Megaport posted solid numbers for FY25. So why did the stock tank 20%?

Megaport MP1 reported what appeared to be a strong FY25 result, with notable numbers like annual recurring revenue climbing 20% year-on-year to a record $243.8 million and a solid $102.1 million cash at bank to pursue further growth opportunities.

But the stock opened 19% lower ($11.86) and fell as much as 22% ($11.52) intraday. Here's why.

FY25 at a glance

• Underlying revenue up 13% to $220.8m vs. $222.6m ests (1% miss)

• EBITDA up 11% to $52.3m vs. $50.7m ests (3% beat)

• EBITDA margin down 50 bps to 28.2% vs. 27.3% ests (90 bp beat)

• Underlying EBITDA flat at $57m vs. $60.7m ests (6% miss)

• Underlying EBITDA margin down 40 bps to 25.8% vs. 27.3% ests (150 bp miss)

• Capex up 73% to $34.4m vs. $30.2m ests (14% above ests)

Capex blowout spooked the market

Simply put, the market was caught off guard by the outsized increase in capex for both FY25 and FY26.

The $34.4 million figure for FY25 was 14% above market expectations, while the FY26 outlook guided to capex of 18-20% of revenue.

RBC Capital Markets analyst Jonathan Atkin says this implies FY26 capex of $46-54 million, which is 50-73% higher than consensus expectations. He noted "management have previously highlighted their pipeline of products in development, however, the degree of pull forward in investment is unexpected."

Atkin highlighted the below key guidance numbers:

• FY26 revenue guidance of $260–270m represents +15-19% growth on the pcp and is +2-6% ahead of consensus $254m

• FY26 EBITDA margin of between 18-20% implies $47-54m EBITDA which is 22-33% below Cons expectations of $70m.

• FY26 Capex guidance of between 18-20% implies $47-54m which is 50-73% ahead of Cons expectations of $31m.

FY25 earnings call highlights

E&P analyst Paul Mason said the earnings call was rather interesting, with Megaport CEO Michael Reid trying his best to "deliver positive energy while the stock traded 15% lower."

Mason notes that Reid saw significant business opportunities and is "really going for it" with growth investments, which aligns with the company's previous flagged intention to double down on expansion.

From his team's perspective, which prioritises structural growth over short-term margins, this was a "very positive result" as it's rare to see companies turn around growth without relying heavily on pricing strategies.

Mason expects long-term believers to return to the stock following the strong key performance indicators that were well ahead of expectations and provide a solid revenue foundation for FY26.

Megaport's epic swing

What's extraordinary is that Megaport is now (as at 12:50 pm AEST) trading around breakeven. If you bought the open, you'd be up around 22%.

Megaport intraday price chart (Source: TradingView)

Given all the above, it seems like the market quickly moved on from the capex blowout, which isn't really a new phenomenon given the large increases in capex in the AI-related sector.

It will be interesting to see how the stock performs on Friday, after analysts have had some more time to digest the numbers and what it means for near-term earnings.