Aussie Broadband share price implodes 18% amid AI investment

The Aussie Broadband Ltd (ASX: ABB) share price is taking a beating today.

Shares in the S&P/ASX 300 Index (ASX: XKO) telco closed on Friday trading for $3.57. In early morning trade on Monday, shares are swapping hands for $2.93 apiece, down 17.9%.

For some context, the ASX 300 is up 0.7% at this same time.

This comes as the company launches its new automated assistant and releases a trading update.

First, the AI rollout.

Aussie Broadband share price tanks on AI investment

Investors are pressuring the Aussie Broadband share price after the company announced the launch of Buddy Telco.

The new digital-first challenger brand is aimed at disrupting Australia’s NBN market. It’s targeting four million households out of a total addressable NBN market of some 8.3 million.

Users can employ Buddy to manage their connection, upgrades, outages and usage through the Buddy Telco app, website and Live Chat. The deep learning program is underpinned by Aussie Broadband’s extensive network with connection to all 121 NBN POIs and the Aussie Fibre backbone. It will be offered on a self-service basis only.

The company intends to invest around $10 million in FY 2025 for marketing, brand and set up related operating expenditure to support the Buddy launch. Buddy is expected to provide positive earnings before interest, taxes, depreciation and amortisation (EBITDA) contribution starting in FY 2027.

The AI-enhanced program is targeting 100,000 customers within three years.

Commenting on the new tech rollout that’s failed to lift the Aussie Broadband share price today, managing director Phillip Britt said, “Aussie is thrilled to launch Buddy Telco, a truly digital-first offering that provides value and ease of use to the consumer.”

Britt added:

Our strategic investment in Buddy allows the group to compete in both the premium and value-led broadband sectors, further diversifying the markets we operate in. We look forward to continuing to ‘Change The Game’ through Buddy’s success.

Which bring us to the trading update and guidance.

ASX 300 telco expects to achieve top end of guidance

The Aussie Broadband share price also has failed to catch any tailwinds from today’s trading update.

Based on preliminary, unaudited results, management expects the company’s FY 2024 EBITDA to be at the top end of its $116 million to $121 million guidance, which was previously upgraded on 23 February.

As for the FY 2025, the $10 million investment in Buddy is now reflected in that EBITDA guidance. Prior FY 2025 EBITDA guidance of $135 million to $145 million has been revised to the new range of $125 million to $135 million.

The Aussie Broadband share price will be one to watch on 26 August, when the telco releases its full-year audited results.

The post Aussie Broadband share price implodes 18% amid AI investment appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Aussie Broadband. The Motley Fool Australia has recommended Aussie Broadband. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.