The NextDC Ltd (ASX: NXT) share price has surged over the last couple of weeks, gaining about 30%.
The data centre operator's share price added to its run on Tuesday, rising around 8% with some positive news coming out of the company.
NextDC announced it had achieved significant contract wins and was pressing ahead with expansion plans to meet increased demand.
Craig Scroggie, NextDC's Chief Executive Officer and Managing Director, described the developments as a significant milestone.
"We are very pleased to have recorded the largest increase in contracted utilisation in the Company's history."
But the ambitious expansion plans will come at a cost, with the company increasing its capital expenditure guidance for FY25 by $100 million.
As such, NextDC has raised its capital expenditure guidance for FY25 to a range of $1.4 billion to $1.6 billion, up from $1.3 billion to $1.5 billion.
It's not the first time NextDC has raised its capex guidance for FY25.
In August last year, NextDC projected a capex range of between $900 million and $1.1 billion for FY25.
The company later revised that range when it announced its capital raising plans to fund expansion efforts in South-East Asia.
NextDC stated it would use part of those proceeds to purchase sites for data centres in Bangkok, Thailand, and Johor, Malaysia.
The company received approval from Thailand's Board of Investment to build a new data centre in Bangkok back in FY24.
And the Johor project would increase NextDC's presence in Malaysia where the company is currently developing a data centre in the capital, Kuala Lumpur.
NextDC is also pressing ahead with further Asian expansion efforts, with plans to develop more data centres in Singapore and Tokyo.
Image source: Getty Images
Is NextDC a buy?
NextDC stated that it will take on more debt to increase its capacity to service its growing customer base.
The company's cash and undrawn debt facilities were sitting at $2.5 billion at the end of last year.
And revenue recognition for the majority of the new customer contracts is expected to commence during FY27, according to the company.
NextDC stated the full revenue run rate associated with the new contract wins will be realised from FY28 onwards.
Additionally, with an increasing presence in South East Asia, a region that presents strong opportunity in the data centre space, NextDC is well positioned for growth.
All this means I still rate NextDC as a buy.
