HIGHLIGHTS

  • Megaport's Latitude.sh Subsidiary secured three binding contracts with a combined total contract value of approximately AUD $254 million (USD $182.9 million), adding AUD $90.6 million in annualised Recurring Revenue.
  • The contracts are with two US-based AI application and inference companies, with two of the three agreements carrying 36-month initial terms and the third running 24 months — delivering committed revenue irrespective of usage levels.
  • Megaport will invest approximately USD $101 million (AUD $140.3 million) in incremental Capital Expenditure, primarily NVIDIA GPU hardware, with an estimated two-year payback period and funding via existing cash and a newly upsized AUD $150 million Debt Facility.

Megaport Limited (ASX:MP1) delivered one of the most significant single-day share price moves in its ASX history on 14 May 2026, with MP1 shares surging 24.57% to A$12.27 after the company disclosed three major binding contracts through its Wholly Owned Subsidiary Latitude.sh. The announcement crystallised the Investment thesis that has driven Megaport's evolving identity — from a software-defined networking provider to a full-stack automated infrastructure platform encompassing GPU compute, CPU, storage, and connectivity — and placed the company squarely in the centre of the accelerating AI infrastructure buildout.

The combined total contract value of the three agreements reached approximately USD $182.9 million, or AUD $254 million at current exchange rates, translating to approximately USD $65.2 million (AUD $90.6 million) in annualised recurring revenue. Critically, the contracts are structured as fixed-term, committed agreements with revenue recognised irrespective of the customers' actual usage levels — a structure that provides Megaport with high revenue visibility and de-risks the return profile relative to on-Demand compute infrastructure.

Who Are the Customers and What Will They Use?

Both contracting parties are described as US-based technology companies running AI applications and inference workloads, each backed by institutional shareholders. Megaport has not disclosed the customers' identities for competitive reasons, and the company confirmed that customer identity does not constitute material information for the purposes of ASX disclosure requirements. One of the two customers is an existing Megaport network customer, representing a successful upsell from the core connectivity product into compute and storage services — a dynamic that validates the cross-sell potential of the combined Megaport-Latitude.sh platform.

The hardware being provisioned includes high-performance NVIDIA GPU servers alongside CPU, network, and storage equipment. The contracts are specifically oriented toward AI inference workloads — the compute-intensive process of running trained AI models at scale — rather than the model Training phase, reflecting where much of the near-term AI infrastructure demand is migrating as enterprises move from foundation model development into production deployment.

Contract Structure: Terms, ARR, and Revenue Recognition Timeline

Two of the three contracts, representing approximately 90% of the combined total contract value, carry initial terms of 36 months. The third contract has a 24-month term. Revenue will be recognised incrementally as the underlying hardware is deployed and becomes operational — a staged process that Megaport expects to complete on a phased basis commencing in the first half of FY27. Management indicated that the full annualised recurring revenue contribution is anticipated to reach run-rate by the end of H1 FY27.

The capital expenditure required to fulfil the contracts totals approximately USD $101 million (AUD $140.3 million), and Megaport has already placed orders for the compute hardware. Delivery is expected in late FY26 or early FY27. Importantly, this capex satisfies the committed USD $86 million capital expenditure undertaking agreed as part of the Latitude.sh Acquisition terms for calendar years 2026 and 2027 — effectively meaning that the contract wins will simultaneously fulfil Megaport's acquisition-related capex obligations. At the end of each contract term, the deployed Assets will be available for revenue generation through the Latitude.sh on-demand compute pool, either through renewal by the existing customers or redeployment to new clients.

Capital Structure and Funding

Megaport will fund the USD $101 million incremental capex requirement through a combination of existing cash reserves and available capacity under a newly upsized AUD $150 million committed debt facility from a leading global financial institution. Pro-forma Liquidity as at 31 December 2025, incorporating the impact of these contracts and a separate strategic deal announced on 27 April 2026, would have been approximately AUD $199.1 million — a level management described as sufficient to support both the near-term hardware procurement and the company's ongoing operational requirements.

The payback period on the initial hardware investment is estimated at approximately two years, measured as the time required for cumulative EBITDA to exceed the initial compute server capex. This represents an attractive return profile for dedicated infrastructure assets and provides a framework for assessing further comparable opportunities, which CEO Michael Reid indicated are being evaluated with discipline across multiple criteria including counterparty Credit quality, contract commitment, and overall return metrics.

Strategic Context: Building an AI Infrastructure Platform

The contract announcement comes as the broader technology industry accelerates its shift from AI foundation model development toward inference-scale compute — a transition that favours providers with globally distributed, low-latency infrastructure capable of deploying hardware rapidly close to end users. Megaport's combination of more than 1,100 data centre locations across its network platform and Latitude.sh's compute and storage capabilities creates what management described as a one-stop platform for the AI ecosystem.

Since acquiring Latitude.sh in November 2025, Megaport has been assessing what it described as a significant and increasing Volume of comparable infrastructure opportunities. Management was explicit in its commitment to capital discipline — applying rigorous criteria around counterparty quality, committed terms, payback periods, and overall returns before proceeding with any deal. The 14 May announcement, together with the previously disclosed AUD $35.4 million compute contract announced on 27 April 2026, brings Megaport's contracted infrastructure revenue pipeline to a scale that is beginning to materially reshape its recurring revenue profile.

Guidance and Outlook

Megaport reaffirmed its previously issued FY26 revenue and EBITDA guidance for the combined group on 14 May 2026, maintaining the outlook provided in its H1 FY26 half year results announcement from February. FY26 group capex guidance of AUD $90 million to $100 million remains unchanged, excluding the new contracts and the April strategic deal. To the extent that equipment acquired under the new contracts is delivered before 30 June 2026, FY26 group capex could increase by up to an additional AUD $140.3 million. Megaport will provide a more detailed financial update, including separate reporting on network and compute financial performance, at its full year results in August 2026.

Conclusion

Megaport's 14 May announcement marks a significant inflection point in the company's evolution from pure-play network infrastructure provider to AI compute and storage platform. The scale of the contracted revenue, the structure of committed fixed-term agreements, and the strategic fit with AI inference deployment demand all reinforce the investment logic of the Latitude.sh acquisition. The market's 24.57% single-day reaction reflects the materiality of the announcement relative to prior expectations. The key variables for investors now centre on hardware delivery timelines, the pace of ARR ramp-up in H1 FY27, and the company's ability to replicate this contracting success with additional customers.