Key Takeaways

Strategic expansion into AI and HPC, boosted by partnerships and technology, positions Northern Data to capture revenue growth in the generative AI market.
Transitioning to carbon-neutral energy and advanced cooling tech may lower costs, while potential asset sales could fund AI-focused reinvestment.
Dependency on NVIDIA and high capital expenditure pose risks to financial stability, while customer concentration and AI market competition threaten revenue growth and market share.

Catalysts

About Northern Data

Develops and operates high-performance computing (HPC) and artificial intelligence (AI) solutions to businesses and research institutions worldwide.What are the underlying business or industry changes driving this perspective?

Northern Data's expansion into AI and high-performance computing solutions, particularly through Taiga Cloud, positions it to capture a significant share of the booming generative AI market, which could drive substantial revenue growth.
Their strategic partnership with NVIDIA and the adoption of the latest Grace Blackwell technology enhances their product offerings, potentially improving net margins through cutting-edge solutions and performance efficiencies.
The company's transition to carbon-neutral energy solutions and proprietary cooling technologies may reduce operational costs, thus positively impacting net margins and overall profitability.
Northern Data's significant GPU acquisition and deployment plans are likely to support further revenue and earnings growth as they expand customer capacity and utilization.
The potential sale of the Peak Mining business could unlock capital, allowing for reinvestment into the AI-focused segments, thereby enhancing revenue and supporting strategic growth initiatives in high-margin areas.

Northern Data Earnings and Revenue Growth

Northern Data Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Northern Data's revenue will grow by 42.0% annually over the next 3 years.
Analysts are not forecasting that Northern Data will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Northern Data's profit margin will increase from -63.6% to the average DE Software industry of 12.2% in 3 years.
If Northern Data's profit margin were to converge on the industry average, you could expect earnings to reach €70.0 million (and earnings per share of €1.09) by about August 2028, up from €-127.4 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 41.9x on those 2028 earnings, up from -8.8x today. This future PE is greater than the current PE for the DE Software industry at 31.3x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.81%, as per the Simply Wall St company report.

Northern Data Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company's reliance on NVIDIA technology means that any delays or issues in GPU supply could impact Northern Data's ability to expand its AI infrastructure, potentially affecting future revenue growth.
The ongoing process of selling the Peak Mining business introduces uncertainty about future financial stability and may impact cash flow and profitability until the sale is completed.
The high capital expenditure involved in expanding data center capacity and acquiring new GPUs could strain cash reserves and increase financial risk if the expected returns from these investments do not materialize as anticipated, impacting net margins.
Customer base concentration, with revenue growth primarily reliant on expanding relationships with existing clients, increases the risk of revenue volatility if there is any change in demand or satisfaction from these key clients.
The rapidly evolving AI market poses a competitive threat, and the emergence of new players in the European AI infrastructure space could lead to increased pricing pressure and impact Northern Data’s market share and earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of €36.6 for Northern Data based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €43.0, and the most bearish reporting a price target of just €27.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €573.0 million, earnings will come to €70.0 million, and it would be trading on a PE ratio of 41.9x, assuming you use a discount rate of 7.8%.
Given the current share price of €17.5, the analyst price target of €36.6 is 52.2% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Taiga Cloud And NVIDIA Partnership Will Drive Market Transformation

Shared on15 Aug 25