Big Customer Wins for Megaport's Compute Services

We expect Megaport's strategy in the near term will revolve around navigating significant pricing mistakes it made in early 2023, which put its products in an uncompetitive position. Our assessment of Megaport's products is that they are commodities, leaving price as the key deciding variable. Given recent price hikes made its products too expensive, compared with alternatives, the company found itself in a position where it either needs to revert recent prices hikes, which would lower revenue again while still leaving existing customers aggravated over the memory of the price hike, expend significantly more resources to sell its overpriced products or hope for competitors to raise prices as well. However, the company appears to have turned a corner in the second half of fiscal 2025, with returns on sales and marketing spending rising sharply.