The Australian data center industry is facing a trust crisis sparked by community protests. Amid the investment boom in AI infrastructure, the "triple bottleneck" of land, capital, and power permits is bringing lofty growth projections back down to earth.
NextDC, dubbed the "Australian version of CoreWeave" and a bellwether for AI infrastructure, disclosed on Wednesday that its critical M3 project's power supply plan has been delayed until fiscal year 2028 due to ongoing opposition from residents in Melbourne’s inner city regarding high-voltage transmission line construction, resulting in a more than one-third reduction in its FY2027 guidance. The company also announced a pause on all new development projects and land acquisitions, and is currently evaluating whether force majeure clauses may be invoked under relevant contracts.
After the announcement, NextDC's stock plunged sharply following the resumption of trading in Sydney after a two-day suspension, falling as much as 45% to A$5.07 during trading and retreating to levels last seen in 2019, dragging down peer stocks in the local market.
This incident further underscores the widespread delivery challenges facing the global data center industry—where GPUs are ready and customer contracts are signed, but projects are often stalled by grid connection permits and opposition from local residents. According to Bloomberg, at least 106 data center projects in the United States have been blocked or delayed this year alone due to community opposition, involving investments of approximately $198 billion.
Backed up by residents: The "low-tech" collapse of Project M3
The catalyst for NextDC's stock plunge was a highly dramatic community confrontation.
To power the M3 project, grid operator Jemena Electricity Networks needed to install high-voltage power poles on residential streets in Maribyrnong, an inner-western suburb of Melbourne. In September this year, local residents blocked construction vehicles with their private cars and backfilled the excavated trenches. Jemena subsequently suspended construction citing “safety concerns and restricted site access,” stating that resumption of work would not be possible until after February 2027 at the earliest. As a result, the next grid capacity upgrade for M3 has been delayed to FY2028.
The local council will not grant planning approval until further community consultation is completed; the planning decision for M3 Phases 6 and 7 has been deferred to 2027—coinciding precisely with the Victorian state government entering caretaker mode ahead of the election on November 28.
The financial impact on NextDC has become immediately apparent. According to the company’s filings with the Australian Securities Exchange, FY2027 net revenue guidance has been reduced from AUD 615 million to AUD 640 million to AUD 475 million to AUD 500 million; FY2027 underlying EBITDA guidance has been cut from AUD 385 million to AUD 410 million to AUD 245 million to AUD 265 million, representing a median decline of approximately 36%; and FY2027 capital expenditure guidance has been narrowed from AUD 5.25 billion to AUD 5.75 billion to AUD 4.5 billion to AUD 5.0 billion.
The new guidance excludes approximately AUD 140 million in revenue and EBITDA related to M3-affected contracts, involving some capacity for which billing has already commenced. The company also warned that EBITDA could face additional pressure if it is required to pay service level breach penalties to customers. CEO Craig Scroggie stated on the investor call:
We will not proceed with any work on sites where there is no existing customer commitment.
Goldman Sachs had previously warned that funds remain a "handbrake."
Eight days before this sharp decline, Goldman Sachs analyst Chris Boulus and his team released a comprehensive report on Australia and New Zealand’s digital infrastructure, forecasting that IT load demand in the region will grow to 5.2 GW by 2030, creating a supply-demand gap of 0.7 GW, and estimating the overall data center capital expenditure cycle at AUD 50 billion to AUD 65 billion.
Notably, Goldman Sachs assigned a cautious rating to NextDC in the same report. At that time, Goldman Sachs initiated coverage of Goodman Group and Megaport with a “Buy” rating, but only started tracking NextDC with a “Neutral” rating and a target price of A$11, citing that “the market loves the macro demand narrative, but capital is the real brake.” The report set NextDC’s FY2028 and FY2029 EBITDA forecasts 3% to 5% below market consensus and highlighted a potential funding gap of over A$1 billion, questioning whether “de-risked capital joint ventures” or “potentially dilutive equity financing” would be the company’s path forward.
NextDC currently has A$8.7 billion in liquidity on its balance sheet, including A$6.7 billion in undrawn senior debt, and the company states it remains in compliance with covenants. However, the company also warns in its filings that a material change in its cash flow profile—such as a revenue shortfall caused by delays from M3—could limit its ability to draw down the aforementioned senior debt.
According to Market Index, citing UBS forecasts, NextDC is not expected to achieve profitability until as early as FY2031, with its long-term debt peaking at A$11.2 billion in FY2030. Based on the current share price, NextDC’s FY2027 EV/EBITDA valuation is approximately 37 times, while Goldman Sachs data shows the global average valuation for pure-play data center operators is 22 times—this comparison does not yet incorporate the latest A$1.1 billion convertible note. Market Index therefore notes that NextDC “would merely revert to global peer valuation levels even if it were to fall another 40%.”
"Force majeure" is becoming a new term in the data center industry.
NextDC invoking the force majeure clause is not an isolated case.
On September 24 of this year, Oracle issued a force majeure notice regarding its large “Project Jupiter” campus in New Mexico, citing the same reasons: delays in permitting and obstacles to power connection. Subsequently, it became known that the company had to transport natural gas to its data center to maintain operations. In early October, Finnish authorities ordered Google to halt construction on two data centers. Now, the same situation is unfolding again in Melbourne.
According to Bloomberg, Morgan Stanley previously estimated that $156 billion in global data center projects were canceled or delayed in 2025 alone, with this figure rising to $130 billion in the first quarter of 2026. Texas has directly ordered a halt to new data center construction.
RBC explicitly stated that the M3 delay incident is strong evidence of a real risk posed by community opposition to the delivery timeline for contracted data center capacity. Mark Luet, Head of Investment Banking for Japan, North Asia, and Australia at Citibank, told Bloomberg Television that investors will be “more discerning” in the future, adding, “We have no doubt that the theme of AI infrastructure will continue to advance.”
Bring your own power, or don't enter at all
In the industry’s view, the fundamental solution to the grid connection dilemma lies in “on-site power generation.” The Australian government has already implemented mandatory national regulations this July, requiring data center operators to “fully fund their own electricity needs and provide guarantees for new power generation projects.”
Goldman Sachs also adjusted its forecasts in its Carbonomics report. Analyst Michele Della Vigna raised the projection for global data center "behind-the-meter" power supply to 67 GW by 2030, at which point on-site gas turbines, reciprocating engines, and fuel cells will meet 25% of global data center electricity demand—up from nearly zero in 2025. The rationale is that grid connection wait times have extended from a historical average of about two years to more than seven years today, while the construction cycle for data centers themselves takes only two to three years.
The M3 project embodies this very contradiction: the main construction is nearly complete, client contracts are secured, yet the only missing element—a 66-kilovolt grid upgrade line—is blocked from access by a few private cars and a handful of shovels.
Meanwhile, Andrew Hauser, Deputy Governor of the Reserve Bank of Australia, recently identified the “data center construction boom” as one of Australia’s three key upside risks to inflation, prompting Goldman Sachs Australia economists to revise their previous expectation of a pause in rate hikes and instead forecast a 25-basis-point rate increase by the RBA in November to 4.85%. This means that the data center investment boom is raising financing costs for the data center industry itself—a feedback loop far from ideal for an industry Goldman Sachs has already identified as being constrained primarily by capital.
The NextDC board will announce the results of its capital expenditure review at the annual general meeting on November 20, and it will be important for the market to monitor whether the sale of development land no longer needed in the near term will serve as the starting point for a series of asset disposals.