Data#3 Limited (ASX:DTL) delivered another year of Earnings growth in FY26, with gross sales, statutory revenue, Gross Profit and net profit all increasing. Net profit after tax rose 13.1% to A$54.5 million, while the company retained a debt-free balance sheet. For FY27, attention is shifting toward artificial intelligence, sovereign cyber security capabilities and faster growth across the Services business.

What the Company Does

Data#3 is an Australian technology services and solutions provider offering cloud, software, infrastructure, security, data and analytics, connectivity and professional services.

Its activities are grouped across Software Solutions, Infrastructure Solutions and Services. Because a substantial proportion of software transactions is recognised on a net basis for statutory accounting purposes, gross sales are materially higher than statutory revenue.

FY26 Gross Sales Reach A$3.4 Billion

Gross sales increased 12.7% to A$3.385 billion in FY26 from A$3.003 billion in the previous year.

Statutory Revenue increased 6.4% to A$907.3 million, while gross profit rose 5.3% to A$305.2 million.

EBIT increased 16.6% to A$69.8 million and net profit before tax rose 14.0% to A$78.8 million.

Net profit after tax increased 13.1% to A$54.5 million from A$48.2 million, while Basic Earnings Per Share increased to 35.16 cents from 31.12 cents.

The combination of faster EBIT growth than gross profit indicates that Operating Leverage and cost management contributed to the earnings improvement.

Software and Infrastructure Drive Sales Growth

Software Solutions generated gross sales of approximately A$2.3 billion, increasing by more than 14%.

Demand was supported by cloud subscriptions, security products and software-related services.

Infrastructure Solutions also recorded gross sales growth of more than 14%, supported by Demand across end-user devices, enterprise networking and data centre solutions.

These two areas remained the main contributors to overall sales growth during FY26.

Services Growth Remains a Priority

Services gross sales increased 3.6%, below the growth rates achieved by Software and Infrastructure Solutions.

Managed Services and Maintenance Services recorded growth during the year, supported by contract renewals and new customer wins.

For FY27, management intends to accelerate the Services Business by expanding advisory capabilities, increasing its Annuity contract base, strengthening managed service platforms and aligning project services with higher-growth technology categories.

A greater contribution from Services could also alter the group's future revenue and Margin mix.

Margin on Gross Sales Declines

Total gross profit increased to A$305.2 million, but gross profit as a percentage of gross sales declined to 9.0% from 9.6%.

This reflected gross sales increasing faster than gross profit during the year.

The measure should be viewed in the context of Data#3's business model, where large volumes of software and infrastructure transactions can generate substantial gross sales but comparatively smaller gross profit contributions.

Future changes in the mix between software resale, infrastructure and higher-value services will therefore remain relevant to overall profitability.

Artificial Intelligence Becomes an FY27 Focus

Data#3 plans to establish a dedicated artificial intelligence practice during FY27.

The structure will bring together AI capabilities across Software, Infrastructure and Services, alongside customer-facing AI delivery teams.

The company expects artificial intelligence to provide both a customer growth opportunity and an internal productivity tool.

Areas of focus include cloud-based AI services, productivity technologies and infrastructure capable of supporting increased AI workloads.

Sovereign Cyber Security Capability Expands

Cyber security is another area receiving additional investment.

During FY27, Data#3 plans to establish a new 24/7 Sovereign Security Operations Centre capability in Australia, building on its existing security operations infrastructure.

The initiative is intended to support customers requiring local data residency, locally operated security services and alignment with regulatory requirements.

This could broaden Data#3's managed security offering, although implementation will require Investment and successful customer adoption.

Balance Sheet Supports Investment and Dividends

Data#3 ended FY26 with no borrowings, maintaining financial flexibility as it invests in new capabilities.

Return on equity was 57.3%, unchanged from FY25.

The board declared a fully franked final Dividend of 18.25 cents per share, taking the full-year dividend to 31.75 cents per share, an increase of 13.0%.

The dividend Payout Ratio remained at 90.3%.

FY27 Outlook

Data#3 has not provided specific FY27 earnings guidance.

The company expects its established seasonal pattern to continue, with sales typically peaking during May and June and earnings weighted toward the second half of the financial year.

Management reported a positive start to FY27 while highlighting continued demand across artificial intelligence, cyber security, cloud technologies and digital transformation.

Performance during FY27 will also depend on customer procurement cycles, technology Supply conditions and the pace at which the Services strategy translates into higher earnings.