Goodman’s business transformation is accelerating, with over 70% of its development pipeline now dedicated to data centres, a proportion we could see rise further at this month’s result. The company has evolved from a traditional industrial landlord into a global AI and digital infrastructure developer, but its long-duration earnings profile means the share price remains highly sensitive to bond yields. If we are correct and Australian bond yields are nearing a peak, Goodman could rerate meaningfully from current levels, particularly as the market increasingly recognises its exposure to one of the decade’s most compelling structural growth themes.
As CEO Greg Goodman noted earlier in the year, “We’re setting ourselves up for the next 10 years, not the next four or five minutes”—a philosophy that aligns closely with our positive long-term view on both GMG and the AI infrastructure build-out. However, the stock has underperformed the ASX200, and fellow DC provider NEXTDC (NXT) in 2026 due to a couple of key headwinds:
Lack of Signed Data Centre Customer Contracts
- This has been the market’s biggest frustration in 2026. Despite building a 6.4GW global power bank and growing work in progress to around $18 billion (73% data centres), Goodman has yet to announce major hyperscaler leasing agreements, unlike peers such as NextDC and CDC Data Centres, which have secured contracts with Google and Amazon.
- Analysts repeatedly questioned CEO Greg Goodman on the May Q3 update call over the absence of signed contracts. He said negotiations are “well advanced”, with contracted commitments expected by the end of calendar 2026.
- Until those leases are signed, the market is unlikely to fully value Goodman’s rapidly expanding data centre pipeline.
Softer Industrial Portfolio Occupancy
While the AI infrastructure business continues to accelerate, Goodman’s core industrial portfolio has faced modest occupancy pressure, which weighed on the shares following the 1H result.
- Occupancy eased from 96.5% in FY25 to 95.5% at 1H26, before recovering slightly to 95.7% in the third quarter.
- Management cited weaker conditions in China as the primary drag on occupancy.
- Like-for-like NPI growth moderated to 4.1% in Q3, although the portfolio still retains 11% under-renting, providing a meaningful runway for future rental growth.
Goodman Group has been involved in data centres since 2010, though the strategy was relatively modest in scale for over a decade before accelerating sharply from 2023 onwards. The data centre pivot that defines GMG today effectively began at the FY23 results, coinciding with the post-ChatGPT surge in AI infrastructure demand.
What Goodman needs to show at its FY26 Results in 2 weeks:
- Data centre contract announcements: This is the single biggest share price catalyst. The market wants signed leases or, at a minimum, credible language that deals are imminent. For GMG, this will be the major share price driver.
- FY27 EPS guidance: Consensus expects Goodman to guide to at least 9% operating EPS growth for FY27, with some analysts modelling 11%. A conservative 9% print is expected but unlikely to excite; an upgrade would be a positive surprise.
- Occupancy stabilisation: Any further deterioration below 95.5% would be poorly received. The market wants evidence the logistics portfolio has found a floor.
- WIP and development pipeline confirmation: Confirmation that WIP has reached ~$18 billion and that the 500 MW data centre target is on track would be supportive.
- Energy and capital progress: Given power availability is the key bottleneck Goodman itself has flagged, any update on power procurement or partnership capital to fund the data centre build-out will be closely watched.
We’ve backed GMG as a quality, tried and trusted operator to get things right in the rapidly evolving DC space, but the stock continues to trade well below its average 5-year valuation, as investors wait to see contract announcements – when GMG starts to lock in such agreements we can see a quick 10-20% rerate in the share price. We’re comfortable being patient for now although when you say “negotiations are well advanced”, expectations start to rise.
- We like the risk/reward towards GMG around $30, ultimately liking the company’s longer-term time horizon.
MM is long and bullish GMG
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