Data#3 Limited has reported its strongest financial year yet, with gross sales soaring 12.7% to $3.4 billion and net profit after tax up 13.1% to $54.5 million, underpinned by robust demand for AI, cloud, and cyber security solutions.
- Gross sales jump 12.7% to $3.4 billion
- Net profit after tax rises 13.1% to $54.5 million
- Fully franked dividend increased 13% to 31.75 cents per share
- Strategic investments in AI practice and sovereign security centre
- Services segment shows mixed results amid labour market softness
Record Sales and Profit Growth Amid IT Market Resilience
Data#3 Limited (ASX:DTL) has delivered a standout FY26, posting record gross sales of $3.39 billion, a 12.7% increase on the prior year, alongside a 13.1% rise in net profit after tax to $54.5 million. Earnings per share climbed 13% to 35.16 cents, while the company declared a fully franked dividend of 18.25 cents per share, lifting the full-year payout to 31.75 cents, also up 13%. The company’s strong performance outpaced the Australian IT industry's projected 8.9% growth for calendar 2026, showcasing the resilience of Data#3’s diversified business model and customer relationships.
Segment Performance: Software and Infrastructure Lead, Services Mixed
Infrastructure Solutions led the charge with gross sales soaring over 14%, buoyed by Windows 11 upgrades, device refresh cycles, and a surge in demand for AI-capable devices and data centre solutions. Gross profit for this segment rose 18.6% to $84.5 million, with management profit surging 78% to $31.2 million, reflecting improved deal margins and vendor rebates, notably from Cisco program shifts.
Software Solutions also posted record gross sales of $2.3 billion, up 14.1%, driven by cloud subscriptions, Microsoft Azure consumption, and growth across non-Microsoft vendors like Adobe and VMware. Despite headwinds from Microsoft’s incentive program changes, the segment’s gross profit grew 7.6% to $78.1 million, with management profit increasing 7.7% to $41 million.
The Services segment’s $412 million in gross sales marked a modest 3.6% increase, but its financial performance was uneven. Consulting and Managed Services grew strongly, with Business Aspect consulting up 22% and Managed Services up 9.4%. Maintenance Services also improved, supported by Cisco Enterprise Agreement renewals. However, Project Services declined 15.3%, and People Solutions faced an 8.7% contraction amid a tight labour market and softer demand in key regions. Management profit for Services fell 12.6% to $28.2 million, influenced by the rebate shift to Infrastructure and the sales mix.
Strategic Investments in AI and Cyber Security
Data#3 is doubling down on AI and cyber security, two key growth pillars. The company plans to establish a dedicated AI Practice and customer-facing AI delivery pods in FY27, aiming for a scalable, outcome-focused market approach across Software, Infrastructure, and Services. This builds on over 100% growth in AI-related solutions in FY26, including Microsoft Copilot and Azure AI.
Cyber security remains a top priority, especially for government and regulated sectors. To meet rising demand for sovereign data governance and compliance, Data#3 will invest in a 24/7 Sovereign Security Operations Centre in Australia, complementing its existing hybrid SOC in Brisbane. This move is designed to strengthen managed security offerings and support customers’ regulatory needs.
Operational Efficiencies and Board Renewal
Cost discipline underpinned the company’s margin improvements, with the Internal Cost Ratio improving to 77.5% from 79.7% in FY25. This reflects operational leverage achieved through automation and AI adoption. Staff costs rose just 2%, balanced by targeted hiring in growth areas and a reduction in Services contractors aligned to market demand.
Board renewal completed in FY26 brought in Diana Eilert and Laurence Baynham as non-executive directors, enhancing the board’s technology, strategy, and industry expertise. Governance enhancements included renaming the Remuneration and Nomination Committee to the People, Remuneration and Nomination Committee, broadening its remit to cover culture, AI use, and workplace frameworks.
Sustainability and Climate Commitments
For the first time, Data#3 reported under the Australian Sustainability Reporting Standard AASB S2, disclosing scope 1 and 2 greenhouse gas emissions of 452 tonnes CO2-e. The company is developing a transition plan with science-based targets to reduce emissions by 63% by 2035, focusing on renewable electricity and vendor influence. Data#3’s sustainability efforts earned multiple partner awards, including HP Amplify Impact Partner of the Year and recognition for circular IT practices.
Balance Sheet Strength and Dividend Policy
Data#3 ended FY26 with a robust balance sheet, holding $326 million in cash and no borrowings. Inventory rose sharply to $73.4 million, reflecting proactive procurement ahead of expected price increases and supply constraints linked to global memory shortages. Operating cash flow was $23.3 million, lower than FY25 due to timing of customer receipts in June.
The board reaffirmed its commitment to a conservative capital management framework balancing financial resilience, growth funding, and attractive shareholder returns. The fully franked dividend payout ratio held steady at 90.3%, reflecting the company’s long-standing policy of returning a high proportion of earnings to shareholders.
What to Watch Next
Data#3 enters FY27 with momentum from AI and cloud tailwinds, a strengthened services strategy, and a clear roadmap for sustainability transition. Investors will be keen to see how the new AI Practice and Sovereign SOC translate into revenue growth and margin expansion, and whether the Services segment can rebound from recent softness. The company’s ability to navigate supply chain challenges and evolving vendor programs will also be critical amid ongoing macroeconomic uncertainty.
Bottom Line?
Data#3’s record FY26 sets a high bar, but execution on AI, cyber security, and services growth will be key to sustaining momentum.
Questions in the middle?
- How effectively will Data#3’s new AI Practice scale and drive customer outcomes across its segments?
- Can the Services business reverse recent softness amid labour market pressures and project delays?
- Will supply chain dynamics and vendor program changes continue to impact margins in FY27?