing and Applied Digital.

So what

Applied Digital announced the launch of its AI cloud business for last month and revealed that it had landed its first customer with a contract worth $180 million over a two-year period. By simple comparison, it looks like the company will be providing a wider range of services to the second customer that it has brought on board — and for a longer contracted duration.

Now what

Applied Digital generated just $14.1 million in sales in its third fiscal quarter, which ended Feb. 28, but it looks like business is on track to ramp up significantly. As a result, the company’s forward price-to-sales ratio has plummeted even though its share price and market capitalization have risen dramatically.

APLD Market Cap data by YCharts

The market is clearly excited about Applied Digital’s push into AI-focused data center offerings, and the company’s share price is now up roughly 511% year to date. With substantial contract wins for high-performance computing services, it’s clear that customers are giving significant votes of confidence to the company’s platform.

While it remains to be seen whether the company can continue winning new contracts, announcing two major customer additions over the last two months is a great sign.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.