Megaport Ltd (ASX: MP1) shares have taken a sharp hit, falling 21% over the past five trading days. That makes the recent sell-off hard to ignore.
Yet the bigger picture looks very different: Megaport shares remain up around 54% year to date and 30% over the past 12 months.
So, is this pullback an opportunity for investors to buy the dip?
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Turning into an AI infrastructure play
Megaport's investment case is increasingly tied to its role in the booming artificial intelligence (AI) infrastructure market.
Unlike traditional data centre operators, Megaport offers exposure to AI-driven demand through an asset-light model. Its connectivity services can have shorter implementation lead times and require significantly less capital expenditure, making the company an interesting way to participate in global AI infrastructure growth.
The acquisition of Latitude.sh has broadened that opportunity. Latitude.sh is a compute-as-a-service platform providing high-performance CPU and GPU infrastructure. The deal gave Megaport a new way to serve customers who need not only connectivity but also the computing power underpinning AI, cloud-native applications, and data-heavy workloads.
That means Megaport is no longer simply selling flexible digital connections. It is moving towards a broader platform that combines compute, network, and storage. In an AI boom, that's an increasingly attractive proposition.
Big contracts boosted the bull case
The share price strength was also supported by several major contract wins following the Latitude.sh acquisition.
In April, Megaport announced that Latitude.sh had secured a 36-month compute and storage contract worth approximately A$35.4 million. The company also reported strong growth in Compute's annualised recurring revenue (ARR), excluding that contract, since the acquisition.
Momentum accelerated in May, when Megaport announced three major GPU, CPU, and network and storage contracts with two US-based technology customers running AI applications and inference workloads.
The contracts had a combined total contract value of approximately A$254 million and were expected to contribute about A$90.6 million in ARR once fully deployed.
Why did Megaport shares fall?
The enthusiasm cooled following the release of Megaport's FY 2026 results. The company delivered full-year revenue of $312 million, up 37% from FY 2025, while EBITDA increased 24% to $77 million.
However, statutory net loss widened dramatically, from $300,000 in FY 2025 to $39 million in FY 2026.
That bottom-line deterioration clearly caught investors' attention and appears to have prompted some profit-taking after the stock's substantial gains.
Are Megaport shares a buy?
Analysts remain broadly bullish. According to TradingView data, 14 of 16 analysts covering the ASX technology share currently have a buy or strong buy rating. The average price target of $26.02 implies roughly 49% upside from the current $17.52 share price.
The most bullish target is $33.52, representing potential upside of about 91%.
UBS was also positive on the results, saying the net outcome was "firmly in the positive". The broker has raised its price target from $24.20 to $26.40 and is forecasting EBITDA of $624 million in FY 2028.
