With a relatively small but growing AI market in Australia, some potential growth companies are coming in focus. ASX stocks likely to become best growth stocks to buy now are
NEXTDC Limited (ASX: NXT)
NEXTDC Limited (ASX: NXT) has taken a significant step to strengthen its balance sheet and support future growth by securing A$2.9 billion in senior bank debt facilities under a new common term’s platform, which will replace its current debt. This new structure enhances NEXTDC's flexibility to pursue long-term growth, providing greater access to both bank and bond markets for financing. Additionally, NEXTDC has announced the acquisition of a new data center site in Eastern Creek, Sydney, known as S7, located approximately 45 kilometers from Sydney’s CBD and 8 kilometers from its planned S4 site in Horsley Park. These sites offer substantial growth potential in the Western Sydney Availability Zone, which is a key strategic area for digital infrastructure expansion. The S7 site acquisition comes at a purchase price of approximately A$353 million, with settlement on the land parcels expected to be completed progressively across FY25. Importantly, NEXTDC will not include S7-related property holding costs in its FY25 Underlying EBITDA guidance due to uncertainties around timing and cost. Capital expenditure guidance for FY25 remains unchanged in the A$1.3 to A$1.5 billion range.
NEXTDC recently raised approximately A$550 million through an institutional placement, issuing roughly 32.1 million new shares. This capital raise saw strong investor demand, underscoring confidence in NEXTDC's growth strategy and long-term vision. As AI continues to drive the demand for high-performance digital infrastructure, this capital ensures NEXTDC is well-positioned to meet the escalating needs of cloud and AI ecosystems and to capture new market opportunities. The company is among high growth stocks remaining focused on innovation and agility to power the next generation of AI-driven technologies, supporting enterprises in the digital era.
NEXTDC reported solid FY24 results, with total revenue increasing by 12% to A$404.3 million, surpassing the company’s guidance range. Underlying EBITDA rose 5% to A$204.3 million, exceeding the high end of guidance. Capital expenditure reached A$1.0 billion, also above guidance, reflecting accelerated development activities. NEXTDC closed the year with a record forward order book of 86.6MW and liquidity of A$2.7 billion, along with a low gearing ratio of 3.4%. These metrics position the company favourably to continue scaling operations and meeting robust demand from traditional enterprises, cloud computing, edge computing, and the rapid growth of AI applications shaping the fourth industrial revolution.
Appen Limited (ASX: APX)
Appen Limited (ASX: APX) has shown continued progress in its financial and operational performance for the quarter ending 30 September 2024. Revenue for Q3 FY24 was $54.1 million, marking a 13% decline compared to the previous corresponding period (pcp), primarily due to the loss of revenue from Google, which contributed $21.9 million in Q3 FY23. However, excluding Google, revenue increased by 35% year-over-year, growing from $40.2 million in Q3 FY23. This growth was driven by strong traction in generative AI projects, particularly in China and with a key global customer.
The company is one of the growing companies to invest in. Its financial health remains strong, with a cash balance of $30.3 million at the end of Q3 FY24, which was further bolstered by a successful A$50.0 million institutional placement in October, bringing the pro-forma cash balance to $62.4 million. The enterprise and government sectors also remain areas of strategic focus. Appen’s revenue from generative AI-related projects has grown significantly, with 15% of group revenue in H1 FY24 derived from this segment. This figure rose to 28% in June 2024, with Appen delivering generative AI-related services to 42 LLM customers.
Appen is optimistic about the revenue momentum, excluding the impact of the Google contract termination. The company remains focused on leveraging its expertise in generative AI and deep learning models, anticipating continued growth in both global and Chinese markets. A key part of Appen’s strategy is the investment in product development, with $10.3 million invested in H1 FY24, although this was lower than prior periods due to the ongoing cost-out programs. The company is committed to developing industry-leading products that support high-quality data creation, including platforms for LLM customization. With its cost management initiatives largely completed, Appen is targeting profitability in its underlying cash EBITDA on a run-rate basis by the second half of FY24. The company's focus on optimizing its product offerings and maintaining tight financial controls remains central to its strategy for sustainable growth and long-term profitability.
Source: Company’s Report
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