Highlights

  • Canaccord Genuity rates MP1 a Buy with a price target of AUD 15.85, representing approximately 7.6% upside to the 28 May 2026 closing price of AUD 14.73.
  • Megaport's Wholly Owned Subsidiary Latitude.sh secured three GPU, CPU, network, and storage contracts with a combined total contract value of approximately USD 182.9 million (AUD 254.0 million), representing approximately USD 65.2 million (AUD 90.6 million) in annualised Recurring Revenue.
  • The contracts require approximately USD 101.0 million (AUD 140.3 million) in incremental Capital Expenditure, with a payback period of approximately two years, and are expected to reach full ARR contribution on a run-rate basis by the end of H1 FY27.

 

Megaport (ASX:MP1) shares closed at AUD 14.73 on 28 May 2026, down 1.67% on the day. The modest decline comes in the context of the company's most significant contract announcement to date — the May 2026 disclosure of AUD 254 million in committed infrastructure contracts secured through its Latitude.sh subsidiary. Canaccord Genuity's Buy rating and AUD 15.85 target suggests only a modest gap to broker Fair Value at current levels, though this likely reflects the incorporation of the contract news into the target price rather than a conservative assessment of the Business.

The relative narrowness of the gap between current price and broker target — approximately 7.6% — is notable when compared to the other ASX-listed companies examined in this series.

The Contracts: Scale, Structure and Customer Profile

On 14 May 2026, Megaport announced that Latitude.sh had secured three binding, fixed-term contracts with two US-based technology companies running AI applications and inference workloads. The contracts have a combined total contract value of approximately USD 182.9 million (AUD 254.0 million), with committed revenue irrespective of usage levels — a structure that provides certainty of Cash Flow regardless of customer utilisation patterns.

Two of the three contracts, representing approximately 90% of total contract value, carry 36-month initial terms. The third has a 24-month term. One of the two customers is an existing Megaport network customer, validating the company's ability to upsell infrastructure services to its existing client base. The combined annualised recurring revenue from the contracts is approximately USD 65.2 million (AUD 90.6 million), expected to reach full run-rate contribution by the end of H1 FY27 as hardware is deployed on a phased basis.

Capital Investment and Payback Profile

The contracts require approximately USD 101.0 million (AUD 140.3 million) in incremental capital expenditure, primarily for high-performance NVIDIA GPU, compute, network, and storage hardware. Orders for the compute hardware have been placed, with delivery expected in late FY26 or early FY27. The company has guided to an approximate two-year payback period, defined as the time required for cumulative EBITDA to exceed initial compute server capital expenditure.

Megaport will fund the capital requirements through a combination of existing cash reserves and an AUD 150 million committed, newly-upsized Debt Facility from a leading global financial institution. Pro-forma Liquidity as at 31 December 2025 — incorporating these contracts and a separate USD 35.4 million compute contract announced on 27 April 2026 — would have been approximately AUD 199.1 million.

An important structural feature of the investment: at the end of each contract term, the deployed hardware enters the Latitude.sh on-Demand compute pool, remaining available for revenue generation through renewals or new customers for the remainder of the asset's life. This means the capital expenditure is not expended solely for the contracted period but retains residual commercial value beyond the initial term.

The Latitude.sh Integration: A New Platform Identity

Megaport's Acquisition of Latitude.sh in late 2025 fundamentally expanded the company's commercial surface area. Previously positioned primarily as a network infrastructure provider, Megaport now operates what it describes as a global automated infrastructure platform — combining its foundational network automation across more than 1,100 data centre locations with Latitude.sh's compute and storage capabilities.

The combination has created the commercial and technical conditions to pursue and win contracts that neither business could have secured independently. The three contracts announced in May 2026 are a direct product of that expanded platform. CEO Michael Reid described the company as sitting at the forefront of an inflection point as AI use cases shift from model Training toward inference and edge deployment — a transition that requires distributed compute at scale, with ultra-low latency and global reach.

Pipeline of Comparable Opportunities

Megaport has flagged that since the Latitude.sh acquisition, it has assessed and continues to evaluate a significant and growing number of comparable infrastructure opportunities. The company has committed to applying rigorous criteria, including counterparty Credit quality, committed contract terms, attractive payback periods, and overall returns. This disciplined approach is designed to ensure that capital is deployed into contracts that meet financial hurdles rather than pursuing Volume for its own sake.

The committed USD 86 million capital expenditure undertaking agreed as part of the Latitude.sh acquisition for calendar years 2026 and 2027 will be satisfied through these new contracts. The timing for assessment and payment of performance payments and the integration payment under the Latitude.sh acquisition terms remains unchanged, keeping vendor and Shareholder incentives aligned.

Guidance and FY26 Outlook

Megaport has reaffirmed its FY26 revenue and EBITDA guidance for the combined group, as provided at the H1 FY26 half-year results in February 2026. Group capital expenditure guidance of AUD 90 to 100 million remains unchanged, excluding the customer contracts and the April 2026 strategic deal. To the extent hardware ordered for the new contracts is delivered before 30 June 2026, FY26 capex could increase by up to a further AUD 140.3 million. Full details of network and compute financial performance will be provided at the full-year results in August 2026.

Conclusion

Megaport has undergone a substantive commercial transformation in a relatively compressed timeframe. The AUD 254 million in committed AI infrastructure contracts announced in May 2026 represent the most tangible evidence yet that the Latitude.sh acquisition is generating returns. With a two-year payback on AUD 140 million in hardware capital expenditure, contracted ARR of AUD 90.6 million, and a pipeline of comparable opportunities under evaluation, the financial profile of the next 12 to 18 months appears well-defined. Canaccord Genuity's Buy call at AUD 15.85, while implying limited near-term upside, reflects a confidence in the Earnings trajectory that the August full-year results will need to validate.