NEXTDC delivers record contract wins and accelerating AI revenue conversion in H1 FY26
NEXTDC Limited reported a 137% increase in contracted utilisation to 416.6MW in its H1 FY26 results, representing the company’s strongest sales period on record. Net revenue grew 13% to $189.2 million, whilst underlying EBITDA advanced 9% to $115.3 million, underpinned by billing utilisation growth of 29% to 119.8MW.
The data centre operator’s 297MW forward order book represents approximately 2.5 times current billing utilisation, providing contracted revenue visibility through FY29. This order book is expected to convert progressively, with 77MW transitioning to billing in 2H26, 152MW in FY27, 55MW in FY28, and 13MW in FY29.
The H1 FY26 results demonstrate NEXTDC’s positioning within Australia’s accelerating AI infrastructure buildout, with 68% of contracted capacity now at power densities exceeding 9kW per rack. Cloud and AI deployments account for 59% of contracted megawatts, whilst ICT providers represent 33% and enterprise and government customers comprise 8%.
Understanding data centre forward order books
A forward order book in the data centre context represents contracted capacity that has not yet commenced generating revenue. These commitments typically reflect customer contracts signed for future deployment, where physical infrastructure is under construction or awaiting customer fit-out.
The conversion from contract signing to billing occurs in stages:
- Contract execution: Customer commits to specific power and space requirements with defined commencement dates
- Infrastructure development: Data centre builds or fits out the contracted capacity to customer specifications
- Customer deployment: Client installs servers, networking equipment, and commences testing
- Billing commencement: Revenue recognition begins once capacity becomes operational
This metric provides revenue visibility that most infrastructure businesses lack, functioning similarly to a construction company’s signed contracts. For NEXTDC, the 297MW forward order book underwrites substantial earnings growth as contracted capacity transitions to recurring billing over the next three financial years.
Forward order book conversion timeline through FY29
NEXTDC’s forward order book is scheduled to convert according to the following timeline:
| Period | Conversion (MW) | Cumulative Billing (MW) |
|---|---|---|
| 2H26 | 77MW | ~197MW |
| FY27 | 152MW | ~349MW |
| FY28 | 55MW | ~404MW |
| FY29 | 13MW | ~417MW |
FY27 represents the inflection point, with 152MW of contracted capacity converting to billing revenue. This single-year conversion approximates 127% of current billing utilisation (119.8MW), positioning FY27 as the primary earnings acceleration period. By the end of FY27, NEXTDC’s billing base is expected to roughly double from H1 FY26 levels, translating to material revenue and EBITDA expansion.
The conversion schedule reflects customer deployment timelines and facility readiness across NEXTDC’s development pipeline, with major projects including S3 Sydney, M3 Melbourne, and KL1 Kuala Lumpur progressing toward completion.
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Balance sheet strength supports $2.7 billion development pipeline
NEXTDC’s balance sheet comprises $7.0 billion in total assets, including $3.6 billion of owned land and buildings across prime metropolitan locations. The company maintains a liquidity position of $4.2 billion, consisting of $278 million in cash and $3.94 billion of undrawn debt facilities.
The capital structure features seven debt tranches maturing between FY30 and FY33, with no repayments required before December 2029. Gearing ratio stands at 33.9% (net debt to net debt plus equity), providing substantial headroom for the contracted development programme.
NEXTDC is preparing to launch a subordinated notes offering to fund its growing capacity pipeline and optimise long-term capital structure, subject to market conditions. In parallel, the company is evaluating partnering with third-party capital through a joint venture structure for the S4 and S7 hyperscale projects.
Capital formation initiatives:
- Subordinated notes offering scheduled for launch
- JVCo structure evaluation for S4 (350MW) and S7 (550MW+)
- Barrenjoey appointed as Lead Financial Adviser
- JVCo intended to enable capital recycling whilst retaining operational control
The JVCo structure offers capital recycling capacity without sacrificing operational control or long-term economic participation in NEXTDC’s hyperscale platform. Both S4 and S7 continue securing customer commitments whilst advancing through development milestones, with growing contracted revenue reducing project risk profiles.
Development projects advancing across the portfolio
NEXTDC currently has 273MW of capacity in progress and a further 50MW+ in planning, supporting contracted utilisation of 173% of built capacity. Capital expenditure in 1H26 totalled $1,285 million, focused on S3 Sydney, M3 Melbourne, and KL1 Kuala Lumpur, alongside expansion activities across the broader portfolio.
| Region | Built Capacity (MW) | In Progress (MW) | Contracted Utilisation (MW) | % of Built Capacity |
|---|---|---|---|---|
| NSW/ACT | 110.7 | 30.8 | 113.1 | 102% |
| Victoria | 106.0 | 216.0 | 280.1 | 264% |
| Rest of Australia | 24.2 | 11.1 | 13.4 | 56% |
| International | — | 15.0 | 10.0 | — |
Key project milestones:
- S4 Sydney: Development Approval secured with total capacity upgraded to 350MW
- M4 Melbourne: Development Approval secured for ~150MW facility
- S7 Sydney: Granted NSW Investment Delivery Authority fast-track status for 550MW+ development
- M3 Melbourne: Target capacity upgraded to 225MW, with 40MW operational and 185MW in progress
- KL1 Kuala Lumpur: 15MW in progress, practical completion targeted for 2H FY26
- TK1 Tokyo: Preliminary works commenced, marking NEXTDC’s first Japanese development
Contracted utilisation exceeding built capacity (173%) demonstrates demand outpacing supply across the portfolio. Development approvals for S4, M4, and S7’s fast-track status unlock the next wave of contracted capacity to support the forward order book conversion through FY29.
FY26 guidance maintained with capex upgraded on contract momentum
NEXTDC maintained FY26 revenue guidance of $390–400 million and underlying EBITDA guidance of $230–240 million, whilst upgrading capital expenditure guidance to $2,400–2,700 million (previously $2,200–2,400 million).
The capex upgrade reflects acceleration following 170MW+ of new contract wins secured during H1 FY26. Management stated the increased investment is demand-led rather than speculative, with development advancing only where customer commitments justify the expenditure.
CEO Commentary on Capital Allocation
“Acceleration of investment following material new contract wins of over 170MW in 1HFY26… 273MW of built capacity under development in line with contracted capacity.”
The revised guidance demonstrates NEXTDC’s disciplined approach to capacity expansion, matching development timelines to contracted customer requirements. With 273MW currently under construction and strong demand across cloud, AI, hyperscale, neocloud, and enterprise segments, the company is positioning to convert the 297MW forward order book without speculative overbuilding.
Customer mix driving high-density deployments
NEXTDC’s contracted capacity by customer category demonstrates concentration in cloud and AI infrastructure:
- Cloud & AI: 59% of contracted MW
- ICT Providers: 33% of contracted MW
- Enterprise & Government: 8% of contracted MW
High-density deployments (exceeding 9kW per rack) represent 68% of total contracted capacity, reflecting the infrastructure requirements of AI workloads and modern cloud applications. These deployments command premium pricing due to increased power delivery, cooling complexity, and network connectivity requirements.
Interconnection growth driven by ICT provider alliances now accounts for 88% of cross-connects by customer category, with enterprise and government customers benefiting from ecosystem services delivered through ICT partnerships. Interconnection revenue comprises 8% of net revenue, with growth in service offerings driving increased connectivity and enhanced returns.
The customer mix concentration in Cloud & AI positions NEXTDC to capture the Australian AI infrastructure buildout. High-density deployments improve facility utilisation economics by maximising revenue per square metre whilst reducing per-megawatt infrastructure costs through operational efficiencies.
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Investment outlook for NEXTDC shareholders
NEXTDC offers investors contracted revenue visibility through FY29 with a fully-funded balance sheet supporting $2.7 billion in development commitments. The 297MW forward order book represents a rare combination of growth certainty and infrastructure quality within the ASX technology sector.
Key investment thesis points:
- Earnings inflection in FY27: 152MW of billing conversion represents approximately 127% of current billing utilisation, positioning FY27 as the primary earnings acceleration year
- Funded development pipeline: $4.2 billion liquidity (cash plus undrawn facilities) eliminates near-term funding risk for contracted capacity expansion
- Strategic optionality: International expansion through KL1 Kuala Lumpur (2H26 opening), TK1 Tokyo (preliminary works commenced), and AK1 Auckland (planning underway)
- Capital recycling capacity: JVCo structure for S4 and S7 hyperscale projects enables growth without equity dilution whilst retaining operational control
- Demand concentration in AI infrastructure: 68% of contracted capacity at high-density specifications (>9kW) captures premium pricing and improving facility economics
The forward order book conversion schedule underwrites substantial organic revenue and EBITDA growth visibility, differentiating NEXTDC from speculative infrastructure developers. Contracted utilisation at 173% of built capacity validates management’s disciplined approach to capacity expansion, with development advancing only where customer commitments support investment.
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