Goodman Group (ASX:GMG) reported operating profit of AUD 1.2 billion for the first half of fiscal 2026, supported by early timing of development and performance income and continued demand for logistics and data center infrastructure in supply-constrained global cities.
On the call, CEO Greg Goodman said the company is “building into strong demand for city locations” across both logistics and data centers, highlighting customer trends toward automation, consolidation, and “unprecedented levels of CapEx spending” in data centers driven by low-latency and connectivity requirements.
Data centers: power capacity expands and work in progress set to rise
In the quarter, the company commenced a 90 megawatt fully fitted data center project in Sydney. Goodman said it remains on track to have projects totaling around 500 megawatts underway by June, which would take work in progress to approximately AUD 18 billion.
During Q&A, management provided additional detail on the data center pipeline and work in progress. Goodman said about 370 megawatts of the 497 megawatts referenced on its materials is currently in work in progress, representing roughly AUD 10 billion of a AUD 14.4 billion figure cited on the call. The company also referenced having “activated” 1,826 megawatts of sites in total, with additional capacity forming part of a longer-dated pipeline.
CEO Greg Goodman also discussed how leasing approaches can differ by market and asset type. He said some projects—particularly “operating assets” that are multi-tenanted—may be leased progressively, while other sites can involve earlier commitments and designs tailored to specific customers. He said large-volume site negotiations are primarily with hyperscalers.
Capital partnering strategy and new development partnerships
Goodman reiterated its long-running capital partnering model, noting the company has established a AUD 14 billion data center development partnership in Europe and a AUD 2 billion logistics partnership in the U.S., with an Australian partnership “on the way.” Management said it expects data center commitments in 2026 as construction starts and other projects near ready-for-service dates.
In the question-and-answer session, the company suggested it is “good at the moment” on partnerships, with an emphasis over time on moving work in progress into longer-term holding structures and assets under management. On Australia, management said the partnership currently being progressed relates to a project already started (referred to on the call as “Tauman”), and described its approach as preparing sites over time and bringing in capital partners as projects go “vertical,” rather than waiting to start.
On the European partnership, CFO Nick Vrondas said the Frankfurt and Amsterdam properties have already been transferred in, and the two Paris properties are expected to transfer in the current half, with closing anticipated “well and truly before the end of June,” subject to local municipality preemptive rights processes.
Segment performance: rental income up, management income down
CFO Nick Vrondas walked through operating profit adjustments and segment movements, emphasizing that operating profit excludes unrealized property valuation movements, hedge mark-to-market changes, and the accounting fair value estimate related to the long-term incentive plan.
Vrondas said operating profit of AUD 1.2 billion was “a little higher than we had expected” due to earlier timing of development and performance income recognition that had not been expected until the full year. He also noted foreign exchange reduced translation of foreign-denominated operating income before interest by AUD 33 million versus the prior period, which was offset by a commensurate benefit in borrowing costs as designed under the firm’s hedging approach.
- Investment earnings increased by AUD 54 million (after a AUD 5 million adverse FX impact). Direct property net rental income rose AUD 59 million, which Vrondas attributed largely to increased assets held directly on the balance sheet following a reorganization of U.S. investments.
- Management income fell AUD 137 million year over year. Transactional and performance-based revenues declined AUD 160 million to AUD 79 million after an “exceptionally strong” prior period. Vrondas said base management income increased on a constant currency basis as stabilized third-party AUM rose.
- Development earnings were down AUD 36 million, with an adverse AUD 26 million FX impact; otherwise, the result was described as largely in line with the prior period. Vrondas said yields on cost for new projects are increasing, reflecting longer-dated stabilization periods for data centers.
Vrondas said the total portfolio stood at AUD 87.4 billion at the end of December, including AUD 75 billion in external assets under management. Stabilized third-party AUM averaged AUD 69 billion during the period, up by more than AUD 4 billion from the prior corresponding half. Total fee revenue was “just over 0.9%” of average stabilized third-party AUM for the half, which management said aligns with long-term expectations.
On the development pipeline, management said the expected yield on costs on work in progress has increased to over 8%, with work in progress now more than 70% data centers. Vrondas noted the projects are “largely uncommitted from a lease perspective” at this stage, reflecting expansion timing and longer lead times, and said the company is compensating by keeping low financial leverage. Goodman completed AUD 2.5 billion of developments in the half, 87% of which are already leased.
Balance sheet, valuation movements, and cash flow
On the balance sheet, Vrondas said development holdings increased to AUD 6.5 billion from AUD 5.6 billion. He said gearing was 4.1%, slightly lower than June, and liquidity totaled AUD 5.2 billion including cash and undrawn loans, after acquisitions, capex funding, and repayment of a EUR 300 million bond at maturity.
Net interest income increased AUD 63 million year over year, with higher interest earned on cash and derivatives and a benefit from FX hedges more than offsetting higher gross interest paid. Vrondas said the cost of borrowings on loans is around 4%, while net weighted average cost of debt is around 1% after hedging.
For non-operating items, the company recorded over AUD 250 million of unrealized valuation gains (representing the group’s share of about AUD 900 million across the portfolio at the 100% level), before deductions and other items, resulting in a net deduction from profits of AUD 112 million in the reconciliation table. Vrondas said the weighted average cap rate on stabilized assets was 5.03%.
Outlook: WIP growth and operating EPS target reaffirmed
Greg Goodman said demand for digital infrastructure is expected to “materially exceed supply” for the foreseeable future and framed the company’s development pipeline as a multi-year program supported by its metropolitan land bank, growing power capacity, and capital position. He also pointed to rising logistics activity as customers invest in automation and robotics, describing larger, more complex industrial developments.
In closing, management reaffirmed its target to deliver 9% operating EPS growth for FY 2026. The CFO added that while the full-year target is unchanged, some income was brought forward into the first half, meaning the previously discussed earnings split across the year is no longer expected to follow a 40/60 pattern.
About Goodman Group (ASX:GMG)
Goodman Group is an integrated property group with operations throughout Australia, New Zealand, Asia, Europe, the United Kingdom and the Americas. Goodman Group, comprised of the stapled entities Goodman Limited, Goodman Industrial Trust and Goodman Logistics (HK) Limited, is the largest industrial property group listed on the Australian Securities Exchange and one of the largest listed specialist investment managers of industrial property and business space globally. Goodman's global property expertise, integrated own+develop+manage customer service offering and significant investment management platform ensures it creates innovative property solutions that meet the individual requirements of its customers, while seeking to deliver long-term returns for investors.
