Megaport shares (ASX: MP1) added 7.8% to A$20.32 today, holding above the psychologically significant A$20 level that had acted as a key technical threshold heading into the latest announcement.
The MP1 share price had risen as high as A$22.72 in intraday trade right out of the gate, before pulling back 10.5% from that point into the close. Today’s updates have clearly been well received by markets, but some of the initial enthusiasm has given way to questions around valuation multiples once more. Even so, the ability to close above A$20 on the break could be the first step towards retesting highs if the macro provides supportive in the final quarter. Today’s move saw the stock come within 26cents of the ATH, before cooling as the day progressed.
The Update Driving Megaport Shares Higher
The centrepiece of Tuesday’s update was the announcement of three new AI infrastructure contracts carrying a combined Total Contract Value of $978.6 million. Of that figure, $322.6 million has been received as upfront cash prepayments, a structural feature that materially strengthens Megaport’s balance sheet and removes the near-term need for dilutive equity raises.
These three deals lift Megaport’s total strategic TCV signed since April to approximately $2.3 billion and push pro forma group Annual Recurring Revenue to around $1.1 billion, a figure that would have seemed ambitious just six months ago.
Operationally, the update confirmed that hardware deployment for earlier strategic deals has progressed ahead of schedule. Compute ARR has risen 90% to $201.4 million since June 30, reflecting the speed at which contracted GPU infrastructure is being activated and billed. Network ARR grew 29% in constant currency terms to $302.6 million, and the company’s Net Retention Rate climbed six percentage points to 116%, beating the market consensus estimate of 115% and indicating that existing customers are actively expanding their usage of Megaport’s services rather than simply renewing at existing levels.
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Guidance Raised
Megaport also lifted its FY27 revenue guidance range to $720 million to $810 million, up from the prior range of $620 million to $730 million. The midpoint of $765 million sits approximately 11% above prior UBS estimates. More notably, FY27 EBITDA margin guidance was raised to 42% to 44% from 38% to 40%, implying EBITDA of between $302 million and $356 million.
Against the consensus estimate of $284.8 million, the midpoint of the new range represents a beat of roughly 16%, a gap wide enough to force a meaningful reassessment of the stock’s earnings trajectory across the broker community.
Capital expenditure guidance was also revised upward, to $1.78 billion to $1.88 billion for FY27, compared with the prior range of $1.28 billion to $1.38 billion. The $500 million increase includes $360 million earmarked specifically to replenish Megaport’s GPU pool to meet growing customer demand.
Management indicated the expanded capex program is fully funded through the combination of $362.2 million in pro forma liquidity and the substantial customer prepayments received alongside the new contracts.
What Lay Ahead?
Megaport is positioning itself as a critical piece of the AI platform stack, providing both the GPU compute capacity and the network connectivity that hyperscalers and enterprise AI workloads require. The combination of $2.3 billion in strategic TCV since April, a 90% surge in Compute ARR, and an NRR above 116% suggests the company is not merely winning contracts but converting them into recurring, expanding revenue relationships at pace.
That being said, bears can point to capex that will compress free cash flow conversion meaningfully, with the company’s financial health tightly linked to the continued deployment of contracted infrastructure on schedule. Any slippage, whether from supply chain disruptions, GPU allocation constraints, or counterparty delays, would likely be met with a sharp reaction given the expectations now built into Megaport’s share price.
With the stock up 70.76% since the turn of 2026, it has been a year of outperformance so far for holders of MP1, but with plenty now built in, and the stock approaching levels that have provided some friction in the past, the final quarter of the year could yet throw up some curveballs. We would keep a close eye on the follow through as the week progresses, to see how much of the move holds, with bulls likely eyeing A$20 as a level to defend.
Bull Case:
- $2.3bn strategic TCV since April confirms Megaport’s leadership in AI infrastructure connectivity.
- $322.6m upfront prepayments fully fund expansion without shareholder dilution.
- FY27 EBITDA guidance midpoint beats consensus by approximately 16%, forcing broker upgrades.
- Compute ARR surged 90% with NRR rising to 116%, proving strong customer upsell momentum.
Bear Case:
- Capex of $1.78-1.88bn will significantly compress near-term free cash flow conversion.
- Heavy reliance on a small number of mega-deals creates revenue lumpiness and concentration risk.
- Elevated guidance raises execution risk; any deployment delay could trigger sharp sell-offs.
