Data#3 Surges 9.1% in Sales as AI Fuels IT Demand

Solid Growth in a Dynamic IT Market

Data#3 Limited has reported a strong half-year performance for the six months ending 31 December 2025, reflecting its adaptability in a fast-evolving technology landscape. The company’s gross sales increased by 9.1% to $1.55 billion, while net profit after tax rose 3.7% to $23.17 million. Revenue from ordinary activities also climbed 7.9% to $429.4 million, underscoring sustained demand across its core business units.

The Australian IT sector’s ongoing investment in digital transformation and artificial intelligence (AI) has provided a tailwind for Data#3, particularly in infrastructure and cloud solutions. The company’s ability to pivot amid vendor incentive program changes and shifting customer priorities has been key to maintaining momentum.

Segment Performance Highlights

The Infrastructure Solutions segment was a standout, with gross sales up 17.6% to $275.2 million. This growth was driven by strong sales in end-user computing, boosted by Windows 11 upgrades and device refresh cycles, as well as data centre solutions benefiting from customers’ hybrid cloud strategies. Gross profit in this segment increased 16.7%, and management profit more than doubled, reflecting improved deal margins and vendor rebates.

Software Solutions saw gross sales rise 8.9% to $1.1 billion, led by significant growth in Azure and Cloud Solution Provider agreements. However, statutory revenue and gross profit declined slightly due to changes in Microsoft’s incentive programs, which reduced channel incentives. Data#3 has implemented mitigation strategies, and expects software gross profit growth to resume in the second half of FY26.

The Services segment experienced a mixed performance. While consulting and managed services grew by 9.4% and 15.9% respectively, project services and people solutions faced headwinds due to subdued bookings and reduced contractor numbers. Despite this, tight cost control helped limit profit decline in the segment.

Financial Position and Dividend

Data#3’s balance sheet remains robust, with a cash balance of $125.4 million at half-year end. The net cash outflow from operating activities of $204.3 million reflects seasonal timing of customer collections and supplier payments, typical for the business. Trade receivables and payables both decreased significantly post the traditional May/June sales peak.

The Board declared a fully franked interim dividend of 13.5 cents per share, up 3.1% from the prior period, reflecting confidence in ongoing earnings growth and cash flow generation.

Outlook: AI and Digital Transformation at the Forefront

Looking ahead, Data#3 is well positioned to capitalise on the accelerating adoption of AI across software, infrastructure, and services. The company highlighted strong opportunities in network infrastructure upgrades, driven by new Cisco technology and end-of-support cycles, as well as data centre optimisation and AI adoption.

While supply constraints in AI-related hardware may persist through 2026 and into 2027, this could create a near-term tailwind as customers advance orders to avoid price increases. Data#3’s integration of AI into its operations and customer solutions is expected to enhance efficiency and service delivery.

Despite some ongoing challenges in parts of the services business, the overall outlook remains positive, with management confident in delivering sustainable earnings growth aligned with its long-term strategy.