Nextdc (ASX: NXT) announced more contract wins for its NSW data centre facilities. Nextdc shares are up 7% in early trading.
What is Nextdc?
Nextdc offers a service of data centres for clients. It provides the infrastructure for the digital economy. It provides power, security and connectivity for global cloud computing providers, enterprise and government.
What did the data centre business announce?
Its contracted commitments at its NSW data centre facilities have increased by approximately 4MW, to more than 36MW.
Contracted customer commitments and expansion options at the NSW data centres are now approaching 60MW. With these customer wins, Nextdc has committed to completing the S2 (its second Sydney data centre) fit out to a total of 30MW.
The revenue from these new commitments is expected to commence during FY21 after completion and commissioning of the associated data halls.
Nextdc CEO and Managing Director Craig Scroggie said: “The demand for our data centre services continues to accelerate and exceed our expectations, yet requires discipline and patience as the nexus between the hyperscale and capacity planning, site development, infrastructure deployment and revenue recognition can in practice be two to three years for these very large hyperscale developments. This is all part of Nextdc’s digital infrastructure business model, which continues to build long term value through contracted capacity and tangible asset backing.”
Nextdc has a solid business model and it’s clearly in high demand. The shift to online by many businesses during COVID-19 will help adoption of cloud services. However, I don’t know enough (yet) about the profit potential and expected lifespan of data centres to know if today’s Nextdc share price is compelling or expensive.
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.