Megaport Shares Jump 9% After Nearly $1 Billion in AI Contracts Trigger Major Revenue Guidance Upgrade

BRISBANE, Australia — Shares of Australian network and cloud infrastructure company Megaport jumped more than 9% on Tuesday after it announced nearly 1 billion Australian dollars in new artificial intelligence infrastructure contracts and sharply raised its full-year revenue and earnings forecasts.

Megaport stock closed at 20.63 Australian dollars, up 1.78 Australian dollars, or 9.44%, from Monday's close of 18.85 Australian dollars. The gain came after a far bigger jump earlier in the session, when the shares rose as much as 20.5% to their highest level since mid-August before investors took profits in the afternoon.

The rally made Megaport one of the top performers on the benchmark S&P/ASX 200 index, which closed up 0.34% on a day dominated by technology stocks.

Three new AI deals

Megaport said it signed three new AI infrastructure contracts with a combined total value of about 978.6 million Australian dollars ($687 million) through Latitude.sh, the U.S.-based cloud computing provider it acquired last year.

The contracts cover GPU and CPU computing power, networking and storage for AI applications and inference workloads, the process of running trained AI models to generate responses. The agreements have a weighted average term of just over four years.

Two of the deals are with new customers, while the third expands an existing relationship. Megaport did not name the customers, but said two are U.S.-based technology providers and the third is a publicly listed company that is the end user of its own AI workloads.

The contracts are expected to add about 232.4 million Australian dollars in annual recurring revenue once the equipment is fully deployed. Megaport said the deals will begin contributing revenue as hardware becomes operational through the third quarter of fiscal 2027 and reach their full run rate in the fourth quarter.

The company said customers will make prepayments of about 322.6 million Australian dollars, including about 281.5 million Australian dollars from a single new customer seeking rapid access to GPUs Megaport had already ordered. Megaport said it has already secured the power and data center space needed for the new contracts.

$2.3 billion in deals since April

The new agreements follow four similar AI infrastructure contracts worth 458.9 million Australian dollars that Megaport secured in early June. The company said it has now announced about 2.3 billion Australian dollars in total strategic contract value since April.

With the latest deals, Megaport said its pro forma group annual recurring revenue has climbed to about 1.1 billion Australian dollars, with more than 85% coming from North America. The company is already billing more than 500 million Australian dollars in group annual recurring revenue, not including the full impact of Tuesday's contracts.

Megaport's compute business has grown rapidly since the Latitude.sh acquisition. Compute annual recurring revenue reached 201.4 million Australian dollars as of Sept. 22, up 90% since the end of June and 227% since the deal was completed.

The company's core network business also continued to grow. Network annual recurring revenue reached 302.6 million Australian dollars in August, up 29% on a constant currency basis from a year earlier, while net revenue retention rose 6 percentage points to 116%.

Guidance raised

On the back of the new contracts, Megaport raised its fiscal 2027 group revenue forecast to between 720 million and 810 million Australian dollars, up from its previous range of 620 million to 730 million Australian dollars. The midpoint of the new range sits about 11% above analysts' prior estimates, according to Market Index.

The company also lifted its earnings before interest, taxes, depreciation and amortization margin forecast to 42% to 44%, up from 38% to 40%.

"Earlier deployments, new contracts, and network growth underpin our upgraded FY27 revenue and EBITDA margin guidance," Megaport CEO Michael Reid said.

Spending surges

The growth comes with a hefty price tag. Megaport raised its fiscal 2027 capital expenditure forecast by about 500 million Australian dollars to between 1.78 billion and 1.88 billion Australian dollars, reflecting the cost of equipment for the new contracts and about 360 million Australian dollars to replenish its pool of GPUs.

Megaport said it remains fully funded for the new contracts and the GPU pool replenishment, with pro forma liquidity of about 362.2 million Australian dollars.

The company recently completed a retail entitlement offer that raised about 308 million Australian dollars at 14.30 Australian dollars per share, as it builds out capacity to meet AI demand.

The sharp increase in spending may help explain why the stock gave back much of its early gain. Investors have grown increasingly focused on the capital intensity of AI infrastructure businesses, which must buy expensive chips and equipment upfront before contracts begin generating revenue.

Riding the AI wave

Megaport, founded in 2013, built its business providing software-defined networking that allows companies to connect to cloud services and data centers. Its acquisition of Latitude.sh marked a major push into AI computing, positioning it as a so-called neocloud provider that rents out GPU capacity to companies building and running AI models.

Demand for such services has soared as technology companies race to secure computing power for AI applications. That demand has benefited chipmakers and infrastructure providers around the world, though it has also raised concerns about whether the pace of spending can be sustained.

Tech sector rally

Megaport's gain came on a strong day for Australian technology stocks. The information technology sector rose 4.6%, making it the best-performing sector on the ASX 200.

Communications equipment maker Codan led the sector, soaring nearly 24% to a record high after sharply raising its profit outlook on strong demand from conflict regions.

The broader market recovered from a brief dip after the Reserve Bank of Australia raised its cash rate by 25 basis points to 4.60%, the highest level in about 15 years, citing inflation pressures from higher energy prices and AI-related demand.

Investors will be watching for updates on when Megaport's new contracts begin generating revenue, how quickly the company deploys its expanded GPU capacity and whether it can continue adding large AI customers.

The company's growing reliance on North American customers and heavy capital spending are also likely to remain in focus as Megaport works to turn its rapid contract wins into sustained profits.