Megaport Locks in $35M Three-Year Compute Deal With US AI Developer Tooling Firm
Megaport secures $35.4 million compute contract through Latitude.sh
Megaport (ASX: MP1) has announced that Latitude.sh, its wholly owned subsidiary, has secured a 36-month contract worth approximately USD$25.1 million (AUD$35.4 million) for compute and storage services. The contract represents approximately USD$8.4 million (AUD$11.8 million) in Annualised Recurring Revenue (ARR) and is structured as contracted revenue irrespective of usage, with commencement expected in H1 FY27.
The customer is a US-based, unlisted high-growth technology company operating in the developer tooling sector, serving enterprise demand for agentic AI and backed by institutional capital. The identity has not been disclosed for competitive reasons.
This represents a material shift in Latitude.sh’s revenue composition, historically weighted toward month-to-month on-demand compute bookings. The contracted nature of the deal provides revenue visibility over three years, reducing reliance on short-term usage patterns.
When big ASX news breaks, our subscribers know first
Latitude.sh compute platform delivers 31% ARR growth
Beyond this strategic contract, Latitude.sh has demonstrated rapid growth under Megaport’s ownership. Compute ARR for the platform’s on-demand product, excluding the newly announced deal, increased 31% to USD$58.7 million (AUD$82.7 million) as of 25 April 2026, up from USD$45.0 million (AUD$68.0 million) on 31 December 2025.
The recent ARR expansion has been accompanied by a significant lift in the proportion of contracted revenue compared to historical month-to-month business. Latitude.sh is positioned as critical infrastructure capturing AI-driven demand for CPU, GPU, and storage.
| Date | Compute ARR (USD) | Compute ARR (AUD) |
|---|---|---|
| 31 December 2025 | USD$45.0M | AUD$68.0M |
| 25 April 2026 | USD$58.7M | AUD$82.7M |
The 31% growth rate validates the Latitude.sh acquisition thesis and demonstrates Megaport’s ability to scale the compute platform organically alongside strategic contracted deals.
Megaport Network ARR grows 23% on constant currency basis
Megaport Network ARR (including India) reached AUD$272.0 million at 31 March 2026, up 23% on a constant currency basis compared to 31 March 2025. Excluding India, Network ARR increased 20% on a constant currency basis.
The Network segment remains the core business and continues to deliver double-digit growth alongside the newer compute offering, demonstrating momentum across both divisions of the combined Group.
What is contracted compute revenue and why it matters
Contracted compute revenue differs fundamentally from on-demand revenue in structure and investor appeal. On-demand compute operates on a month-to-month, usage-based model where customers pay for resources consumed without long-term commitments. This approach offers flexibility but creates revenue variability tied to customer usage patterns.
Contracted revenue, by contrast, involves fixed-term commitments where the customer agrees to pay a specified amount irrespective of actual usage over the contract period. This structure improves revenue predictability, reduces churn risk, and supports financial planning by locking in cash flows over multiple years.
Historically, Latitude.sh revenue was predominantly month-to-month. This contract represents a strategic shift toward longer-term committed relationships, which aligns with how enterprise customers typically procure critical infrastructure. The move de-risks the compute business model by reducing exposure to short-term demand fluctuations.
Capital deployment and 24-month payback economics
The contract will be supported by approximately USD$12.2 million (AUD$17.2 million) in incremental capital expenditure on CPU servers. Megaport has stated the investment carries a payback period of approximately 24 months, defined as the time required for cumulative EBITDA to exceed the initial CPU server capex.
This capital deployment counts toward the committed USD$86.0 million capex undertaking for CY26 and CY27 agreed as part of the Latitude.sh acquisition. The payback framework ensures the investment is self-funding within the contract term, while the hardware retains productive capacity beyond the initial 36 months.
The asset lifecycle follows these phases:
- Hardware has been ordered by Megaport
- Delivery is expected in FY26
- Phased deployment will commence in H1 FY27 aligned with customer requirements
- At contract conclusion, assets remain in the Latitude.sh compute pool for renewal by the existing customer or redeployment to on-demand revenue generation
The disciplined capital allocation approach ensures investments are tied to committed customer demand with quantified return profiles, rather than speculative capacity expansion.
FY26 guidance reaffirmed
Megaport has reaffirmed FY26 Revenue and EBITDA guidance for the combined Group as provided in the H1 FY26 results announcement lodged with ASX on 20 February 2026. FY26 Group Capex guidance of AUD$90 million to AUD$100 million remains unchanged, excluding this strategic deal.
To the extent that equipment acquired for this contract is delivered prior to 30 June 2026, FY26 Group Capex could increase by up to AUD$17.2 million. This reflects potential timing variability in hardware delivery but does not alter the underlying investment thesis or total committed capex.
Management’s decision to maintain existing guidance signals confidence in operational execution across both Network and Compute segments while transparently flagging potential capex timing impacts.
The next major ASX story will hit our subscribers first
CEO perspective on AI-driven infrastructure demand
Michael Reid, CEO
“Securing a contract of this size reflects both the scale of the opportunities we see in the compute market, and our disciplined approach to deploying capital. We will continue to evaluate similar opportunities, investing alongside committed customer demand at compelling paybacks, ensuring capital is deployed after rigorous analysis while supporting the long-term growth of these markets.”
Reid also highlighted the broader demand environment driving contract opportunities of this scale. The expansion in AI use cases is generating substantial demand for compute and storage, with CPUs remaining a critical component of the infrastructure that powers AI applications. As businesses increasingly seek flexible, high-performance automated infrastructure, Megaport is positioned to capture a growing share of this accelerating opportunity.
Management’s messaging reinforces a returns-focused approach to growth capital, where investments are evaluated against committed customer demand and quantified payback periods rather than pursuing growth without corresponding economic discipline.
The contract is expected to commence revenue recognition in H1 FY27, with phased deployment aligned to customer requirements. Latitude.sh ARR momentum continues across both on-demand and contracted revenue streams, while Megaport maintains financial discipline through structured capital allocation tied to customer commitments.
Want the Next Tech Infrastructure Winner in Your Inbox?
Join 20,000+ investors getting FREE breaking ASX tech news delivered within minutes of release, complete with in-depth analysis. Click the “Free Alerts” button at Big News Blast to start receiving alerts the moment market-moving announcements drop.