Megaport (ASX:MP1) Strong Half, But Statutory Earnings Could Still Get Hit

Megaport Network Engine Is Working

Megaport had a strong half, but there were a few areas in the financials and operating performance that the market may still punish in the near term.

What really mattered this half came down to three core things.

First, Megaport core network business accelerated. That is the engine of the story, and it was the clearest signal that underlying demand and execution are trending in the right direction.

Second, the group bought two assets (a compute asset and an internet exchange) and funded that strategy with a large equity raise.

Third, acquisition accounting costs pulled statutory profit negative, even though EBITDA improved. This is the key disconnect: the cash earnings profile strengthened, but reported earnings took a hit because the accounting adjustments and one offs from acquisitions flowed through the income statement.

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A Classic Investment Phase

Revenue grew 26% to $134m. Megaport Management attributed this to stronger expansion within the existing base (NRR), solid new logo wins, and the inclusion of one month of Latitude revenue from December.

The core network metrics were healthy. Network ARR was up 16% and net revenue retention was 111%, which tells you customers are sticking around and spending more over time. Net new customers were +167, so overall it was a credible top line result.

Gross profit rose 31% and gross margin improved to 72%. Revenue is now outpacing direct network costs, which is exactly what you want to see as the platform scales and unit economics improve. With expansion and acquisitions in the mix over the next 3 years, investors will want this efficiency trend to keep compounding.

EBITDA grew 28% to $35m, with the margin broadly flat year on year. The weak spot was net income, where one-off acquisition costs and heavier reinvestment weighed on the statutory result. In our view, it is a deliberate reinvestment phase, but near-term, the market will still want proof that today’s spend turns into a higher profitability run rate.

Operationally, the build-out continued at pace. Enabled data centres increased +51 in H1 FY26 to 1,034 total, cloud on ramps grew +11 to 344, and capacity upgrades continued, including a broader 400G rollout into more countries.

Capex and capitalised investment also stepped up. PPE cash spend was $24.9m (up from $11.5m) and intangibles were $9.2m (up from $5.6m). Management also highlighted higher capitalised wages as product, engineering, and deployment investment accelerated.

What Happens Next

The investor takeaway for MP1 is that this half was clearly a large investment phase for the business.

Seeing acquisitions weigh on the bottom line initially is not a red flag in itself. We think the acquisitions align with the company’s growth trajectory, and if integration and synergies track to plan, they should enhance both the top line and the long term profitability profile.

The near term debate, and what the market will likely fixate on, is execution. How many customers are onboarded through the new assets, how quickly cross sell translates into revenue, and how long acquisition related costs and reinvestment continue to pressure statutory earnings.