SOCO Returns to Profit, Eyes Growth with New Federal Contract and AI Push

A Return to Profitability

SOCO Corporation Ltd (ASX – SOC) marked a pivotal turnaround in FY25, returning to profitability after a loss in the previous year. The company reported a modest net profit after tax of $0.07 million on revenue of $21.3 million, reflecting a 3.6% increase year-on-year. This improvement was underpinned by disciplined cost management, tighter pricing strategies, and operational efficiencies that lifted gross margins to 24.2% from 23.5% the year before.

Despite a softer second half impacted by delays in Federal government spending ahead of the Australian federal election, SOCO’s diversified client base helped offset this slowdown. The company’s strategic focus on expanding beyond Federal contracts proved crucial, with 64% of revenue now derived from non-Federal clients, up from 59% in FY24.

Strategic Contract Wins and Client Growth

FY25 saw SOCO secure a significant new 3-year contract with a Federal Government agency, providing enhanced revenue visibility and a foundation for future growth. Alongside this, the company expanded its footprint in the commercial sector, adding marquee clients and deepening existing relationships. By year-end, SOCO served 134 active clients, up from 121 the previous year, illustrating successful business development efforts and diversification across industries and regions.

These client wins were complemented by the delivery of complex, high-profile projects that reinforced SOCO’s reputation for quality and reliability, generating further referrals and follow-on contracts. The company’s “clients as advocates” approach continues to be a key differentiator in a competitive IT consulting market.

Investing in Technology and Partnerships

SOCO has invested strategically in emerging technologies, notably enhancing its AI and data analytics capabilities to meet evolving client demands. The company also strengthened its partnership with Microsoft, achieving five core Microsoft Solution Partner designations across cloud, security, and AI solutions. These alliances not only bolster SOCO’s credibility but also open new co-selling opportunities in targeted verticals.

Internally, SOCO upgraded its project and time tracking systems to improve real-time visibility and operational efficiency, alongside ongoing process improvements and security enhancements aligned with ISO and Defence standards. These investments position SOCO to scale effectively while maintaining delivery excellence and data security.

FY26 Strategic Priorities and Market Focus

Looking ahead, SOCO’s strategy for FY26 centers on sustainable growth through client diversification, operational discipline, and capability development. The company plans to increase recurring and subscription-based revenues by converting one-off projects into managed services and support contracts, aiming to build a stable earnings base.

SOCO is also sharpening its market focus by targeting three priority verticals, including Defence Industry Suppliers, where regulatory complexity and compliance needs align well with its expertise. The company’s vertical strategy is supported by a comprehensive six-lens framework that considers regulatory environments, industry associations, key opinion leaders, and community impact to build deep, multi-layered industry relationships.

Talent retention and development remain high priorities, with investments in professional training, certifications, including Microsoft Copilot AI technologies, and leadership development. SOCO’s growth enablement initiatives are designed to ensure the company has the right skills and leadership to execute its ambitious plans.

Balancing Opportunity and Risk

While SOCO’s return to profit and strategic contract wins are encouraging, the company remains mindful of risks. Its historical reliance on Federal Government contracts exposes it to shifts in public sector spending, underscoring the importance of its diversification efforts. Talent competition and concentration risks linked to its Microsoft partnership are also being actively managed through ongoing upskilling and certification programs.

Overall, SOCO emerges from FY25 with a stronger financial footing, a diversified client base, and a clear strategic roadmap. The company’s focus on operational discipline, technology investment, and targeted market expansion sets the stage for a potentially stronger FY26.