Pentanet’s FY26 results reveal robust growth in cloud gaming and telco segments, with a 74% jump in EBITDA to $2.4 million and ongoing GPU expansion plans.
- Group revenue up 8% to $24.4 million
- Cloud gaming EBITDA grows 61% to $1.7 million
- Telco segment EBITDA increases 5% with 4% subscriber growth
- Operating cash flow improves 17% to $1.6 million
- Negotiations underway for additional NVIDIA Blackwell servers
Cloud Gaming Drives Profitability Surge
Pentanet Limited (ASX:5GG) has reported a striking 74% increase in group EBITDA to $2.4 million for FY26, underpinned by a 61% jump in its cloud gaming segment’s EBITDA to $1.7 million. Cloud gaming revenue climbed 16% year-on-year to $2.8 million, boasting a healthy 68% gross margin, up 11 percentage points. This segment now contributes 46% of group EBITDA, up from 35% the prior year, illustrating the rising importance of gaming to Pentanet’s earnings profile.
The company’s gaming average revenue per user (ARPU) also surged 36% to $24, reflecting a shift of subscribers into premium tiers, particularly the Ultimate plan, which now accounts for 59% of paying customers. With around 31,773 paying subscribers and 840,000 registered users, Pentanet’s CloudGG platform is positioned to capitalise on growing demand for cloud gaming in Australia and New Zealand.
Telco Segment Maintains Steady Growth and Cash Flow
While cloud gaming steals the spotlight, Pentanet’s telecommunications segment remains a reliable cash engine, delivering a 5% increase in EBITDA to $2.0 million on 7% revenue growth to $21.6 million. Total subscribers rose 4% to nearly 19,000, supported by 15% growth in higher-margin 5G subscribers and a low monthly churn rate of 1.3%. The telco segment’s blended ARPU nudged up 2% to $96, underpinning a resilient recurring revenue base.
Notably, the company’s fixed wireless network continues to hold for now, with fibre backhauled towers and pricing strategies designed to maintain competitiveness against rising NBN wholesale prices. Pentanet is prioritising utilisation over expansion in this segment, awaiting a market inflection point before committing additional capital.
Capital Deployment and NVIDIA Alliance Expansion
Pentanet is advancing negotiations with NVIDIA to acquire additional Blackwell servers, aiming to incrementally scale its GPU infrastructure in line with demand. This modular approach contrasts with prior lump-sum hardware investments, allowing the company to deploy capital efficiently and preserve margins. The Blackwell upgrade will support a new flagship RTX 5080 plan, enhancing service quality and ARPU potential.
As the sole NVIDIA GeForce NOW Alliance Partner in Australia and New Zealand, Pentanet operates the exclusive cloud gaming platform for the region, streaming games from local NVIDIA GPUs to multiple devices. This alliance grants privileged access to GPU supply and positions Pentanet at the heart of a growing market where hardware costs are rising sharply, making cloud gaming an increasingly attractive alternative to owning expensive gaming rigs.
Impairment and Underlying Profitability
The reported net loss after tax widened to $6.9 million, largely due to a $4 million impairment on legacy Gen 2 hardware as the company phases out older infrastructure in favour of Gen 3 deployments. Excluding this impairment, underlying losses improved by 36% to $2.9 million, reflecting operational progress and improved cost discipline.
Management highlights that the shift away from Gen 2 hardware aligns with evolving user demand and platform migration to higher resolution and performance standards, setting a cleaner operational base for future growth.
Strategic Focus on Scaling and National Reach
Looking ahead, Pentanet’s strategy centres on four pillars: maintaining telco as a predictable cash generator, holding fixed wireless assets for future opportunities, enabling national NBN connectivity for CloudGG users, and aggressively expanding GPU capacity. The company aims to double its paid cloud gaming user base and eventually scale to 100,000 paid users, leveraging its existing subscriber database and NVIDIA partnership.
In a market where over 80% of Australians play video games and rising hardware costs are reshaping consumer economics, Pentanet’s cloud gaming platform is well positioned to capture shifting demand. The company’s focus on incremental GPU deployment and national connectivity changes aims to unlock growth without overextending capital, balancing ambition with financial prudence.
Bottom Line?
Pentanet’s FY26 results mark a turning point as cloud gaming gains momentum and GPU capacity expansion looms, but execution risks remain around capital deployment and competitive pressures in telco and gaming markets.
Questions in the middle?
- Will Pentanet secure the additional NVIDIA Blackwell servers to meet growing cloud gaming demand?
- How will rising NBN wholesale prices and competitive dynamics affect Pentanet’s fixed wireless and telco margins?
- Can Pentanet successfully scale its paid cloud gaming user base fivefold while maintaining profitability?