Key facts
- NextDC shares dropped 44%, erasing A$3.1 billion in market value.
- Delays in electricity network upgrades at its Melbourne M3 data centre will defer A$140 million in contracted revenue.
- The company is pausing new development projects and land acquisitions.
- NextDC lowered its 2027 net revenue forecast to A$475 million - A$500 million and EBITDA forecast to A$245 million - A$265 million.
- Capital expenditure outlook for 2027 was reduced to A$4.5 billion - A$5 billion.
SYDNEY Oct 21 (Reuters) - Australian data centre operator NextDC experienced a significant drop in its market capitalisation, shedding nearly half its value on Wednesday. This decline followed the company's announcement of substantial revenue forecast cuts for the upcoming year and a decision to halt future development projects. The issues stem from delays in electricity network upgrades at its major Melbourne asset, which will defer approximately A$140 million in contracted customer revenue this financial year.
The company stated it would shelve all new development projects and land acquisitions for the foreseeable future, while also evaluating capital recycling opportunities, including potential sales of selected development sites. The news sent NextDC shares down 44% and erased about A$3.1 billion from its market value in early trading, making it the biggest loser on the broader ASX200 benchmark index.
Investments in data centre operators have been robust, driven by expectations of surging demand for AI services fueling a new wave of digital infrastructure spending. However, recent market sentiment has weakened as investors scrutinize whether massive AI spending can justify soaring computing, land, and power costs. Signs of strain are emerging in some of these investments, evidenced by a data centre IPO withdrawal in Australia last week and increased selectivity from credit investors toward AI-linked companies.
NextDC now anticipates net revenue between A$475 million and A$500 million in 2027, a reduction from its previous outlook of A$615 million to A$640 million, excluding the affected M3 contracts. The company also lowered its 2027 underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) forecast to A$245 million to A$265 million, down from A$385 million to A$410 million, also excluding the affected M3 contracts.
Delays in works by Jemena Electricity Networks mean the next increase in power supply to NextDC's M3 Melbourne data centre is now expected in 2028. Jemena had suspended parts of the necessary electricity network works due to opposition from the community and stakeholders, and does not expect to recommence them before February 2027.
Tom Beadle, an analyst at RBC Capital Markets, commented that while the situation is out of NextDC's control, the delays in power supply and development applications for the M3 data centre highlight the real risk that community concerns around data centre developments pose to the timing of capacity delivery for data centre owners.
Separately, NextDC reduced its 2027 capital expenditure outlook to A$4.5 billion to A$5 billion from A$5.25 billion to A$5.75 billion and has initiated a detailed review of its spending program.