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Brisbane-headquartered network-as-a-service provider Megaport (ASX: MP1) has announced its bare metal cloud subsidiary Latitude.sh has secured a 36-month compute and storage contract worth about US$25.1 million ($35.4 million) with an undisclosed US-based technology company operating in the developer tooling and agentic AI space.
The deal represents US$8.4 million ($11.8 million) in annualised recurring revenue and marks a significant commercial milestone for Latitude.sh, which Megaport acquired in November for up to US$300 million ($459 million).
The news comes five months after the acquisition closed and underscores accelerating demand within the Latitude.sh business.
Megaport today revealed that on-demand compute annual recurring revenue (ARR), excluding the new contract, grew 31 per cent to US$58.7 million ($82.7 million) as of 25 April 2026, up from US$45 million at 31 December 2025.
Megaport CEO Michael Reid says the contract demonstrates the company's disciplined approach to capital allocation alongside surging demand for dedicated compute infrastructure.
“Securing a contract of this size reflects both the scale of the opportunities we see in the compute market, and our disciplined approach to deploying capital,” says Reid.
“We will continue to evaluate similar opportunities, investing alongside committed customer demand at compelling paybacks, ensuring capital is deployed after rigorous analysis while supporting the long-term growth of these markets.
“The explosion in AI use cases is driving incredible demand for compute and storage, with CPUs remaining a critical component of the infrastructure that powers AI.
"As businesses increasingly seek flexible, high-performance automated infrastructure, Megaport is perfectly positioned to capture a growing share of this rapidly accelerating opportunity.”
The contract requires about US$12.2 million ($17.2 million) in incremental CPU server capital expenditure, which Megaport expects to deliver a payback period of roughly 24 months.
The spending counts toward the committed US$86 million capex undertaking for calendar years 2026 and 2027 that was agreed as part of the original Latitude.sh acquisition.
Megaport has reaffirmed its FY26 revenue guidance of $302 million to $317 million and an EBITDA margin of 21 to 24 per cent of revenue.
Group capital expenditure guidance of $90 million to $100 million for FY26 remains unchanged excluding the new contract, although that figure could rise by up to $17.2 million depending on when the additional server hardware is delivered.
At the time of the acquisition in November 2025, Latitude.sh had ARR of US$43.1 million.
Megaport paid an upfront price of US$150 million, representing 3.5 times ARR, and funded the deal through a $200 million institutional placement at $14.30 per share.
The acquisition structure includes up to three contingent consideration milestones of US$50 million each, tied to revenue performance targets.
The 31 per cent ARR growth reported since 31 December 2025 suggests strong momentum. Megaport's core network business is also tracking well.
Network ARR, including India, reached $272 million at 31 March 2026, representing 23 per cent year-on-year growth in constant currency terms.
The company reported group revenue of $149.2 million for the first half of FY26, up 26 per cent, with EBITDA of $35.5 million and a margin of 23.8 per cent.
The customer behind the new Latitude.sh contract has not been named, with Megaport describing it only as a high-growth, unlisted US technology company focused on developer tooling and agentic AI applications.
Shares in Megaport were trading 7 per cent higher at $9.51 at noon (AEST).
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