Australian AI data centre operator NextDC shares shed 42% on revenue delay, future plans on hold

By Scott Murdoch and Rajasik Mukherjee

SYDNEY, Oct 21 (Reuters) - Australian data centre operator NextDC shed nearly half of its market value on Wednesday after sharply cutting revenue forecasts for the year ahead and putting future developments on hold.

The company said delays to electricity network upgrades at one of its major Melbourne projects would mean about A$140 million ($98 million) worth of contracted customer revenue this financial year would be deferred.

NextDC said it would shelve all new development projects and land acquisitions for the foreseeable future and would evaluate capital recycling opportunities, including potential sales of selected development sites.

NextDC shares closed down 41.7% with about A$3 billion wiped from its market value in its worst day of trade since listing in 2010. The stock was also the biggest loser on the broader ASX200 benchmark index, which closed up 0.16%.

AI exuberance has given way to caution, dragging down data centre and technology stocks as investors reassess growth expectations and the sector's rich valuations.

Sentiment towards the new technology has weakened in recent weeks as investors question whether massive AI spending can justify soaring computing, land and power costs.

Signs of strain are emerging in some of those bets, with a data centre IPO withdrawn in Australia last week and credit investors becoming increasingly selective toward AI-linked companies.

Shares in South Korean AI firm Elice rebounded 30% on Wednesday after falling 32% on the stock's first day of trade on Tuesday. The debut was the worst ever in Seoul for a company's IPO that raised more than $100 million.

NextDC now expects net revenue of A$475 million to A$500 million in 2027, down from its prior outlook of A$615 million to A$640 million, excluding the affected M3 contracts.

The company also cut its 2027 underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) forecast to A$245 million to A$265 million, from A$385 million to A$410 million, excluding the affected M3 contracts.

Delays to works by Jemena Electricity Networks meant the next increase in supply to its M3 Melbourne data centre was now expected in 2028, NextDC said.

The site is also facing delayed approval times for its expansion plans due to an election being held in the state of Victoria on November 28.

"Together with later grid supply, this delays M3's final capacity stages by several years," said Macquarie analysts, who added NextDC had limited other choices to secure power.

Jemena had suspended parts of the electricity network works needed to increase power supply to M3 due to opposition from the community and stakeholders and does not expect to recommence them before February 2027.

"Whilst out of the company's control, delays to power supply and development applications relating to NXT's M3 data centre is evidence that community concerns around data centre developments present a real risk to the timing of delivery of contracted capacity for data centre owners," said Tom Beadle, an RBC Capital Markets analyst.

Separately, NextDC lowered its 2027 capital expenditure outlook to A$4.5 billion to A$5 billion from A$5.25 billion to A$5.75 billion and said it had begun a detailed review of its spending programme.

NextDC said it would release the initial results of that review at its annual investor meeting on November 20.

($1 = 1.4271 Australian dollars)

(Reporting by Scott Murdoch in Sydney and Rajasik Mukherjee; additional reporting by Shivangi Lahiri in Bengaluru; Editing by Diti Pujara, Stephen Coates and Lincoln Feast.)