Revenue and Earnings Forecasts Fall Sharply

NextDC, an Australian operator of data centres supporting cloud computing and AI workloads, cut its outlook for the financial year ending June 30, 2027, after delays to electricity network upgrades disrupted plans for its M3 facility in Melbourne. The company’s revised net revenue forecast is A$475 million to A$500 million, down from A$615 million to A$640 million previously, excluding the affected M3 contracts.

Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) are now expected to reach A$245 million to A$265 million, compared with the earlier forecast of A$385 million to A$410 million. The reductions highlight how delays in bringing new capacity online can affect a data-centre operator’s financial outlook even when demand for computing services remains strong.

Approximately A$140 million in contracted customer revenue is expected to be deferred during the current financial year. The timing of the additional power supply has become a critical variable for investors assessing when NextDC can convert its infrastructure investments and customer agreements into recognised revenue.

Community Opposition Delays Melbourne Infrastructure

The immediate problem centres on electricity network work required to increase power supply to NextDC’s M3 Melbourne data centre. Electricity network operator Jemena suspended parts of the necessary upgrades after opposition from local communities and other stakeholders. The company does not expect work to resume before February 2027, while the next increase in power supply to M3 is now expected in 2028.

The delay illustrates a broader challenge facing energy-intensive digital infrastructure: securing customers and financing is not enough if power connections and planning approvals cannot be delivered on schedule. Data centres require substantial and reliable electricity supplies, while the infrastructure needed to provide that power can face local resistance over its impact on residential areas.

NextDC has also reduced its FY2027 capital expenditure forecast to A$4.5 billion–A$5 billion, from A$5.25 billion–A$5.75 billion, and begun a detailed review of its spending programme.

AI Infrastructure Investment Faces Greater Scrutiny

The sell-off comes amid growing investor caution toward AI-related companies, as questions mount over whether projected demand will justify the high costs of computing equipment, land, electricity and construction. The withdrawal of a major Australian data-centre IPO in the preceding week added to concerns about valuations and the funding required to expand AI infrastructure.

NextDC has responded by putting new development projects and land acquisitions on hold for the foreseeable future. It will also evaluate capital-recycling opportunities, including possible sales of selected development sites. The shift suggests that management is prioritising capital discipline while reassessing the timing and economics of expansion.

Investors will now focus on whether Jemena’s work can resume as planned, when additional electricity capacity will become available, and how quickly deferred customer revenue can be recognised. Future project approvals, revised spending plans and the company’s ability to meet existing commitments will also be important indicators. The longer-term opportunity from AI-driven demand remains, but NextDC’s setback underscores that access to power and timely infrastructure delivery may be just as important as demand itself.