SYDNEY--Australia's NextDC said it could sell some data center developments amid a darkened earnings outlook, triggering a 42% share-price fall and dealing another blow to sentiment on the artificial intelligence trade ahead of Anthropic's blockbuster IPO.
NextDC, which is in the midst of an aggressive expansion in Australia and the Asia-Pacific region, said a key power distributor to one of its facilities in Melbourne had suspended work because of safety concerns and opposition from local residents.
The setback prompted NextDC to pause all projects not backed by customer contracts and to reallocate capital to building out capacity already contracted to customers. Management said it is considering whether it could declare force majeure under its contracts for the M3 facility in Melbourne.
More than $2 billion was wiped off the value of NextDC's stock as investors reacted to prospects of lower profitability and heightened concerns over its debt. NextDC's share price ended Wednesday at a nearly nine-year low.
NextDC's troubles are the latest challenge to the global AI trade that has powered global stock markets to record highs this year. Worries over the cost of debt and the sustainability of future revenues have hit shares of listed data-center operators from the U.S. to South Korea in recent weeks, while two of NextDC's local peers, Airtrunk and Firmus Grid, have delayed plans for public offerings.
Anthropic's IPO promises to be the next big litmus test of investor sentiment. The public offering could raise as much as $100 billion with a valuation of around $2 trillion, The Wall Street Journal previously reported.
Anthropic is advancing plans against the backdrop of rising interest rates and a political environment that is increasingly hostile to data centers. Concerns around AI's impact on the job market and the impact on power bills from the electricity needed to power data centers are amplifying anxiety among communities.
NextDC's decision on Wednesday to abandon the timeline for an expansion of its M3 center, about six miles west of central Melbourne, illustrates the changed environment for data-center operators.
NextDC had already contracted the additional capacity to a major customer, but now said that the power distributor doesn't expect to resume work before February.
Unable to rely on the additional near-term M3 revenue from expansion, NextDC cut all material discretionary capital expenditure to focus on building contracted capacity.
It has no plans to raise equity and could recycle capital if needed, Chief Executive Craig Scroggie said in a call with analysts. The company expects to remain in compliance with all its financial covenants, he added.
NextDC is Australia's largest data-center operator, with 17 centers in operation and another 11 in development or in the planning stage. The majority of its facilities are in Australia, but it is also expanding into New Zealand, Japan and Malaysia.
It didn't say which sites it could look at offloading. The company will present the findings of its capex review at next month's annual general meeting.
NextDC is still building M3 data-center halls and handing them over to the customer on completion, but cut its guidance for the 12 months through June 30 to reflect the removal of 140 million Australian dollars, or US$98 million, of M3 revenue.
Scroggie said M3 could yet generate earnings in the current fiscal year, but that NextDC couldn't forecast how much.
NextDC now expects fiscal 2027 revenue of between A$475 million and A$500 million, compared with August's guidance of between A$615 million and A$640 million.
It cut its guidance range for underlying earnings before interest, tax, depreciation and amortization to between A$245 million and A$265 million, down from A$385 million to A$410 million.
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