SOCO Corporation reported a 12% revenue decline in 1H FY26, weighed down by delayed federal projects and a $4.6 million goodwill impairment. However, the company achieved its strongest first-half contracted sales on record and expects a stronger second half.
- 12% revenue decline to $9.7 million, driven by 39% drop in Axsym revenue
- Core business revenue grew 8.2%, offsetting some losses
- $4.6 million goodwill impairment related to Axsym acquisition
- Strongest first-half contracted sales on record, over $10 million
- Strategic focus on recurring managed services and AI-enabled solutions
Revenue Challenges Amid Strategic Reset
SOCO Corporation Ltd (ASX:SOC), a specialist in IT consultancy and digital solutions, revealed a mixed half-year performance for the six months ending December 31, 2025. The company’s consolidated revenue fell 12% to $9.7 million, primarily due to a 39% decline in revenue from its Axsym business unit, which faced delays in federal government projects. This setback was partially offset by an 8.2% increase in core business revenue, reflecting steady demand in other segments.
Cost Restructuring and Goodwill Impairment
In response to the challenging environment, SOCO undertook a cost restructure aimed at reducing its operating expenses and bolstering sales capabilities. The company reported an underlying EBITDA loss of $0.6 million and a statutory net loss after tax of $5.9 million, which included a non-cash goodwill impairment of $4.6 million linked to the Axsym acquisition. This impairment resets the balance sheet but does not affect cash flow or the company’s ability to deliver contracted work.
Record Contracted Sales and Pipeline Growth
Despite the revenue dip, SOCO achieved its strongest first-half contracted sales on record, exceeding $10 million. This robust sales performance, alongside a strengthened and expanding sales pipeline, provides confidence in improved revenue conversion in the second half of FY26. Notably, the company secured 19 new clients contributing $1.2 million in revenue, including major projects with a national regulator and multiple Queensland government entities.
Strategic Shift Towards Recurring Revenue and AI
SOCO is actively repositioning its managed services offering to increase recurring revenue streams, which enhances revenue visibility and stability. The company’s AI strategy focuses on practical applications within the Microsoft ecosystem, emphasising governance and security to mitigate operational risks. This approach aligns with growing client interest in AI-enabled workflows and productivity tools, particularly in regulated sectors.
Outlook and Market Positioning
Looking ahead, SOCO expects a materially stronger second half, driven by the mobilisation of delayed projects and improved utilisation. The company’s investments in governance, including ISO recertifications, position it well to meet the stringent requirements of government and enterprise clients. While uncertainties remain around project timing and federal government demand, SOCO’s strategic focus on disciplined sales execution, recurring revenue growth, and capability investment sets a foundation for sustainable growth.
Bottom Line?
SOCO’s turnaround hinges on converting its record sales pipeline into profitable growth amid ongoing market uncertainties.
Questions in the middle?
- How quickly will delayed federal projects translate into revenue in 2H FY26?
- What impact will the goodwill impairment have on investor confidence and future acquisitions?
- How effectively can SOCO scale its AI-enabled managed services to drive recurring revenue?