Pentanet (ASX: 5GG) Lifts EBITDA 74% as Cloud Gaming Margins Expand

Pentanet Limited lifted annual earnings and operating cash flow as its higher-margin cloud gaming business gained weight within the group.

Revenue rose 8% to $24.4 million for the year ended June 30, 2026. Group EBITDA increased 74% to $2.4 million, while operating cash flow climbed 17% to $1.6 million.

The improvement extends a three-year turnaround in operating performance. Pentanet recorded a $1.3 million EBITDA loss and a $600,000 operating cash outflow in FY24.

However, the statutory result remained in the red. The loss after tax widened 55% to $6.9 million, from $4.5 million in FY25.

Impairment Weighs on the Bottom Line

The reported loss included a $4 million impairment against second-generation cloud gaming hardware. Pentanet decided to retire that equipment after customers increasingly migrated to its higher-performance third-generation infrastructure.

Excluding the impairment, the loss narrowed to $2.9 million. That represented a $1.6 million improvement from the previous year.

Pentanet finished June with $1.5 million in cash. Investing cash outflow narrowed 16% to $2.3 million.

That spending included $1.8 million for intangibles and $500,000 for network equipment. It also covered the final $1.6 million payment for a 15-year spectrum licence.

Gaming Delivers the Margin Expansion

Cloud gaming revenue increased 16% to $2.8 million. Gross profit rose 40% to $1.9 million, while gross margin expanded 11 percentage points to 68%.

Segment EBITDA advanced 61% to $1.7 million. Gaming supplied 46% of group EBITDA before corporate costs, compared with 35% one year earlier.

The shift toward premium subscriptions supported those economics. Monthly gaming average revenue per user rose 36% to $24.

Ultimate customers represented 59% of the paying base at year-end, up 20 percentage points. Pentanet has about 10,000 monthly active paying users and 840,000 registered CloudGG accounts.

Another 83,000 users have previously paid for a plan. Around half of paid activations involve customers returning to the platform.

Blackwell Capacity Becomes the Priority

Pentanet is in advanced negotiations with NVIDIA to acquire additional Blackwell servers under its alliance agreement. The company cautioned that negotiations remain ongoing and may not produce an agreement.

Its strategy prioritises incremental server deployment rather than large upfront purchases. Management said each added server would enter service immediately, with deployment paced against demand.

Pentanet is the sole GeForce NOW alliance operator across Australia and New Zealand. That position connects its cloud gaming service with its existing telecommunications backbone.

Meanwhile, the telco segment remains the larger revenue contributor. Telco revenue grew 7% to $21.6 million, although gross margin eased two points to 46%.

Telco EBITDA increased 5% to $2 million. Subscribers rose 4% to 18,936, while average monthly churn was 1.3%.

Pentanet plans to use telco cash generation to support GPU expansion. Its roadmap also includes national NBN enablement for CloudGG users.

The company outlined longer-term ambitions to grow active paying gamers from about 10,000 to 100,000. Those milestones are aspirational and do not constitute forecasts or guidance.