Goodman Group: A High-Barrier Play in the Data Center Gold Rush

The global data center market is undergoing a seismic shift, driven by the insatiable demand for AI training, cloud computing, and hyperscale infrastructure. At the forefront of this transformation is Goodman Group (ASX: GMG), a logistics-to-digital-infrastructure powerhouse. With a 9% FY2026 EPS growth target, a $13.7 billion work-in-progress (WIP) pipeline, and a debt profile that defies the volatility of capital-intensive sectors, Goodman is positioning itself as a long-term winner in a market where supply is struggling to keep pace with demand.

Financial Fortitude: The Bedrock of Growth

Goodman's FY2025 results laid the groundwork for its 2026 ambitions. Operating profit surged to A$2.311 billion, with operating EPS rising 9.8% to 118 cents per security. This performance, coupled with a 9.0% FY2026 EPS guidance (targeting $2.6 billion in operating profit), reflects confidence in its strategic pivot to digital infrastructure.

The company's balance sheet is a masterclass in prudence. As of Q2 2025, gearing stands at 4.3%, with $6.6 billion in liquidity and an interest cover of 47x. These metrics not only insulate Goodman from market volatility but also provide flexibility to fund its $4 billion capital raise—a move specifically designed to accelerate data center development.

Strategic Positioning: From Logistics to Digital Infrastructure

Goodman's WIP of $13.7 billion is a testament to its strategic foresight. Over 50% of this pipeline is now allocated to data centers, up from 42% in early FY25. This shift is no accident: hyperscalers like Google, Amazon, and Microsoft are locking in long-term leases for Goodman's low-latency, high-power-capacity facilities.

Key projects like LAX01 (Los Angeles) and HK10 (Hong Kong) are expanding its footprint in AI-driven markets, while the Artarmon (Sydney) project—100% pre-leased—promises A$2.5 billion+ in FY26 earnings. The company's 5 GW global power bank, with 2.6 GW already secured, is a critical differentiator in a sector where power availability is the ultimate bottleneck.

Risks and Rewards: Navigating the Capital-Intensive Landscape

While Goodman's strategy is compelling, it is not without risks. The capital intensity of data center development—requiring upfront investment in power infrastructure, cooling systems, and site acquisition—poses liquidity challenges. However, Goodman's $6.6 billion liquidity buffer and institutional backing mitigate this risk.

Another concern is market saturation. With global vacancy rates tightening (e.g., 6.6% in Q1 2025), competition for prime sites is intensifying. Yet Goodman's focus on dual-purpose developments (combining data centers with industrial logistics) and its ability to secure 10–15-year leases provide a moat against short-term volatility.

Investment Thesis: A High-Conviction Play

Goodman's strategic alignment with AI and cloud computing trends positions it to outperform peers. Its 9% yield-on-cost (YoC) for recent data center projects—well above the 7.1% average—signals strong margins, while pre-leases ensure cash flow visibility. Analysts at UBS and JPMorgan have set price targets as high as A$41.04, reflecting confidence in its 2026 earnings catalyst.

However, investors should monitor power conversion ratios (a recent Ord Minnett concern) and macroeconomic headwinds. For those with a 5–7 year horizon, Goodman offers a compelling risk-reward profile: a conservative balance sheet, a high-growth WIP pipeline, and a leadership position in a sector where demand is outpacing supply.

Conclusion

Goodman Group is not just riding the data center wave—it's shaping it. By leveraging its logistics expertise, securing power infrastructure, and locking in long-term hyperscaler contracts, the company is building a durable competitive advantage. While capital-intensive risks exist, its financial discipline and strategic execution make it a standout play in the AI-driven infrastructure boom. For investors seeking exposure to the next phase of digital transformation, Goodman's 9% EPS guidance and $13.7 billion WIP pipeline offer a compelling case for long-term outperformance.