DXN Limited reported a 63% revenue decline in Q2 FY26 due to project delays but bolstered its future outlook with a $15 million backlog and a strategic joint venture in Indonesia.
- Q2 revenue fell 63% to $1.74 million amid project deferrals
- Backlog remains strong at $15 million with $3.9 million in new contracts
- First recurring revenue from Data Centre as a Service launched
- Strategic joint venture formed with Super Sistem Indonesia
- Cash balance steady at $1.7 million despite negative operating cash flow
Revenue Challenges Amid Project Delays
DXN Limited, a specialist in prefabricated modular data centres, reported a significant 63% drop in revenue to $1.74 million for the December 2025 quarter. This decline primarily reflects customer-driven project deferrals rather than a loss of contracted work, highlighting the timing challenges in the modular data centre sector.
Robust Backlog and New Contract Wins
Despite the revenue setback, DXN's order backlog remains robust at $15 million, supported by a growing pipeline of projects. The company secured $3.9 million in new contracts during the quarter, including notable wins with AP Telecom and an Edge Data Centre project. These contracts are expected to contribute significantly to revenue in the second half of FY26, underpinning management’s confidence in a revenue rebound.
Emerging Recurring Revenue Stream
DXN also marked a milestone by generating its first Data Centre as a Service (DCaaS) fees, establishing a new recurring revenue stream. This capital-light model offers bespoke data centre solutions with end-to-end management, positioning DXN to benefit from ongoing service contracts beyond traditional project deliveries.
Strategic Expansion in Asia-Pacific
In a strategic move to deepen its footprint in Southeast Asia, DXN signed a non-binding Memorandum of Understanding and shareholder agreement to form a joint venture with Super Sistem Indonesia. This partnership aims to localise operations and tap into Indonesia’s rapidly growing digital infrastructure market, aligning with DXN’s broader Asia-Pacific growth strategy targeting Singapore, Malaysia, and Indonesia.
Financial Position and Outlook
DXN closed the quarter with a cash balance of $1.7 million, though operating cash flow remained negative due to slower project execution and delayed milestone payments. The company holds a $5 million secured loan facility, providing financial flexibility. Management expects improved project activity and milestone receipts in the second half of FY26, with approximately 65% of the backlog anticipated to convert into revenue over the coming quarters.
Bottom Line?
DXN’s strategic moves and strong backlog set the stage for a potential turnaround, but execution risks remain as the company navigates project delays and cash flow pressures.
Questions in the middle?
- How quickly will DXN convert its $15 million backlog into revenue?
- What impact will the joint venture with Super Sistem Indonesia have on DXN’s market share in Southeast Asia?
- Can the new Data Centre as a Service model deliver sustainable recurring revenue growth?