Company Reports

NextDC has a big opportunity in front of it, with ample room to increase its data center footprint in Australia and the Asia-Pacific region and reap the financial benefits that its larger scale should provide. The firm is already a primary provider of cloud on-ramps to the biggest global cloud providers, and we expect its importance for cloud connectivity and artificial intelligence compute power in Australia to grow.

NextDC ended fiscal 2026 with billing utilization of 175MW and a 565MW forward order book, the bulk of which should convert to billing over the next two years. Guidance is for fiscal 2027 revenue growth to jump to 55% from 16% in fiscal 2026 with underlying EBITDA growth of 60% forecast.

NextDC has a big opportunity in front of it, with ample room to increase its data center footprint in Australia and the Asia-Pacific region and reap the financial benefits that its larger scale should provide. The firm is already a primary provider of cloud on-ramps to the biggest global cloud providers, and we expect its importance for cloud connectivity and artificial intelligence compute power in Australia to grow.

NextDC has a big opportunity in front of it, with ample room to increase its data center footprint in Australia and the Asia-Pacific region and reap the financial benefits that its larger scale should provide. The firm is already a primary provider of cloud on-ramps to the biggest global cloud providers, and we expect its importance for cloud connectivity and artificial intelligence compute power in Australia to grow.

NextDC raised AUD 1.5 billion in equity at AUD 12.70 per share and increased its debt facilities by AUD 2.3 billion to fund increased capital expenditure to meet growing data center demand driven by AI.

NextDC reported first-half 2026 net revenue growth of 13%. Billing utilization increased 29% to 120 megawatts, which management guides to increase 2.7 times by fiscal 2027 and 3.4 times by fiscal 2028 based on the existing forward order book, given faster conversion rates for AI contracts.

NextDC has a big opportunity in front of it, with ample room to increase its data center footprint in Australia and the Asia-Pacific region and reap the financial benefits that its larger scale should provide. The firm is already a primary provider of cloud on-ramps to the biggest global cloud providers, and we expect its importance for cloud connectivity and artificial intelligence compute power in Australia to grow.

NextDC has a big opportunity in front of it, with ample room to increase its data center footprint within Australia and the Asia-Pacific region, and reap the financial benefits that its larger scale should provide. The firm is already a primary provider of cloud on ramps to the biggest global cloud providers, and we expect the firm’s importance for cloud connectivity in Australia to grow.

NextDC reported fiscal 2025 net revenue growth of 14%. Billing utilization increased by 29% to 110MW, which management guides to approximately double by fiscal 2027 based on existing contracted utilization, given faster conversion rates for AI contracts.

NextDC has a big opportunity in front of it, with ample room to increase its data center footprint within Australia and the Asia-Pacific region, and reap the financial benefits that its larger scale should provide. The firm is already a primary provider of cloud on ramps to the biggest global cloud providers, and we expect the firm’s importance for cloud connectivity in Australia to grow.

NextDC issued two updates since early May announcing contracted utilization increased by a total of 39% to 244MW since the end of 2024. Revenue recognition for these contract wins is expected from fiscal 2027, following completion of new data centers.

We believe securities in DigiCo, a newly created data center REIT and developer to be listed on the Australian Securities Exchange, are overvalued.

NextDC held its Annual General Meeting with bullish updates highlighting a very strong demand for global data centers, driven by the move to cloud and artificial intelligence.

NextDC has a big opportunity in front of it, with ample room to increase its data center footprint within Australia and the Asia-Pacific region, and reap the financial benefits that its larger scale should provide. The firm is already a primary provider of cloud on ramps to the biggest global cloud providers, and we expect the firm’s importance for cloud connectivity in Australia to grow.

NextDC’s first-half fiscal 2024 result highlighted a huge wall of customer demand, with customers now discussing larger opportunities than only a few years ago. Previously, it discussed 10-15 megawatt opportunities with customers, but it now discusses opportunities of more than 100 MW. Base-level demand from cloud computing is very strong, with customers discussing demand in 50 MW to 100 MW increments. The potential demand from artificial intelligence could be three to five times larger than this, coming from AI model training and inference. There is not enough supply at scale in the market to meet this demand, with management describing the urgency to deliver the planned capacity of its two Sydney data centers, S4 (targeted 300 MW capacity) and S5 (targeted 60 MW capacity), as critical. With such strong demand, NextDC sees per-unit pricing increasing, with annualized revenue per square meter and per MW reaching record levels in first half 2024.

NextDC has a big opportunity in front of it, with ample room to increase its data center footprint within Australia and the Asia-Pacific region, and reap the financial benefits that its larger scale should provide. The firm is already a primary provider of cloud on ramps to the biggest global cloud providers, and we expect the firm’s importance for cloud connectivity in Australia to grow.

NextDC’s fiscal 2023 (ending June 2023) result highlighted strong data center industry growth, with the company building 19.5 MW of capacity in fiscal 2023 with plans to build out a further 47.9 MW of capacity in fiscal 2024 that would imply the addition of around 60% capacity to its data center fleet over those two years. The company has also contracted 38 MW of capacity in the second half alone to end the fiscal year with 122.2 MW of contracted capacity. Total planned capacity has also more than doubled to 970 MW from 441 MW at the first-half 2023 result briefing. The costs associated with catering for this surge in demand and the projected future demand mean the anticipated earnings recovery has been pushed back, with the company guiding to underlying EBITDA of between AUD 190 million and AUD 200 million in fiscal 2024, broadly flat on the AUD 193.7 million reported in fiscal 2023. Fiscal 2024 capital expenditures are also forecast to increase to AUD 850 million to AUD 900 million from AUD 690.4 million in fiscal 2023 to support customer orders and accelerate expansion of existing projects, including M2 and M4. We lift our fair value estimate to AUD 12.00 from AUD 11.00 previously. While our near-term earnings forecasts have been reduced due to the extra costs of rapid expansion, this has been more than offset by increases in our long-term forecasts. We see the shares as slightly overvalued.

NextDC has a big opportunity in front of it, with ample room to increase its data centre footprint within Australia and the Asia-Pacific region, and reap the financial benefits that its larger scale should provide. The firm is already a primary provider of cloud on ramps to the biggest global cloud providers, and we expect the firm’s importance for cloud connectivity in Australia to grow.

NextDC has a big opportunity in front of it, with ample room to increase its data centre footprint within Australia and the Asia-Pacific region, and reap the financial benefits that its larger scale should provide. The firm is already a primary provider of cloud on ramps to the biggest global cloud providers, and we expect the firm’s importance for cloud connectivity in Australia to grow.

No-moat NextDC is increasing its share capital by around 12.5% through a fully underwritten 1-for-8 pro-rata accelerated nonrenounceable entitlement offer of new fully paid ordinary shares to raise AUD 618 million. The entitlement offer is priced at AUD 10.80 per new share, a discount of 7.5% to the current trading price of AUD 11.64. It is also at a small discount to our new fair value estimate of AUD 11.20, which we raised from the previous AUD 11.00 on our positive views on the use of the funds, particularly the accelerating of a fit-out of a Sydney data centre to meet unexpectedly strong demand. The institutional offer raised around AUD 416 million, while the retail offer opens on May 18 and is expected to close on May 31. We suggest investors take up their entitlements, provided doing so is consistent with individual investing goals.