It has been a wild year for the NEXTDC Ltd (ASX: NXT) share price.
After trading as high as $16.78 over the past 12 months, the data centre operator saw its shares crash to just $5.07 in October.
Then, last Thursday, they surged more than 50% in a single session before settling around $10.39 on Monday.
So, what on Earth is going on? Let's take a closer look.
Image source: Getty Images
How did things get so bad?
For much of 2026, NEXTDC appeared to be in an excellent position to benefit from growing demand for data centres.
Artificial intelligence (AI) and cloud computing are driving enormous investment in digital infrastructure, and NEXTDC has been securing contracts to support that demand.
Its FY26 results highlighted just how significant the opportunity had become. Contracted capacity had tripled to approximately 740 megawatts, with 565 megawatts still waiting to begin generating revenue.
Management estimated that its existing contracts could eventually generate more than $1 billion in annual underlying EBITDA.
That's a big lift on the $249 million delivered with its FY26 results in August.
However, investors received a nasty surprise in October. NEXTDC revealed that electricity network delays at its M3 Melbourne data centre would prevent it from delivering some contracted capacity as planned.
The next increase in power supply is now expected in FY28. As a result, management slashed its FY27 underlying EBITDA guidance from $385 million to $410 million to just $245 million to $265 million.
The announcement sent NEXTDC shares crashing, and I can understand why. NEXTDC is spending billions developing data centres, and investors need confidence that those facilities can begin generating revenue as expected.
The Melbourne delays raised concerns about how quickly the company could convert its enormous order book into earnings. They also highlighted the risks associated with power availability, construction and funding.
Then everything changed
Just when things were looking bleak, the NEXTDC share price received a significant vote of confidence.
Last week, Goodman Group (ASX: GMG) and Digital Realty Trust (NYSE: DLR) launched an offer to acquire up to 9.9% of NEXTDC at $9.50 per share.
That represented a 45.5% premium to the previous closing price.
The news triggered Thursday's extraordinary rally, with investors seemingly encouraged by the fact that two experienced data centre operators saw value in the business.
NEXTDC's board described their interest as opportunistic, suggesting it believed the companies were taking advantage of the recent weakness.
What would I do now with the NEXTDC share price?
Despite the big share price rebound, I remain positive on NEXTDC's long-term investment potential.
For me, the opportunity lies in the enormous amount of capacity NEXTDC has already contracted but has not yet brought online.
If the company can begin generating revenue from those facilities over the coming years, I believe its earnings could increase substantially.
The challenge is getting that capacity operational without further delays or unexpected costs. That's why I'll be paying close attention to the company's next update on 20 November, when management is expected to provide more details on M3 Melbourne and its capital expenditure review.
I'd like to see a clearer picture of when the delayed capacity will become available and what it will cost to deliver.
I think that could go a long way towards rebuilding investor confidence in NEXTDC's growth plans.
Foolish takeaway
I think NEXTDC's share price volatility reflects the enormous opportunity investors see in data centres, alongside growing concerns about the cost and complexity of delivering them.
The interest from Goodman and Digital Realty is encouraging, but NEXTDC still has plenty to prove.
For me, the long-term opportunity remains compelling. I'd be comfortable buying shares at current levels, although investors should be prepared for further volatility as the company works through its challenges.
