NextDC’s weaker outlook raises ‘low-balling’ concerns

The tech group has forecast an annual revenue drop of about 14 per cent, but some analysts say the data centre giant may be ‘low-balling’ its outlook.

NextDC CEO Craig Scroggie at its data centre in Fortitude Valley, Brisbane. Picture: Mark Cranitch

NextDC’s lower fiscal guidance has left cause for concern with some analysts expecting consensus downgrades while others have made the assertion the company has intentionally “low-balled” the figures.

Those concerns arrive as the data centre giant forecast a net revenue drop of about 14 per cent over the next 12 months, expecting to generate revenue of $340m to $350m for the 2025 ­financial year. This compares with a 12 per cent jump to $404.3m in the past 12 months.

NextDC is expecting just a slight jump in its annual underlying earnings, which is forecast to reach between $210m to $220m. That’s up about between 3 and 8 per cent from the $204m recorded in the 12 months to June 30.

Its shares closed down 4.3 per cent at $17.05 on Wednesday as analysts sought clarity on how the company planned to boost its revenue in the years ahead.

Part of those plans had been teased ahead of the company’s results, with boss Craig Scroggie announcing in The Australian earlier this year the company was building its first AI factory at a yet-to-be-disclosed location.

NextDC’s $100m A1 data centre on Pirie Street in Adelaide.

This month it became the first Australian-owned operator to achieve certification in NVIDIA’s DGX Platform, a move that would put it first in line for businesses looking to power AI products with NVIDIA’s chip.

In fiscal 2025, the company has already opened one new data centre, D1 in Darwin, and expects to open its $100m A1 Adelaide Data centre in September.

The company expects to spend between $900m and $1.1bn on capital expenditure in fiscal 2025.

NextDC has 15 operational data centres across Australia and has five more under construction. The company has plans to build seven more, one of which will be in Bangkok with a value of 13.76bn Thai baht ($600m). Japan and Singapore are also target markets.

Not all analysts were content with NextDC’s guidance. E&P’s Paul Mason suggested the company may be “low-balling” its outlook. “NextDC has reported its FY24 results, which are reasonably ahead of guidance and consensus,” he said. “The company looked like it was low-balling at the half-year result, having gone more than halfway through the underlying ­EBITDA top-end range already, and looks sort of like it is doing it again in its FY25 guidance. The market isn’t likely to sweat FY25 materially, and I wouldn’t be surprised if consensus ends up modelling an EBITDA figure above NXT’s guidance.”

Citi analyst Siraj Ahmed said there was also some concern that NextDC did not provide bookings guidance for FY25.

“We expect consensus downgrades given softer EBITDA guidance, however do note that NXT has a track record of setting conservative guidance and the cost investment is within NXT’s control,” he said.

“The share price performance is likely dependent on outlook commentary on the result call, especially on the billing ramp, as it could have implications on FY26 revenue growth.”

Despite the criticisms, NextDC chief executive Craig Scroggie said overall the company had recorded a “record result” and that FY25 would be a “landmark year”.

“As data centres become the factories of the future, transforming data into actionable insights, our focus is on capitalising on this historic technological transformation,” he said.

“These investments will reinforce our role as a critical enabler of innovation, where robust digital infrastructure is the foundation of tomorrow’s enterprises.”