Highlights

  • FY26 gross sales rose 12.7% to A$3.4 billion, while Gross Profit increased 5.3% to A$305.2 million.
  • EBITDA increased 15.1% to A$76.4 million and net profit after tax reached A$54.5 million.
  • Operating cash flow fell to A$23.3 million as the timing of receipts and payments affected year-end conversion.
  • The full-year Dividend increased to 31.75 cents per share, with the Payout Ratio around 90%.
  • Azure, security and AI-related activity continued to expand, while project services were affected by customer delays.

Data#3 Limited (ASX:DTL) is an Australian information technology services provider serving government and large enterprise customers across software, infrastructure and services. FY26 combined higher gross sales, profit growth and increased dividends with a notable fall in operating cash flow. The result also highlighted the different Economics of software resale and services, while cloud, security and artificial intelligence remained areas of customer demand.

FY26 Earnings and Sales Mix

Gross sales increased 12.7% to A$3.4 billion and gross profit rose 5.3% to A$305.2 million. EBITDA increased 15.1% to A$76.4 million, EBIT rose 16.6% to A$69.8 million, profit before tax reached A$78.8 million and net profit after tax was A$54.5 million. Basic Earnings Per Share were 35.16 cents. The mix of activity remains important because software solutions generate high pass-through sales but lower gross profit margins than services. In FY26, software solutions generated about A$2.3 billion of gross sales and A$78.1 million of gross profit, while services generated A$412.3 million of sales and A$142.3 million of gross profit. Infrastructure solutions contributed A$651.1 million of sales and A$84.5 million of gross profit.

Cash Flow and Dividend Position

Operating cash flow fell to A$23.3 million in FY26. The company attributed the decline to the timing of customer receipts and vendor payments, which can move materially around the June year-end because sales are seasonally weighted toward May and June. The Balance Sheet still included A$326 million of cash and no borrowings at year end. Data#3 declared a final dividend of 18.25 cents per share, fully franked, taking the full-year dividend to 31.75 cents. The payout ratio was about 90%, leaving a smaller portion of reported profit retained within the business.

Cloud, Security and AI Activity

Recurring activity remained a key feature of the model, accounting for about 70% of gross sales. Azure sales increased 29% and security solutions rose 21%, while AI solutions more than doubled from a smaller base. Data#3 also highlighted a dedicated AI practice and a 24-hour sovereign security operations centre. These initiatives carry near-term costs, including an initial profit impact of about A$2 million, while their future contribution depends on customer adoption and project conversion. The company did not provide numerical FY27 earnings guidance and noted that earnings are weighted to the second half.

Services Execution and Key Risks

Services growth was more mixed. Project services declined 15.3% as customer delays and procurement timing affected activity, while recruitment fell 8.7%. These movements show the exposure of services Revenue to project timing even as recurring software and cloud Demand supports overall sales. Other risks include vendor dependence, incentive changes, hardware constraints, staff costs and shifts in government technology spending. The lower FY26 Operating Cash Flow also makes working-capital normalisation an important measure for the next reporting period.

Key Insights

Data#3's FY26 result showed profit growth across EBITDA, EBIT and net profit while maintaining a high dividend payout. At the same time, the sharp reduction in operating cash flow and softer project services activity underline the importance of timing and execution in the reseller and services model. Cloud, security and AI remain areas of expansion, but the next stage will depend on converting those activities into sustained earnings and cash generation without increasing working-capital volatility.