NTT: Investor Day Highlights Strong Global Data Center Portfolio

Narrow-moat NTT 9432 has held in investor day, focusing on two of its businesses, NTT global data centers and the smart energy business. As a recap, NTT plans to increase its EBITDA by 40% over the next five years from JPY 1.3 trillion in fiscal 2022 to JPY 1.8 trillion by fiscal 2027. NTT’s global data center business is expected to contribute around 20% on the incremental consolidated company growth target, with its EBITDA expecting to grow from JPY 80 billion in fiscal 2022 to JPY 180 billion by fiscal 2027. The smart energy business is tasked with helping NTT meet its target of level 3 carbon neutrality by 2040. We make no changes to our existing forecasts or our JPY 176 per share fair value for NTT. The company looks broadly fairly valued at these levels.

In order to help facilitate the targeted data center EBITDA growth, NTT has committed to spend JPY 1.5 trillion in the data center business over the five years to fiscal 2027. NTT has the third-largest global data center portfolio in the world behind Equinix and Digital Realty, both narrow-moat companies covered by Morningstar. Equinix has around 12% of the global data center colocation revenue market, with digital realty at around 9% and NTT at around 6%. The next largest is digital bridge at around 3%. Structure research forecasts 13.5% per year growth in total global data center revenue, excluding artificial intelligence, or AI, demand, out to 2028. NTT has seen very strong demand from AI in the U.S. over the past six months, with the company booking 100 MW of AI clients in the past two months, compared with a total booked capacity of 916 MW by the end of fiscal 2022. The company’s AI customers have also been inquiring about AI capabilities in Europe and Asia, so it expects AI growth to take off in those markets over the next 18 months.