DXN loses US$6.19 million AI HPC contract as revenue rises

By Amara Osei

DXN has lost an AU$8.8 million (US$6.19 million) AI high-performance computing contract after a US-listed neocloud changed its business strategy.

Why did the customer withdraw?

DXN announced this week that an unnamed, US-listed neocloud had cancelled the order following a strategic shift in its business. The June award required DXN to supply a 1.36MW liquid-cooled module to the United States, with rack densities of up to 150kW.

The company has recognized AU$100,000 in revenue from the agreement. DXN expects payment of AU$4.2 million (US$2.95 million) for work completed to date, equal to about 48% of the overall contract. The customer said it was unlikely to proceed with the larger follow-on campus.

The announcement did not name the neocloud or specify the operational change behind its decision. The customer was DXN’s maiden AI HPC client, according to managing director Shalini Lagrutta.

Shalini Lagrutta, managing director of DXN, said:

“While we are disappointed that our maiden AI HPC customer has changed its strategic direction, our contract terms have protected DXN's position...”

“Our focus for the remainder of FY27 is disciplined execution, converting backlog into revenue, while nurturing the growing customer relationships we are attracting.”

Lagrutta said the design work and US relationships built through the cancelled programme opened further AI opportunities in the US market. She also reported a significant step-change in customer inbounds during the quarter, driven by changes in industry demand and the supply response.

DXN still expects AU$4.2 million for completed work, but the larger US campus remains unlikely.

How did Q1 FY27 revenue break down?

DXN reported Q1 FY27 revenue of AU$3.4 million (US$2.39 million), up 340% from AU$700,000 in the same quarter of the prior year. The modular data center business supplied most of the total:

• Modular data centers: AU$2.9 million (US$2 million).
• Data center operations: AU$400,000 (US$280,000).
• Data center as a service: AU$100,000 (US$70,000).

The modular business therefore supplied AU$2.9 million of the AU$3.4 million result, while operations and data center as a service supplied AU$500,000 combined. That mix leaves quarterly sales concentrated in the modular systems unit.

DXN reported current contract backlog of AU$30.8 million (US$21.7 million), but did not state whether the cancelled agreement remains included. Management’s stated priority for the rest of FY27 is to convert that backlog into revenue. It also cited a significant rise in inbound customer interest during the quarter.

Most Q1 FY27 revenue came from modular data centers, which generated AU$2.9 million.

What manufacturing capacity is DXN adding?

DXN has secured a temporary lease on a manufacturing facility in Seven Hills, New South Wales. The lease adds about 1,000 sqm of factory space to meet short-term demand while the company pursues a permanent site.

DXN is working to secure a permanent manufacturing site on Australia’s east coast. It is also establishing manufacturing capacity in Johor, Malaysia, and Jakarta, Indonesia. The company expects the permanent Australian facility and both overseas plants to come live next year.

Together, the three-site plan would extend DXN’s manufacturing presence beyond the temporary Seven Hills facility, with one permanent site on Australia’s east coast and one each in Johor and Jakarta.

DXN is using a 1,000 sqm lease to cover short-term demand while preparing three manufacturing sites for next year.