Why Megaport (ASX:MP1) Is Spending Heavily on AI Compute Contracts After a Larger FY26 Loss

Sonal Goyal

11 November 2026 06:45 PM AEDT

Why Megaport (ASX:MP1) Is Spending Heavily on AI Compute Contracts After a Larger FY26 Loss

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Key Highlights

Revenue was A$312.2 million for the year to June 2026.
A net loss of A$39.0 million was recorded, larger than the prior year, as the company invests in compute.
The company has taken on new AI infrastructure contracts and a new A$825 million Debt facility.
Megaport acquired the compute platform Latitude.sh and India's Extreme IX internet exchange.

Why would a network-connectivity company with a growing Revenue base choose to take on hundreds of millions of dollars of Capital spending and a new A$825 million debt facility? Megaport Ltd. (ASX:MP1) answered that question on 20 August 2026, when it released its FY26 results alongside new Artificial Intelligence (AI) infrastructure contracts. The company reported FY26 revenue of A$312.2 million, but also a net loss of A$39.0 million, because it is investing in a compute Business well beyond its original software-defined networking offer. It matters because the pivot changes what kind of company Megaport is, and how its results should be read.

What Megaport does

Megaport built its name selling on-demand network connections. Customers use its platform to link cloud providers, data centres and other networks without negotiating separate physical circuits. Revenue is recurring and tied to services and ports activated on its network, which is why the company emphasises annualised Recurring Revenue (ARR).

Over the past year it has added compute. Through Latitude.sh, Megaport now supplies GPU and CPU compute, networking and storage to customers building AI workloads.

The FY26 result

Revenue A$312.2 million, up 37% from A$227.1 million in FY25.

EBITDA A$77.1 million, up 24% from A$62.3 million.

Net loss A$39.0 million, against a loss of A$0.3 million in FY25.

Group ARR A$395.2 million, up 62%.

Cash and cash equivalents of A$435.4 million at year end, which the company also states in its own 20 August announcement.

No Dividend for FY26.

Revenue growth outpaced EBITDA growth, and profit moved the wrong way. That pattern is typical when a business takes on depreciation, financing costs and acquisition-related items while new contracts have not yet reached full revenue run rate.

The AI contracts

The contract flow is the central development. On 20 August 2026, through its Latitude.sh subsidiary, Megaport announced three contracts covering GPU and CPU compute, network and storage. According to the ASX announcement:

Total contract value of about US$359.4 million (A$506.2 million).

Annualised recurring revenue of about US$91.7 million (A$129.2 million), expected at full run rate by the end of the third quarter of FY27.

Incremental Capital Expenditure of about US$207.2 million (A$291.8 million), included in FY27 guidance.

Compute hardware delivery expected in the second quarter of FY27, with phased deployment.

Customers described as US-based technology providers backed by institutional shareholders, with identities undisclosed.

The company also said two contracts announced on 3 June 2026 were varied because of Supply constraints, moving to higher-grade GPUs. The aggregate contract value for those contracts is expected to rise by about US$87.1 million (A$122.7 million), with no material change to ARR or capital expenditure. Since 27 April 2026, cumulative strategic contracts total about US$0.9 billion (A$1.3 billion) by contract value including the variations.

How the expansion is funded

Funding is the other half of the story. The 20 August announcement describes a new A$825 million debt Facility from a syndicate of domestic and international banks. Megaport says that, pro forma, it is fully funded for committed capital expenditure from the strategic contracts announced since 27 April 2026, plus a potential Acquisition mentioned in the results announcement.

Capital-heavy compute contracts, partly debt-financed, carry fixed obligations whatever happens to customer demand.

Sector and competitive position

Megaport's core market is interconnection, where it competes with data-centre operators' own offerings and other network-as-a-service providers. In AI compute, it enters a market dominated by large cloud providers and specialist GPU operators. Its pitch rests on its established network and its customer relationships, and the pivot depends on securing hardware in a supply-constrained market. The supply-driven contract variation illustrates that dependence.

The customers in the latest contracts are undisclosed, so their Credit standing cannot be assessed from public information.

Risks and what to watch

Execution and supply: compute deployments depend on hardware delivery, and one set of contracts has already been varied because of supply constraints.

Financing: a new A$825 million facility adds interest costs and covenants.

Customer concentration and credit: the new contracts are with a small number of undisclosed customers.

Profitability: the FY26 net loss widened, and the path to profit depends on contracts reaching full run rate.

Strategy drift: a networking company is becoming a compute provider, which involves different competitors and capital intensity.

Those will show whether growth in ARR converts into earnings.

FAQs

Q: How did Megaport (ASX:MP1) perform in FY26?

A: Revenue was A$312.2 million, but the company recorded a net loss of A$39.0 million.

Q: Why is Megaport investing in compute?

A: It is moving well beyond its original software-defined networking offer, changing what kind of company it is and how its results should be read.

Q: What does Latitude.sh provide?

A: Through Latitude.sh, Megaport supplies GPU and CPU compute, networking and storage to customers building AI workloads.

Q: How is the business's revenue recognised?

A: Revenue is recurring and tied to services and ports activated on the network, which is why the company emphasises annualised recurring revenue.

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