diff --git a/e2e/next/src/next-legacy.test.ts b/e2e/next/src/next-legacy.test.ts
index 01b15a1e287caa..8c05db712e8b0d 100644
--- a/e2e/next/src/next-legacy.test.ts
+++ b/e2e/next/src/next-legacy.test.ts
@@ -279,4 +279,44 @@ describe('@nx/next (legacy)', () => {
     await killPort(prodServePort);
     await killPort(selfContainedPort);
   }, 600_000);
+
+  it('should support --custom-server flag (swc)', async () => {
+    const appName = uniq('app');
+
+    runCLI(
+      `generate @nx/next:app ${appName} --no-interactive --custom-server --linter=eslint --unitTestRunner=jest`,
+      { env: { NX_ADD_PLUGINS: 'false' } }
+    );
+
+    // Check for custom server files added to source
+    checkFilesExist(`${appName}/server/main.ts`);
+    checkFilesExist(`${appName}/.swcrc.server`);
+
+    const result = runCLI(`build ${appName}`);
+
+    checkFilesExist(`dist/${appName}-server/server/main.js`);
+
+    expect(result).toContain(
+      `Successfully ran target build for project ${appName}`
+    );
+  }, 300_000);
+
+  it('should support --custom-server flag (tsc)', async () => {
+    const appName = uniq('app');
+
+    runCLI(
+      `generate @nx/next:app ${appName} --swc=false --no-interactive --custom-server --linter=eslint --unitTestRunner=jest`,
+      { env: { NX_ADD_PLUGINS: 'false' } }
+    );
+
+    checkFilesExist(`${appName}/server/main.ts`);
+
+    const result = runCLI(`build ${appName}`);
+
+    checkFilesExist(`dist/${appName}-server/server/main.js`);
+
+    expect(result).toContain(
+      `Successfully ran target build for project ${appName}`
+    );
+  }, 300_000);
 });
diff --git a/e2e/next/src/next.test.ts b/e2e/next/src/next.test.ts
index fcf104e28b9f14..8a2355f6f33ea5 100644
--- a/e2e/next/src/next.test.ts
+++ b/e2e/next/src/next.test.ts
@@ -158,11 +158,13 @@ describe('Next.js Applications', () => {
       `generate @nx/next:app ${appName} --no-interactive --custom-server --linter=eslint --unitTestRunner=jest`
     );
 
+    // Check for custom server files added to source
     checkFilesExist(`${appName}/server/main.ts`);
+    checkFilesExist(`${appName}/.swcrc.server`);
 
     const result = runCLI(`build ${appName}`);
 
-    checkFilesExist(`dist/${appName}/server/main.js`);
+    checkFilesExist(`dist/${appName}-server/server/main.js`);
 
     expect(result).toContain(
       `Successfully ran target build for project ${appName}`
@@ -180,7 +182,7 @@ describe('Next.js Applications', () => {
 
     const result = runCLI(`build ${appName}`);
 
-    checkFilesExist(`dist/${appName}/server/main.js`);
+    checkFilesExist(`dist/${appName}-server/server/main.js`);
 
     expect(result).toContain(
       `Successfully ran target build for project ${appName}`
diff --git a/packages/js/src/executors/node/node.impl.ts b/packages/js/src/executors/node/node.impl.ts
index a50474a613bf15..2701900b915dcf 100644
--- a/packages/js/src/executors/node/node.impl.ts
+++ b/packages/js/src/executors/node/node.impl.ts
@@ -58,6 +58,29 @@ function debounce<T>(fn: () => Promise<T>, wait: number): () => Promise<T> {
     return pendingPromise;
   };
 }
+// This function is used to process the queue of tasks.
+function queueProcesser<T>(fn: () => Promise<T>) {
+  let isProcessing = false;
+  let pendingPromise = Promise.resolve(); // Ensures sequential processing
+
+  return async () => {
+    if (isProcessing) {
+      return pendingPromise;
+    }
+
+    isProcessing = true;
+    pendingPromise = (async () => {
+      try {
+        await fn(); // Process the queue
+      } catch (error) {
+        console.error('Error processing queue:', error);
+      } finally {
+        isProcessing = false;
+      }
+    })();
+    return pendingPromise;
+  };
+}
 
 export async function* nodeExecutor(
   options: NodeExecutorOptions,
@@ -127,10 +150,7 @@ export async function* nodeExecutor(
       await task.start();
     };
 
-    const debouncedProcessQueue = debounce(
-      processQueue,
-      options.debounce ?? 1_000
-    );
+    const processQueueSafely = queueProcesser(processQueue);
 
     const addToQueue = async (
       childProcess: null | ChildProcess,
@@ -145,7 +165,7 @@ export async function* nodeExecutor(
           // Wait for build to finish.
           const result = await buildResult;
 
-          if (!result.success) {
+          if (result && !result.success) {
             // If in watch-mode, don't throw or else the process exits.
             if (options.watch) {
               if (!task.killed) {
@@ -276,7 +296,7 @@ export async function* nodeExecutor(
           });
         });
         await addToQueue(childProcess, whenReady);
-        await debouncedProcessQueue();
+        await processQueueSafely();
       };
       if (isDaemonEnabled()) {
         additionalExitHandler = await daemonClient.registerFileWatcher(
@@ -319,7 +339,7 @@ export async function* nodeExecutor(
       while (true) {
         const event = await output.next();
         await addToQueue(null, Promise.resolve(event.value));
-        await debouncedProcessQueue();
+        await processQueueSafely();
         if (event.done || !options.watch) {
           break;
         }
diff --git a/packages/js/src/utils/swc/add-swc-config.ts b/packages/js/src/utils/swc/add-swc-config.ts
index f6783e7bffcf87..547af1138c0daa 100644
--- a/packages/js/src/utils/swc/add-swc-config.ts
+++ b/packages/js/src/utils/swc/add-swc-config.ts
@@ -54,11 +54,20 @@ export function addSwcConfig(
   tree: Tree,
   projectDir: string,
   type: 'commonjs' | 'es6' = 'commonjs',
-  supportTsx: boolean = false
+  supportTsx: boolean = false,
+  swcName: string = '.swcrc',
+  additionalExcludes: string[] = []
 ) {
-  const swcrcPath = join(projectDir, '.swcrc');
+  const swcrcPath = join(projectDir, swcName);
   if (tree.exists(swcrcPath)) return;
-  tree.write(swcrcPath, swcOptionsString(type, defaultExclude, supportTsx));
+  tree.write(
+    swcrcPath,
+    swcOptionsString(
+      type,
+      [...defaultExclude, ...additionalExcludes],
+      supportTsx
+    )
+  );
 }
 
 export function addSwcTestConfig(
diff --git a/packages/next/src/generators/application/application.ts b/packages/next/src/generators/application/application.ts
index a99c7f889eed44..703868f5d80045 100644
--- a/packages/next/src/generators/application/application.ts
+++ b/packages/next/src/generators/application/application.ts
@@ -32,6 +32,7 @@ import {
   updateTsconfigFiles,
 } from '@nx/js/src/utils/typescript/ts-solution-setup';
 import { sortPackageJsonFields } from '@nx/js/src/utils/package-json/sort-fields';
+import { configureForSwc } from '../../utils/add-swc-to-custom-server';
 
 export async function applicationGenerator(host: Tree, schema: Schema) {
   return await applicationGeneratorInternal(host, {
@@ -93,6 +94,11 @@ export async function applicationGeneratorInternal(host: Tree, schema: Schema) {
   updateCypressTsConfig(host, options);
   setDefaults(host, options);
 
+  if (options.swc) {
+    const swcTask = configureForSwc(host, options.appProjectRoot);
+    tasks.push(swcTask);
+  }
+
   if (options.customServer) {
     await customServerGenerator(host, {
       project: options.projectName,
diff --git a/packages/next/src/generators/custom-server/custom-server.ts b/packages/next/src/generators/custom-server/custom-server.ts
index 4c2e6af45d42cf..235c2ff6ea1b0a 100644
--- a/packages/next/src/generators/custom-server/custom-server.ts
+++ b/packages/next/src/generators/custom-server/custom-server.ts
@@ -18,6 +18,7 @@ export async function customServerGenerator(
   options: CustomServerSchema
 ) {
   const project = readProjectConfiguration(host, options.project);
+  const swcServerName = '.server.swcrc';
 
   const nxJson = readNxJson(host);
   const hasPlugin = nxJson.plugins?.some((p) =>
@@ -26,11 +27,7 @@ export async function customServerGenerator(
       : p.plugin === '@nx/next/plugin'
   );
 
-  if (
-    project.targets?.build?.executor !== '@nx/next:build' &&
-    project.targets?.build?.executor !== '@nrwl/next:build' &&
-    !hasPlugin
-  ) {
+  if (project.targets?.build?.executor !== '@nx/next:build' && !hasPlugin) {
     logger.error(
       `Project ${options.project} is not a Next.js project. Did you generate it with "nx g @nx/next:app"?`
     );
@@ -38,9 +35,7 @@ export async function customServerGenerator(
   }
 
   // In Nx 18 next artifacts are inside the project root .next/ & dist/ (for custom server)
-  const outputPath = hasPlugin
-    ? `dist/${project.root}`
-    : project.targets?.build?.options?.outputPath;
+  const outputPath = `dist/${project.root}-server`;
   const root = project.root;
 
   if (
@@ -68,9 +63,9 @@ export async function customServerGenerator(
 
   // In Nx 18 next artifacts are inside the project root .next/ & dist/ (for custom server)
   // So we need ensure the mapping is correct from dist to the project root
-  const projectPathFromDist = `../../${offsetFromRoot(project.root)}${
-    project.root
-  }`;
+  const projectPathFromDist = hasPlugin
+    ? `../../${offsetFromRoot(project.root)}${project.root}`
+    : `${offsetFromRoot(`dist/${project.root}`)}${project.root}`;
 
   const offset = offsetFromRoot(project.root);
   const isTsSolution = isUsingTsSolutionSetup(host);
@@ -107,6 +102,9 @@ export async function customServerGenerator(
       tsConfig: `${root}/tsconfig.server.json`,
       clean: false,
       assets: [],
+      ...(options.compiler === 'tsc'
+        ? {}
+        : { swcrc: `${root}/${swcServerName}` }),
     },
     configurations: {
       development: {},
@@ -150,6 +148,11 @@ export async function customServerGenerator(
   });
 
   if (options.compiler === 'swc') {
-    return configureForSwc(host, project.root);
+    // Update app swc to exlude server files
+    updateJson(host, join(project.root, '.swcrc'), (json) => {
+      json.exclude = [...(json.exclude ?? []), 'server/**'];
+      return json;
+    });
+    return configureForSwc(host, project.root, swcServerName, ['src/**/*']);
   }
 }
diff --git a/packages/next/src/generators/custom-server/files/server/main.ts__tmpl__ b/packages/next/src/generators/custom-server/files/server/main.ts__tmpl__
index 0ec46fe5607a49..3a22b42538aae7 100644
--- a/packages/next/src/generators/custom-server/files/server/main.ts__tmpl__
+++ b/packages/next/src/generators/custom-server/files/server/main.ts__tmpl__
@@ -15,8 +15,8 @@ import next from 'next';
 // - The fallback `__dirname` is for production builds.
 // - Feel free to change this to suit your needs.
 
-const dir = process.env.NX_NEXT_DIR || <%- hasPlugin ? `path.join(__dirname, '${projectPathFromDist}')` : `path.join(__dirname, '..')`; %> 
 const dev = process.env.NODE_ENV === 'development';
+const dir = process.env.NX_NEXT_DIR || <%- hasPlugin ? `path.join(__dirname, '${projectPathFromDist}')` : `path.join(__dirname, dev ? '..' : '', '${projectPathFromDist}')`; %> 
 
 // HTTP Server options:
 // - Feel free to change this to suit your needs.
diff --git a/packages/next/src/utils/add-swc-to-custom-server.ts b/packages/next/src/utils/add-swc-to-custom-server.ts
index e7bade6a1e61ab..8c08d4ca9edf2f 100644
--- a/packages/next/src/utils/add-swc-to-custom-server.ts
+++ b/packages/next/src/utils/add-swc-to-custom-server.ts
@@ -4,7 +4,6 @@ import {
   installPackagesTask,
   joinPathFragments,
   readJson,
-  updateJson,
 } from '@nx/devkit';
 import {
   swcCliVersion,
@@ -14,8 +13,13 @@ import {
 } from '@nx/js/src/utils/versions';
 import { addSwcConfig } from '@nx/js/src/utils/swc/add-swc-config';
 
-export function configureForSwc(tree: Tree, projectRoot: string) {
-  const swcConfigPath = joinPathFragments(projectRoot, '.swcrc');
+export function configureForSwc(
+  tree: Tree,
+  projectRoot: string,
+  swcConfigName = '.swcrc',
+  additonalExludes: string[] = []
+) {
+  const swcConfigPath = joinPathFragments(projectRoot, swcConfigName);
   const rootPackageJson = readJson(tree, 'package.json');
 
   const hasSwcDepedency =
@@ -27,22 +31,17 @@ export function configureForSwc(tree: Tree, projectRoot: string) {
     rootPackageJson.devDependencies?.['@swc/cli'];
 
   if (!tree.exists(swcConfigPath)) {
-    addSwcConfig(tree, projectRoot);
-  }
-
-  if (tree.exists(swcConfigPath)) {
-    updateJson(tree, swcConfigPath, (json) => {
-      return {
-        ...json,
-        exclude: [...json.exclude, '.*.d.ts$'],
-      };
-    });
+    // We need to create a swc config file specific for custom server
+    addSwcConfig(tree, projectRoot, 'commonjs', false, swcConfigName, [
+      ...additonalExludes,
+      '.*.d.ts$',
+    ]);
   }
 
   if (!hasSwcDepedency || !hasSwcCliDependency) {
     addSwcDependencies(tree);
-    return () => installPackagesTask(tree);
   }
+  return () => installPackagesTask(tree);
 }
 
 function addSwcDependencies(tree: Tree) {