The Megaport Ltd (ASX: MP1) share price jumped 18% at the open of trading after returning to trade after its capital raising.
Megaport says it brings network and compute together seamlessly, while deploying secure, scalable infrastructure closer to users, data and clouds. It partners with service providers, data centres and system integrators to provide connectivity across more than 1,100 enabled locations.
Capital raising
Megaport revealed it has completed the institutional part of its $827.3 million capital raising of new Megaport shares, conducted at an offer price of $14.30. The institutional offer raised $518 million.
It noted that the institutional offer attracted strong demand from Megaport’s eligible institutional shareholders, with a take-up rate of around 99%. The other 1% was allocated to eligible institutional shareholders who bid for more new shares than they were originally entitled to.
Why is the ASX tech share issuing more Megaport shares?
Earlier this week, the company announced it had secured four new AI infrastructure contracts with a combined total contract value (TCV) of approximately A$458.9 million.
Megaport said that the contracts support AI inference workloads and require approximately A$369.5 million of capital expenditure, primarily for high-performance NVIDIA GPUs, network and storage infrastructure.
The ASX tech share said that it will establish an on-demand GPU pool, supported by A$350 million of investment, providing enterprise customers with access to AI infrastructure through both contracted and consumption-based commercial models.
Megaport said that its compute division pro forma (underlying) annual recurring revenue (ARR) increased to A$385.2 million, with strategic contracts contributing A$747.8 million of TCV and A$301.3 million of ARR. Combined group pro forma ARR increased to A$662.9 million.
The ASX tech share also reported that network ARR increased 25% year on year on a constant currency basis to A$277.7 million, while network net revenue retention (by logo) increased to 113%.
At the time of this update, the company said that the revenue guidance range was tightened to between A$307 million to A$315 million, while the EBITDA (EBITDA explained) margin guidance remains between 21% to 24% of revenue.
Management comments
In response to the capital raising, the Megaport CEO Michael Reid said:
This exceptional outcome reflects the strong support of our institutional shareholders and their confidence in our strategy.
By combining Megaport’s global footprint of more than 1,100 data centres in 31 countries with Latitude.sh’s platform capabilities, we are building a Globally-Distributed AI Inference Cloud designed to support AI at global scale. We now look forward to our retail shareholders having the same opportunity to participate on a pro rata basis. We’re just getting started. Game on!
Final thoughts on the Megaport share price
While the company jumped significantly at the open, it’s now up 6.5%. That’s still a large increase from last week, of course.
The company is growing at a strong pace and this bodes well for future revenue growth and hopefully that flows through to its other financial metrics.
It has already risen, so I’m not sure if it’s a great buy today. How much longer can it continue rising at a strong pace to justify the excitement? I don’t have a time machine to know, so it’s not one of the ASX growth shares I want to buy right now. But, I’d be very happy if I were a shareholder.
