NextDC Shares Rebound 7% After Crash as Brokers Defend Data Center Operator Despite Melbourne Power Delay

SYDNEY — Shares of NextDC rose 7.5% on Thursday, recovering part of the previous day's record drop as analysts said the selloff had gone too far. The data center operator had cut its earnings forecast because of a power delay at one of its Melbourne sites.

The stock gained 40 Australian cents to close at A$5.75, giving the company a market value of about A$4.4 billion. More than 30 million shares changed hands. It traded between A$5.26 and A$5.83 and rose as much as 8.2% at one point.

The gain came on a weak day for the broader market. The S&P/ASX 200 index fell 0.43%, dragged down by mining, energy and retail stocks.

Biggest fall since listing

The rebound followed a 42% plunge on Wednesday, NextDC's largest one-day drop since it listed on the ASX in 2010. Its shares had traded at A$9.18 before a trading halt requested on Oct. 19 and fell as low as A$5.07 when trading resumed.

NextDC cut its guidance for the fiscal year ending June 30, 2027, after electricity distributor Jemena suspended parts of the 66-kilovolt power line upgrade needed to increase grid supply to its M3 data center in Melbourne's inner west.

Jemena attributed the suspension to safety concerns and a lack of access to work sites because of community and stakeholder opposition. It has told NextDC it does not expect to restart the work before February 2027. NextDC now expects the next increase in grid supply at M3 during fiscal 2028.

Forecast cut by about A$140 million

NextDC lowered its fiscal 2027 net revenue forecast to A$475 million to A$500 million, from A$615 million to A$640 million. It cut its underlying EBITDA forecast to A$245 million to A$265 million, from A$385 million to A$410 million. That is about 36% lower at the midpoint.

The affected M3 contracts accounted for about A$140 million of both revenue and EBITDA in the company's August guidance. Some of those contracts include service-level credits, and customers may be able to terminate them in some situations.

Chief executive Craig Scroggie said the company had removed the affected contracts from its forecast "until we can reliably estimate their contribution."

The company also cut its capital spending forecast to A$4.5 billion to A$5.0 billion, from A$5.25 billion to A$5.75 billion. It put all new developments and land purchases on hold and is reviewing possible site sales.

A Victorian government decision on a planning permit for M3's next two stages, filed in February, is also taking longer than expected.

Analysts call the selloff overdone

Several brokers kept bullish ratings after the guidance cut.

"The selloff is overdone and provides an attractive opportunity," Morgan Stanley analysts Andrew McLeod and Angela Sutcliffe said in a note. They also warned that NextDC now faces several important issues, including consultation with the local community and government.

Citi kept its buy rating and A$21.15 price target. It noted that the revised forecast excludes possible service-level credits.

Most analysts covering the company still rate the stock a buy or strong buy, according to market data providers.

Strong finances

NextDC said it had A$8.675 billion in liquidity as of Sept. 30, which gives it room to manage the delay and continue projects not affected by the Melbourne problem.

The company is one of Australia's largest data center developers and has benefited from growing demand from cloud companies and artificial intelligence businesses.

Long road back

Even after Thursday's gain, the stock is down about 64% over the past year and is near its lowest level in eight years. The M3 delay has highlighted a growing problem for AI infrastructure: getting enough power from the grid, along with local opposition to new large-scale projects.

NextDC said it will give more updates at its annual meeting on Nov. 20. Investors will want to know whether Jemena can restart work sooner, how M3 customers respond and whether planning approvals for the site's expansion move ahead.