NEXTDC shares fell 41.7% on Wednesday after the company cut FY27 net revenue guidance from $615–640 million to $475–500 million, removing approximately $140 million in anticipated revenue.
The driver: electricity infrastructure delays at the M3 Melbourne data centre. Customer contracts are signed, but revenue cannot be recognised until power is secured and facilities go live. That is the commercial reality when selling AI compute capacity: demand means nothing without grid access.
NEXTDC reported FY26 total revenue of $496.5 million, up 16% year-on-year. Contracted utilisation sits at 316MW, with a forward order book of 205MW, up 53%. The pipeline is strong. The problem is execution timing.
The company is pausing projects without customer contracts, reviewing capital expenditure, and considering site sales. A decision on further M3 stages depends on Victoria's 28 November election outcome.
For context, NEXTDC competes with Equinix, Macquarie Data Centres, AirTrunk, CDC, Digital Realty, STACK and Vantage in Australia's colocation market. The domestic data centre sector is forecast to grow from $3.2 billion in 2025 to $16.75 billion by 2035, driven by AI infrastructure demand.
Meanwhile, emerging developer WinDC announced it has ordered 11MW of Armada modular data centre units and is positioning itself as Nvidia's Australian partner for 230MW of AI capacity in 2027. Firmus Technologies, which withdrew a proposed $44 billion IPO amid valuation concerns, faces pressure to meet OpenAI commitments on capacity that has yet to be built.
Senator David Pocock has proposed a 5% revenue levy on data centres, projecting $500 million over four years. That adds policy risk to an already complex mix of power access, customer contracts, and capital deployment.
The sales implication: established operators like NEXTDC have contracted capacity but face infrastructure bottlenecks. Emerging developers are competing for power, anchor tenants, and technology partnerships. The gap between demand and deliverable capacity is widening, and investor patience for execution risk just got thinner.