Company Reports

Megaport shares jumped nearly 10% as it announced around AUD 1 billion in new artificial intelligence infrastructure contracts. Guidance for revenue was raised by 13% for fiscal 2027, and EBITDA margin guidance was 4 percentage points higher.

We expect Megaport's strategy in the near term will revolve around helping AI companies address the global shortage of compute through its new compute offerings. To that end, Megaport can leverage its existing presence in over 1,100 data centers to install small amounts of GPU capacity per center, which is then tied together with its networking technology to create capacity of sufficient scale to be interesting to AI companies.

We expect Megaport's strategy in the near term will revolve around helping AI companies address the global shortage of compute through its new compute offerings. To that end, Megaport can leverage its existing presence in over 1,100 data centers to install small amounts of GPU capacity per center, which is then tied together with its networking technology to create capacity of sufficient scale to be interesting to AI companies.

Megaport shares fell after full-year results showed adjusted EBITDA, which excludes stock-based compensation and certain nonrecurring items, up 24% to AUD 77 million, driven by 37% revenue growth. Coinciding with the results, the company announced AUD 500 million worth of new contracts.

Megaport is raising around AUD 827 million in a fully underwritten offering at a 1 for 3.08 pro rata accelerated nonrenounceable entitlement to fund four new large GPU contracts and the establishment of a new on-demand GPU pool.

We expect Megaport's strategy in the near term will revolve around helping AI companies address the global shortage of compute through its new compute offerings. To that, Megaport can leverage its existing presence in over 1,000 data centers to install small amounts of GPU capacity per center, that is then tied together with its networking technology to create capacity of sufficient scale to be interesting to AI companies.

Megaport announced three large contract wins for recently acquired subsidiary Latitude, valued at around AUD 250 million over the next three years. Shares closed up nearly 30% on the day.

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.

Megaport's first-half fiscal 2026 adjusted EBITDA, which excludes stock-based compensation and certain nonrecurring items, was up 28% on the prior year's 26% revenue growth. Shares dropped 8% on the result.

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.

Megaport agreed to acquire Latitude.sh for up to USD 300m in cash and scrip. To help fund the acquisition, it launched a fully underwritten AUD 200 million institutional placement and plans to run a nonunderwritten share purchase plan of up to AUD 20 million. Full-year guidance is unchanged.

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.

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.

Megaport reported fiscal 2025 normalized adjusted EBITDA, which excludes stock-based compensation and certain nonrecurring items, and is adjusted for currency movements, up a mere 4% on the prior year.

US President Donald Trump's tariffs have rattled global markets. Tariff rates have been raised to levels not seen in a century, which may set in motion a cascade of supply/demand side shocks, depending on how long and high these tariffs stay.

We raise our fair value estimate for no-moat Megaport by 4% to AUD 10.90 per share with first-half results. The company raised the lower end of its revenue guidance for the year by 1%, but left guidance for EBITDA, which excludes stock-based compensation and certain nonrecurring costs and benefits, unchanged.

We expect Megaport's strategy in the near term will revolve around navigating significant pricing mistakes it made in early 2023, which have put its products in an uncompetitive position. Our assessment of Megaport's products are 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 now finds 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.

We lower our fair value estimate for no-moat Megaport by 16% to AUD 10.50 per share. Management reaffirmed guidance for fiscal 2025, which we expected it to beat, and guided for fiscal 2026 to have a similar growth trajectory.

We expect Megaport's strategy in the near term will revolve around navigating significant pricing mistakes it made in early 2023, which have put its products in an uncompetitive position. Our assessment of Megaport's products are 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 now finds 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.

We expect Megaport will grow rapidly in the coming years in terms of revenue and profitability.