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NEXTDC share price jumps 8% on new contract wins

nextdc share price

In morning trade the NEXTDC Ltd (ASX: NXT) share price is charging higher following the release of a positive announcement.

At the time of writing the data centre operator’s shares are up over 8% to $10.72.

This latest gain means that NEXTDC’s shares are now up 64% since the start of the year.

Investors have been buying the company’s shares after the pandemic accelerated the shift to the cloud and demand for data centre capacity.

What did NEXTDC announce?

This morning NEXTDC announced that its data centres in New South Wales have won several material customer contracts.

According to the release, the company’s contracted commitments at its New South Wales data centre facilities have now increased by approximately 4MW, to more than 36MW.

But it doesn’t stop there. Contracted customer commitments plus expansion options at its data centres in the state are now approaching a sizeable 60MW.

In light of this, NEXTDC has committed to completing the Sydney-2 centre fit-out to a total planned capacity of 30MW.

What now?

Management advised that revenue recognition for these new contracted commitments is expected to commence during FY 2021. This will be after the completion and commissioning of the associated data halls.

The company’s CEO and Managing Director, Craig Scroggie, was pleased with the wins and notes that demand for its services has been growing quicker than expected.

He said: “The demand for our data centre services continues to accelerate and exceed our expectations, yet requires discipline and patience as the nexus between the hyperscale capacity planning, site development, infrastructure deployment and revenue recognition can in practice be 2-3 years for these very large hyperscale developments.”

“This is all part of NEXTDC’s digital infrastructure business model, which continues to build long term value through contracted capacity and tangible asset backing,” he concluded.

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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.

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