Megaport's EPS Misses Expectations in First Half 2025

Megaport Ltd (ASX: MP1), a leading network-as-a-service (NaaS) provider, reported its first half 2025 earnings on February 23, 2025, with earnings per share (EPS) missing analysts' expectations. The company's shares fell 27% to $12.15 in morning trade following the release of the results. Megaport's revenue growth slowed down compared to the previous year, with total revenue increasing by 12% to $106.8 million, while annual recurring revenue (ARR) grew by 18% to $226.6 million. The company's EBITDA was slightly down year-on-year, attributed to reinvestment in go-to-market functions.



Megaport's CEO, Michael Reid, attributed the earnings miss to market saturation and noise in digital communication, as well as the ramp-up period for new hires. Despite the earnings miss, Megaport reported a net cash flow positive year, generating $28.0 million, up $62.5 million year-on-year. This achievement reflects the company's successful financial turnaround and improved operational efficiency. Megaport plans to invest in go-to-market strategies, product development, engineering, and its ecosystem to drive long-term growth and profitability.



Megaport's guidance for FY 2025 fell short of analysts' expectations, with revenue growth of +10% to +14% (midpoint: +12%) compared to the average analyst forecast of +16.5% (midpoint: +16.5%), and EBITDA growth of +0% to +14% (midpoint: +7%) compared to the average analyst forecast of +17.5% (midpoint: +17.5%). The company's guidance reflects a focus on accelerating annual recurring revenue (ARR) through reinvestment in the business to drive long-term growth. Megaport plans to expand into new markets and geographic locations, prepare for additional capacity augmentations, and invest in product, engineering, and ecosystem development to achieve its targets.

In conclusion, Megaport's EPS miss in the first half of 2025 is primarily due to a slowdown in revenue growth, reinvestment in go-to-market functions, market saturation, foreign exchange impacts, and the ramp-up period for new hires. Despite the earnings miss, Megaport's net cash flow positive year and strategic initiatives for FY 2025 suggest that the company's long-term growth prospects remain strong. Investors should closely monitor Megaport's progress as it executes its strategic plans and reinvests in growth initiatives to drive profitability.