NextDC Broker Ratings Updated: March 1

Macquarie – Following NextDC’s first-half results, Macquarie highlights that contracted utilisation from hyper-scale customers offers clear visibility on revenue and EBITDA, with potential medium-term growth from AI integration and cloud migration. An anticipated record contracted capacity in FY24, driven by hyper-scale demand, suggests a minimum of 15MW in the second half. Additionally, Macquarie underscores the significant AI opportunity, estimated at 3-5 times the current hyper-scale demand per availability zone of 150-300 MW. While all new projects remain on track, discussions with the NZ government regarding additional floors have delayed AK1’s progress.

Ord Minnett – Ord Minnett perceives a significant surge in customer demand based on NextDC’s first-half results, with discussions now involving larger opportunities. Despite NextDC guiding to unchanged revenue of $400-415 million, the broker anticipates potential surpassing of these figures. With a forward order book of 68.8 MW, expected to convert to revenue by the end of FY24 and ramp up over FY25-29, Ord Minnett highlights strong liquidity. However, the broker cautions that due to the lengthy planning, construction, and fitting-out processes for data centres, earnings and cash flow in the short to medium term could be negatively impacted. 

Citi – In a recent research update on NextDC following its H1 release, Citi analysts anticipate that the company’s booking momentum will continue to grow over the medium term, particularly with the increasing adoption of AI. Citi foresees the potential for 50 MWs per annum of bookings in the next few years, with further increases thereafter. While forecasts have been upgraded to reflect lower interest costs in the short term, the analysts expect the significant momentum to become more apparent in the medium to longer term.

UBS – UBS acknowledges the robust performance of NextDC, noting that first-half revenue and underlying earnings surpassed expectations. Strong demand, propelled by the cloud, AI, and enterprise migration to co-location, remains a driving force, with momentum in contracted megawatts persisting. The broker views the business as well-positioned to capitalise on the solid baseline cloud demand. However, UBS identifies inventory as a short-term growth constraint, while energy availability emerges as a longer-term concern.

Morgans – NextDC’s 1H results revealed revenue matching Morgans’ forecast and a 7% earnings (EBITDA) beat, attributed mainly to timing changes in additional growth-related operating costs. For the broker, NextDC’s appeal lies in the symbiotic relationship between hyperscale and enterprise (cloud and corporate colocation). While cloud/hyperscale accounted for the majority of the record 149MW’s contracted capacity (a 77% increase) in the 1H, the company also achieved a record 4MW of enterprise capacity sales in the 2Q of FY23. The broker’s forecasts for the next three years remain largely unchanged, but medium-term estimates have increased due to enhanced confidence in the outlook.