NextDC swings to loss but eyes data centre growth

Data centre operator NextDC swung to a first-half loss as it invested in expensive new facilities to cater for growing demand for cloud computing and streaming.

Data centre operator NextDC swung to a first-half loss as it invested in expensive new facilities to meet growing demand for cloud computing and streaming.

The Brisbane-based company’s $2.7m loss after tax for the six months to December 31, 2022 compares to a $10.2m profit in the previous corresponding period in 2021.

Revenue from data centre services climbed 10 per cent to $159.7m while underlying earnings increased 15 per cent to $97.5m. Operating cash flow increased 3 per cent to $71.3m.

NextDC upgraded guidance for 2023 with data centre services revenue expected to be towards the top end of the $340m to $355m range with underlying remaining unchanged in the range of $190m to $198m.

Capital expenditure of between $620m and $670m has been upgraded from $380m to $420m as it acquires land and builds new data centres.

“NextDC remains on track to deliver another record financial performance in 2023 on the back of strong performance in the first half,” Mr Scroggie said. The shares closed 2.8 per cent higher at $10.31 on Tuesday.

Mr Scroggie said that with liquidity of $2bn and a record sales pipeline, the company remains in an position to take advantage of further customer growth. No dividend will be paid.

The Covid-19 pandemic had been an unexpected boon for NextDC with rising demand for cloud computing due to work-from-home arrangements, Zoom meetings and streaming.

Clients including Amazon Web Services, Microsoft Azure, Google Cloud and international investment banks are migrating more services to the cloud.

NextDC chief executive Craig Scroggie

Mr Scroggie said last year that the company was planning to roll out data centres in key Asian markets – including Japan, Indonesia, Singapore and Malaysia – as part of an international expansion “Asia is booming, with technologies actually skipping generations,” he said. NextDC last October opened its third data centre in Melbourne, its largest facility to date. The company expects to invest $1.5b in the technology campus over time, which spans a land area of more than 100,000 sqm.

The company also is developing another Sydney data centre; ‘topping out’ the new facility last year in Artarmon, located on Sydney’s lower North Shore. The centre comprises more than 26,000m2 of data halls and ancillary infrastructure over eight storeys.

NextDC, which has a market value of $4.6bn and uses the slogan “where the cloud lives,” is a business taking advantage of the fast-growing digital economy.

Founded by IT entrepreneur and richlister Bevan Slattery, NextDC’s first data centre in Brisbane cost a mere $150m when it opened in 2011. The latest ones being built in Sydney and Melbourne will cost over $1bn.

The rise of online banking and shopping, streaming and social media has pushed NextDC into the big league as demand surges for secure places to store the data necessary to run the digital economy. “A decade ago, the cloud did not exist and Amazon was a book store. But over the past 10 years we have witnessed the rise of the public and private cloud driven by software as a service, pay per view and streaming,” Mr Scroggie said.

Mr Scroggie, who was a founding board member of NextDC, said the data centre industry still had huge growth potential. “There has been a transformational way in how information technology has been managed,” he said. “But there is lots of room for growth.”

Originally published as NextDC swings to loss but eyes data centre growth