NextDC plans nearly $1b spend on data centres as AI wave looms

Mr Scroggie mentioned that it is becoming increasingly clear that Australia will require a significant amount of new digital infrastructure each year to accommodate the expansion of AI. He believes that the demand for digital infrastructure due to the rise of AI could rival or even surpass that of cloud technology, potentially growing one, two, or even three times larger in the future.

NextDC's stock experienced a 6 percent decline, settling at $12.81 on Monday morning, though it managed to rebound to $13.21 before lunchtime. This year alone, the company's shares have seen an impressive surge of 47 percent.

NextDC is one of the few companies listed on the ASX that investors believe will profit from the growing need for computing power and data storage necessary to handle AI workloads.

According to Mr. Scroggie, NextDC experienced its highest number of newly signed contracts in the period of 12 months until June 30. The company's customer base grew by 13%, reaching a total of 1820 customers. Additionally, there was a significant increase of 47% in contracted utilization, which amounted to 122.2 megawatts.

The business predicts that its earnings for this fiscal year will fall somewhere between $400 million and $415 million. Additionally, it anticipates that profit margins will improve in the latter half of the year due to contracted price hikes filtering in and decreasing power expenses.

The projected underlying EBITDA is estimated to range from $190 million to $200 million, whereas the expenses for Australian facilities are predicted to rise from $12 million to $16 million. These expenses will be primarily driven by growth in workforce numbers and investments in land bank properties to facilitate future expansion.

Paul Mason, an analyst from E&P Capital, stated that the projected earnings were below market expectations, while the spending on investments was higher. According to Mr. Mason's note to his clients, these circumstances are likely due to increased expenses for establishing numerous new facilities and expanding the sales team for growth in the Asian market.

"We anticipate that the stock might experience some modest downward influence from the figures... prior to the market fully assimilating them. Once the market comprehends the situation, we anticipate a potential increase in the stock value."

During the fiscal year, the company acquired properties in Auckland and Kuala Lumpur to establish its initial data centers in New Zealand and Malaysia. Additionally, it extended its presence into fresh local markets in Adelaide, Darwin, and Port Hedland.

NextDC unveiled its third data centre in Sydney, known as S3, in October. Alongside that, they also introduced their biggest facility yet, M3, located in Melbourne. Additionally, a data centre was established in the Pilbara region to cater to mining clients like BHP.