The NEXTDC Ltd (ASX: NXT) share price will be one to watch on the ASX 200 on Wednesday.
This follows the release of a very positive announcement out of the data centre operator this morning.
What did NEXTDC announce?
This morning NEXTDC announced that contracted commitments at its Victorian data centre facilities have now increased by 40% from 15MW at December 31 to approximately 21MW.
This figure could still increase further from here. When including contracted expansion options, NEXTDC now has more than 28MW.
In light of these new commitments, management has decided to bring forward the fourth stage of construction at its M2 facility to provide up to 12MW of incremental capacity.
This has had a knock-on effect on its capital expenditure guidance for FY 2020. NEXTDC has lifted its guidance to the range of $320 million to $340 million compared to its previous guidance of $280 million to $300 million.
Management has advised that revenue recognition for these new contracted commitments will commence after completion and commissioning of the associated data halls at M2.
The company’s chief executive officer, Craig Scroggie, was pleased to lock in these commitments.
He said: “This is a very exciting new phase in development of NEXTDC’s operations in Victoria. We advised the market at the time of our FY20 results that the Company’s sales pipeline was very strong and the timing of large sales to the hyperscale cloud providers is long running given the planning cycle and the scale of these investments. We are very pleased to have now locked in material commitments against these expectations.”
“The demand for our data centre services continues to accelerate and requires discipline and patience as the nexus between hyperscale capacity planning, site development, infrastructure deployment and revenue recognition can, in practice, be up to 2-3 years. This is simply reflective of the nature of NEXTDC’s digital infrastructure business model, which continues to build long term value through contracted capacity and tangible asset backing,” he added.
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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
