This report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 based on our current expectations, assumptions, and estimates about us and our industry. These forward-looking statements involve risks and uncertainties. Words such as "believe," "anticipate," "estimate," "expect," "intend," "plan," "will," "may, " and other similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. All statements other than statements of historical facts, including, among others, statements regarding our future financial position, business strategy, projected levels of growth, projected costs and projected financing needs, are forward-looking statements. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of several important factors including, without limitation, that we may be further impacted by slowdowns, postponements or cancellations in our client's businesses or deterioration in the financial condition of our clients, a history of losses, competitive factors, uncertainties inherent in government contracting, concentration of business with a small number of clients, the ability to service debt, substantial leverage, material weaknesses in our internal controls and our disclosure controls, energy costs, the interest rate environment, failure to successfully implement expansion plans or integrate acquired businesses into our operations, one-time events and other factors more fully described in "Risk Factors" and elsewhere in this report. The forward-looking statements made in this report relate only to events as of the date on which the statements are made. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely upon forward-looking statements as predictions of future events. Except as required by applicable law, including the securities laws of the United States, and the rules and regulations of the Securities and Exchange Commission, we do not plan and assume no obligation to publicly update or revise any forward-looking statements contained herein after the date of this report, whether as a result of any new information, future events or otherwise.

Our Business

We are a global provider of managed IT infrastructure services leveraging data centers throughout the United States, Europe and Latin America and access to massive carrier-neutral network connectivity. Utilizing top-tier, purpose-built data center infrastructure, Terremark delivers a comprehensive suite of managed solutions including managed hosting, colocation, connectivity, disaster recovery, security and cloud computing services. The combination of our carrier-neutral global infrastructure with our complete suite of managed services, including our Infinistructuretm utility computing platform, enables companies to reduce the capital and operational expenses associated with running their IT operations, while at the same time improving application performance, availability and security. We differentiate ourselves through our world-class, carrier-neutral data centers combined with our continued investment in proprietary service delivery and platform technologies, including our Infinistructure utility computing platform and digitalOps® service platform, and our premium managed services portfolio supported by a team of highly experienced infrastructure experts.

Our business model is driven primarily by recurring revenue. As a carrier-neutral provider, we do not own or operate our own network, and, as a result, our interconnection services enable our customers to exchange network traffic through direct connection with each other or through peering connections with multiple parties. As a result of having more than 160 carriers in our facilities, our customers have "zero mile" access to robust connectivity and are able to realize significant cost savings, flexibility, and can scale to match their growth while still delivering the performance they demand. The immediate proximity of our facilities to major fiber routes with access to North America, Latin America and Europe has attracted the major global telecommunications carriers, to colocate their equipment with us in order to better service their customers. This network density, which allows our customers to reduce their connectivity costs, combined with the security of our facilities, has attracted enterprise and government sector customers.

During the three months ended September 30, 2008, a significant impact on our results of operations was related to the evaluation of strategic alternatives by our Board of Directors. This evaluation began in April 2008 upon receipt by our company of an unsolicited expression of interest regarding a potential acquisition of

all our outstanding shares at a premium to the then current trading price. Our Board of Directors formed a strategic committee to conduct a market check and to authorize and oversee management's preliminary exploratory process to identify transaction alternatives to maximize stockholder value. No definitive transaction with any third party ensued as a result of the process in light of global economic conditions and credit market illiquidity. Therefore, the Board of Directors determined that it was in the shareholders' best interest to continue executing our business plan.

Our principal executive office is located at 2 South Biscayne Boulevard, Suite 2900, Miami, Florida 33131. Our telephone number is (305) 856-3200.

Results of Operations

Results of Operations for the Three Months Ended September 30, 2008 as Compared
to the Three Months Ended September 30, 2007.

Revenues. The following charts provide certain information with respect to our
revenues:


                                             For the Three
                                              Months Ended
                                             September 30,
                                            2008        2007

                         U.S. Operations        86 %       87 %
                         Outside U.S.           14 %       13 %

                                               100 %      100 %

                                            For the Three Months Ended September 30,
                                           2008                          2007

  Revenues consist of:
  Colocation                          $    20,221,909         34 %   $ 13,981,081        31 %
  Managed and professional services        32,652,028         55 %     27,224,344        60 %
  Exchange point services                   3,967,044          7 %      3,086,775         7 %
  Equipment resales                         2,740,110          4 %      1,076,285         2 %

                                      $    59,581,091        100 %   $ 45,368,485       100 %

The increase in revenues is mainly due to both an increase in our deployed customer base and an expansion of services to existing customers. Our deployed customer base increased to 1,016 customers as of September 30, 2008 from 890 customers as of September 30, 2007. Revenues consist of:

• colocation services, such as licensing of space and provision of power;

• exchange point services, such as peering and cross connects;

• procurement and installation of equipment; and

• managed and professional services, such as network management, managed web hosting, outsourced network operating center services, network monitoring, procurement of connectivity, managed router services, secure information services, technical support and consulting.

Our utilization of total net colocation space increased to 23.3% as of September 30, 2008 from 20.9% as of September 30, 2007. Our utilization of total net colocation space represents the percentage of space billed versus total space available for customers.

The increase in managed and professional services is primarily the result of an increase in orders from both existing and new customers as reflected by the growth in our customer base and utilization of space, as discussed above.

The increase in exchange point services is mainly due to an increase in cross-connects billed to customers. Cross-connects billed to customers increased 7,459 as of September 30, 2008 from 6,119 as of September 30, 2007.

Equipment resales may fluctuate quarter over quarter based on customer demand and include $1.8 million from a service provider of data storage, data protection and data availability systems acquired in January 2008.

We anticipate an increase in revenue from colocation, exchange point and managed services as we add more customers to our network of NAPs, sell additional services to existing customers and introduce new products and services. We anticipate that the percentage of revenue derived from public sector customers will fluctuate depending on the timing of exercise of expansion options under existing contracts and the rate at which we sell services to the public sector. We anticipate that public sector revenues will continue to represent a significant portion of our revenues for the foreseeable future.

Cost of Revenues. Costs of revenues, excluding depreciation and amortization, increased $9.8 million to $35.1 million for the three months ended September 30, 2008 from $25.3 million for the three months ended September 30, 2007. Cost of revenues, excluding depreciation, consist mainly of operations personnel, fees to third party service providers, procurement of connectivity and equipment, technical and colocation space rental costs, electricity, chilled water, insurance, property taxes, and security services. The increase is mainly due to increases of $2.8 million in personnel costs, $1.3 million in managed service costs, $1.0 million in colocation space costs and $0.8 million in costs of equipment resales. We also had increases of $2.3 million in certain variable costs such as electricity and maintenance as a result of an increase in orders from both existing and new customers as reflected by the growth in our customer base and utilization of space, as discussed above.

The $2.8 million increase in personnel costs is mainly due to operations and engineering staffing levels increasing, which is attributable to the expansion of operations in Virginia and Colombia. The $1.3 million in managed services costs is consistent with increase in related revenues and includes a $0.8 million increase in connectivity procurement costs. The $1.0 million increase in colocation space costs is primarily the result of the opening of our new facility in Colombia and taking additional colocation space in Dallas, Belgium and Madrid. The $0.8 million in costs of equipment resales is consistent with increase in related revenues.

General and Administrative Expenses. General and administrative expenses increased $2.5 million to $11.0 million for the three months ended September 30, 2008 from $8.5 million for the three months ended September 30, 2007. General and administrative expenses consist primarily of administrative personnel, professional service fees, rent, and other general corporate expenses. The increase in general and administrative expenses is mainly due to an increase in administrative personnel costs of $1.6 million and one-time professional fees and other direct costs of $1.0 million incurred as a result of an evaluation of strategic alternatives by our Board of Directors. Personnel costs include payroll and share-based compensation. The increase in administrative personnel is the result of a $0.9 million increase in share-based compensation and an increase in headcount from an average of 144 employees during the three months ended September 30, 2007 to an average of 159 employees during the three months ended September 30, 2008. This increase is mainly attributed to the expansion of operations in Virginia, Colombia and the expansion of our corporate infrastructure, including planning and information systems resources to manage the existing customer base and plan anticipated business growth. Other general corporate expenses such as accounting, consulting, legal services, recruiting fees, travel, telecommunications, software, hardware and facilities rent also increased as a result of the increase in headcount.

Sales and Marketing Expenses. Sales and marketing expenses increased $1.3 million to $6.8 million for the three months ended September 30, 2008 from $5.5 million for the three months ended September 30, 2007. The increase is primarily due to an increase in sales personnel from an average of 67 employees during the three months ended September 30, 2007 to an average of 94 employees during the three months ended September 30, 2008 and an increase in sales commissions paid for sales bookings.

Depreciation and Amortization Expenses. Depreciation and amortization expense increased $2.3 million to $6.9 million for the three months ended September 30, 2008 from $4.6 million for the three months ended September 30, 2007. The increase is the result of necessary capital expenditures to support our business

growth, including the expansion of operations in Virginia, upgrades to support our infrastructure in Miami and expansion in Silicon Valley.

Change in Fair Value of Derivatives. For the three months ended September 30, 2008, we recognized a loss of $1.5 million due to the changes in the fair values of our derivatives which was mainly related to our two interest rate swap agreements which became effective March 31, 2008. The estimated fair value of these interest rate swap agreements assumes that LIBOR rates will decrease to 4.5% over the next 30 months. LIBOR rate was 6.9% as of September 30, 2008.

Interest Expense. Interest expense decreased $2.1 million to $6.6 million for the three months ended September 30, 2008 from $8.7 million for the three months ended September 30, 2007. This decrease is primarily a result of an increase in the amount of interest being capitalized as well as lower interest rates on our financing arrangements.

Interest Income. Interest income decreased $1.2 million to $0.2 million for the three months ended September 30, 2008 from $1.4 million for the three months ended September 30, 2007. This decrease is primarily due to a decrease in our average cash and cash equivalent balances for the period.

Other Financing Charges. During the three months ended September 30, 2007, we expensed $1.2 million of financing charges consisting of title and legal fees. These charges were expensed after determining that our term loan of $250.0 million was not a substantial modification of our existing Credit Suisse debt instruments.

Results of Operations for the Six Months Ended September 30, 2008 as Compared to the Six Months Ended September 30, 2007.

Revenues. The following charts provide certain information with respect to our revenues:

                                                For the
                                           Six Months Ended
                                             September 30,
                                           2008          2007

                       U.S. Operations         86 %         86 %
                       Outside U.S.            14 %         14 %

                                              100 %        100 %

                                             For the Six Months Ended September 30,
                                            2008                        2007

   Revenues consist of:
   Colocation                          $   39,091,697        34 %   $ 27,103,647        34 %
   Managed and professional services       63,708,574        55 %     46,244,985        57 %
   Exchange point services                  7,664,739         7 %      5,888,158         7 %
   Equipment resales                        5,232,286         4 %      1,372,265         2 %

                                       $  115,697,296       100 %   $ 80,609,055       100 %

The increase in revenues is mainly due to both an increase in our deployed customer base and an expansion of services to existing customers, as well as including a full six months of revenues from web hosting provider acquired in May 2007. Our deployed customer base increased to 1,016 customers as of September 30, 2008 from 890 customers as of September 30, 2007. Revenues consist of:

• colocation services, such as licensing of space and provision of power;

• exchange point services, such as peering and cross connects;

• procurement and installation of equipment; and

• managed and professional services, such as network management, managed web hosting, outsourced network operating center services, network monitoring, procurement of connectivity, managed router services, secure information services, technical support and consulting.

Our utilization of total net colocation space increased to 23.3% as of September 30, 2008 from 20.9% as of September 30, 2007. Our utilization of total net colocation space represents the percentage of space billed versus total space available for customers.

The increase in managed and professional services is mainly due to an increase of approximately $10.5 million in managed web hosting services as a result of including a full semester of revenues in 2008 from a hosting services provider acquired in May 2007. The remainder of the increase is primarily the result of an increase in orders from both existing and new customers as reflected by the growth in our customer base and utilization of space, as discussed above.

The increase in exchange point services is mainly due to an increase in cross-connects billed to customers. Cross-connects billed to customers increased 7,459 as of September 30, 2008 from 6,119 as of September 30, 2007.

Equipment resales may fluctuate year over year based on customer demand and include $3.6 million from the January 2008 acquisition of a service provider of data storage, data protection and data availability systems.

We anticipate an increase in revenue from colocation, exchange point and managed services as we add more customers to our network of NAPs, sell additional services to existing customers and introduce new products and services. We anticipate that the percentage of revenue derived from public sector customers will fluctuate depending on the timing of exercise of expansion options under existing contracts and the rate at which we sell services to the public sector. We anticipate that public sector revenues will continue to represent a significant portion of our revenues for the foreseeable future.

Cost of Revenues. Costs of revenues, excluding depreciation and amortization, increased $22.9 million to $67.2 million for the six months ended September 30, 2008 from $44.3 million for the six months ended September 30, 2007. Cost of revenues consist mainly of operations personnel, fees to third party service providers, procurement of connectivity and equipment, technical and colocation space rental costs, electricity, chilled water, insurance, property taxes, and security services. The increase is mainly due to increases of $7.6 million in personnel costs, $2.9 million in managed service costs, $2.4 million in colocation space costs and $2.3 million in costs of equipment resales. We also had increases of $5.3 million in certain variable costs such as electricity and maintenance as a result of an increase in orders from both existing and new customers as reflected by the growth in our customer base and utilization of space, as discussed above.

The $7.6 million increase in personnel costs is mainly due to operations and engineering staffing levels increasing, which is attributable to the expansion of operations in Virginia and Colombia. The $2.9 million in managed services costs is consistent with increase in related revenues and includes a $1.7 million increase in connectivity procurement costs. The $2.4 million increase in colocation space costs is primarily the result of the opening of our new facility in Colombia and taking additional colocation space in Dallas, Belgium, and Madrid. The $2.3 million in costs of equipment resales is consistent with increase in related revenues.

General and Administrative Expenses. General and administrative expenses increased $5.0 million to $19.9 million for the six months ended September 30, 2008 from $14.9 million for the six months ended September 30, 2007. General and administrative expenses consist primarily of administrative personnel, professional service fees, rent, and other general corporate expenses. The increase in general and administrative expenses is mainly due to an increase in administrative personnel costs of $2.9 million fees and one-time professional fees and other direct costs of $1.0 million incurred as a result of an evaluation of strategic alternatives by our Board of Directors. Personnel costs include payroll and share-based compensation. The $2.9 million increase in administrative personnel is the result of a $1.1 million increase in share-based compensation and an increase in headcount from an average of 132 employees during the three months ended September 30, 2007 to an average of 158 employees as of September 30, 2008. This increase is mainly attributed to the acquisition of a hosting services provider in May 2007, the expansion of operations in

Virginia, Colombia and the expansion of our corporate infrastructure, including planning and information systems resources to manage the existing customer base and plan anticipated business growth.

Sales and Marketing Expenses. Sales and marketing expenses increased $3.2 million to $12.5 million for the six months ended September 30, 2008 from $9.3 million for the six months ended September 30, 2007. The increase is primarily due to an increase in sales personnel from an average of 68 employees during the six months ended September 30, 2007 to an average of 91 employees during the six months ended September 30, 2008 and an increase in sales commissions paid for sales bookings.

Depreciation and Amortization Expenses. Depreciation and amortization expense increased $4.2 million to $12.5 million for the six months ended September 30, 2008 from $8.3 million for the six months ended September 30, 2007. The increase is the result of necessary capital expenditures to support our business growth and the expansion of operations in Virginia, upgrades to support our infrastructure in Miami and expansion in Silicon Valley.

Change in Fair Value of Derivatives. For the six months ended September 30, 2008, we recognized income of $4.2 million due to the changes in the fair values of our derivatives which was mainly related to our two interest rate swap agreements which became effective March 31, 2008. The estimated fair value of these interest rate swap agreements assumes that LIBOR rates will decrease to 4.5% over the next 30 months. LIBOR rate was 6.9% as of September 30, 2008.

Interest Expense. Interest expense decreased $1.9 million to $13.6 million for the six months ended September 30, 2008 from $15.5 million for the six months ended September 30, 2007. This decrease is primarily a result of an increase in the amount of interest being capitalized as well as lower interest rates on our financing arrangements.

Interest Income. Interest income decreased $1.5 million to $0.8 million for the six months ended September 30, 2008 from $2.3 million for the six months ended September 30, 2007. This decrease is primarily due to a decrease in our average cash and cash equivalent balances for the period.

Other Financing Charges. During the six months ended September 30, 2007, we expensed $1.2 million of financing charges consisting of title and legal fees. These charges were expensed after determining that our term loan of $250.0 million was not a substantial modification of our existing Credit Suisse debt instruments.

Liquidity and Capital Resources

As of September 30, 2008, our principal source of liquidity was our $58.8 million in unrestricted cash and cash equivalents and our $31.6 million in accounts receivable. The terms of the First and Second Lien Agreement prohibit us from having cash and cash equivalents less than $10.0 million at any time.

During the six months ended September 30, 2008, we generated $26.9 million of cash flows from operations. We anticipate that we will generate sufficient cash flows from operations in the second half of this fiscal year to fund our capital expenditures and debt service in connection with our currently identified business objectives for the same period. Consequently, we expect to maintain our current liquidity and be able to repay the $30 million in convertible debt in June 2009. Our plan, however, with our 9% Senior Convertible Notes and our Series B Notes is to offer bondholders to exchange current notes for new notes with an extended term or other acceptable security.

We are anticipating capital expenditures of approximately $80.0 million for the fiscal year ended March 31, 2009, with the majority related to the completion of the first phase of our data center campus in Virginia, upgrades to support our infrastructure in Miami and the start up of our expansion in Silicon Valley. The remaining capital expenditures will be used to improve our technology and service delivery platforms. Capital expenditures for the six months ended September 30, 2008 amounted to $63.3 million.

Our projected revenues and cash flows depend on several factors, some of which are beyond our control, including the rate at which we provide services, the timing of exercise of expansion options by customers under existing contracts, the rate at which new services are sold to the government sector and the commercial sector, the ability to retain the customer base, the willingness and timing of potential customers in outsourcing

the housing and management of their technology infrastructure to us, the reliability and cost-effectiveness of our services and our ability to market our services. Besides our cash on hand and any financing activities we may pursue, customer collections are our primary source of cash. While we believe we have a strong customer base and have experienced strong collections in the past, if the current market conditions continue to deteriorate we may experience increased churn in our customer base, including reductions in their commitments to us, which could also have a material adverse effect on our liquidity.

Sources and Uses of Cash

Cash provided by operations for the six months ended September 30, 2008 was approximately $26.9 million as compared to cash used in operations of $9.4 million for the six months ended September 30, 2007. The increase in cash provided by operations is mainly due to a decrease in our net loss and the timing of vendor payments and collection from customers.

Cash used in investing activities for the six months ended September 30, 2008 was $63.3 million compared to cash used in investing activities of $96.0 million for the six months ended September 30, 2007, a decrease of $32.7 million. This . . .