Megaport Ltd: AI-driven compute momentum improving; valuation remains balanced

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Megaport Ltd: AI-driven compute momentum improving; valuation remains balanced

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Megaport Ltd

AI-driven compute momentum improving;

valuation remains balanced

Reiterate Rating: NEUTRAL | PO: 13.10 AUD | Price: 12.87 AUD

MP1 announces cA$254m compute contract 18 May 2026

MP1 has announced a ~A$254m, 3-year compute contract (~45%/30% of FY28 Equity

compute/group revenue) underscoring growing demand from US-based AI customers for

inference and training workloads. The deal requires ~A$140m incremental capex (largely

Key Changespre-flagged in the acquisition) primarily for NVIDIA GPUs with ~2-year targeted payback

and phased deployment from 2H CY26 supporting ARR ramp. Residual value is partly (A$) Previous Current

mitigated by redeploying GPUs into the on-demand pool post-contract, while FY26 Price Obj. 11.00 13.10

guidance (revenue/EBITDA growth of ~36%/13% at mid-point) remains unchanged. 2026E EPS 0.03 0.02

2027E EPS 0.17 0.14

2028E EPS 0.28 0.38Contract points to improving Compute momentum

We think the deal is largely positive and points to strengthening Compute momentum 2026E EBITDA (m) 61.7 62.1

supported by favourable GPU-as-a-Service dynamics. After 2-3 years of price declines, 2027E EBITDA (m) 123.8 131.5

tight GPU supply has driven a ~40% pricing uplift since Oct’25 and while margin 2028E EBITDA (m) 174.4 231.3

durability remains debated, (1) the implied ~2-year payback suggests EBITDA margins of

~60–70% (vs current Compute margins of ~50%), and (2) ongoing capacity constraints Ware Kuo >>

Research Analyst

could sustain GPU utilisation and pricing even post-contract. We now assume 54% CAGR Merrill Lynch (Australia)

in Compute revenue across FY27–29 (vs 32% prior). +61 2 9226 5709 ware.kuo@bofa.com

Reiterate Neutral.