Megaport Ltd (ASX: MP1) shares are trading at $19.51 at the time of writing.
The stock has had a huge run of increases over the past couple of months. After dipping to a three-year low of just $6.48 in early April, the software-defined network (SDN) service provider's shares have rebounded a huge 201%.
Megaport shares are now 64% higher year to date and trading 44% higher than this time 12 months ago.
The latest share price rally has been incredible, and I think there are still several reasons why it's not too late to buy into the ASX tech shares.
Here are three reasons why.
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1. Megaport is quickly expanding
The company was previously known as a cloud-connectivity business but has rapidly expanded into the AI infrastructure space through its acquisition of Latitude.sh and several AI-focused contracts.
Over the past couple of months, Megaport has announced several major AI infrastructure contracts worth hundreds of millions of dollars.
In late April, the company confirmed that it had secured a three-year compute and storage contract with a total value of approximately US$25.1 million (A$35.4 million) through its recently acquired Latitude.sh business.
Then last month, Megaport announced it had secured three more binding contracts with two US AI customers. These contracts are worth a total contract value (TCV) of around US$183 million and annualised recurring revenue (ARR) of approximately US$65 million.
Two of those three contracts have 36-month terms, providing visibility into revenue.
2. The business has strong and recurring revenue growth
Earlier this year, Megaport reported that its annual recurring revenue (ARR) is growing steadily, thanks to strong customer retention and a stock subscription-style revenue model.
At its first-half FY26 results announcement, the company recorded a group ARR of $338 million, which represents a 49% year-over-year growth.
In early May, Megaport also tightened its FY26 revenue range to A$307 million to A$315 million, and continues to forecast substantial growth. Its EBITDA margin and Capex guidance are unchanged.
3. Analysts tip a large upside ahead for Megaport shares
According to TradingView data, the majority of analysts are very bullish on Megaport's outlook over the next 12 months.
Of 15 analysts, 13 have a buy or strong buy rating on the shares. The average $22.43 target price implies a potential 15% upside at the time of writing. However, some are even more bullish and tip the shares to increase up to 42% to $27.80 over the next 12 months.
Macquarie is impressed with the company's latest new contract wins. The broker said Megaport provides AI exposure for investors with shorter lead times and less capital expenditure than data centre operators. It has a buy rating and a $27.80 price target for the shares.
Meanwhile, the team at Morgans downgraded its rating on Megaport shares last week, to accumulate, from buy. The broker said that after a 90% surge in the share price over the past month, it sees the stock at fair value. It has a $21 target price on the shares.
