Data#3 has released its results for the half year ended 31 December 2025 (1H FY26), reporting an uptick in overall gross sales but little change in gross profits.
Gross sales for the company reached $1.5 billion, up 9.2% on the prior corresponding period to, but gross profit figures remained flat (up 0.3% to $144 million).
Statutory revenue rose 8.1% to $423.1 million, EBIT was up 6.2% to $27.6 million and NPAT was 3.7% higher on the PCP to $23.2 million.
Software solutions continue to drive business
Gross sales in the Software Solutions business were up 8.9% to $1.1 billion, driven predominately by significant growth in sales of Azure and Cloud Solution Provider (CSP) agreements.
Growth across non-Microsoft software vendors was also strong, according to Data#3, including Adobe, VMware and Veeam.
Statutory revenue of $37.5 million was down 4.7% and gross profit of $37.5 million was down 4.6% on 1H 25, both impacted by the Microsoft incentive program changes effective 1 January 2025.
These changes reduced the incentives earned by Data#3 on its Microsoft Enterprise agreements, with Microsoft increasing its focus on Small, Medium and Corporate initiatives, as well as increasing incentives for its Copilot, Security, Azure Migrations and Cloud Solutions Provider (CSP) programs.
Gross margin of 3.5% was also down slightly (1H FY25: 4.0%) due to lower Microsoft channel incentives, in addition to competitive market pricing activity.
Infrastructure gross sales for the first half were up 17.6% on the prior period to $275.2 million, driven by strong sales of end user computing, which were up over 30% on PCP and boosted by Windows 11 upgrades and device refresh cycles.
Data Centre sales were also up over 30%, due to customers optimising their servers and storage through a hybrid cloud approach, according to the company.
Statutory revenue of $253.1 million for the Infrastructure Solutions segment was up 20.6%, and gross profit was up 16.7% to $36.8 million driven by a continued focus on maximising individual deal margins and increased vendor rebates off the back of strong device sales.
Managed services strong, but projects and people dip
Gross sales in the Services segment were up just under 1% for the first half of FY26, with a mixed performance across business units.
Managed Services led the pack, up 15.9% to $31.0 million, boosted by new contract wins and successful contract renewals, with the pipeline of new customers remaining "solid", according to Data#3.
Consulting also grew 9.4% to $16.0 million, with an improved pipeline and momentum in key accounts across most practices including Information and Analytics, Cyber Security and Transformation and Governance.
Project Services saw double digit declines, falling 13.2% to $36.7 million, impacted by a continuing lag in bookings despite "a solid pipeline" as customers delayed larger projects, particularly in the QLD and VIC markets.
People Solutions was also down 4.8% to $30.7 million, impacted by a reduction in contractor numbers across some key accounts, due to customers reprioritising IT budget spend.
Maintenance Services saw a slight increase, up 3.8% to $90.6 million, supported by a strong rebound in the Infrastructure business. Data#3 said that growth is expected to improve in the second half of FY26 with a strong pipeline of Enterprise Agreements.
2025 saw Data#3 selected as a preferred supplier to the WA Government's Technology Infrastructure and Solutions panel, as well as extending a contract to supply licenses and subscriptions to Transport for New South Wales, nearly doubling the existing value.
Chip shortage, Cisco partner program to assist rather than ail
Data#3 said that while the global memory chip supply shortage has reduced availability for PCs, network equipment, and servers, contributing to sharp price increases and early signs of supply constraints across these markets - with shortages expected to persist through calendar year 2026 and potentially into 2027 - in the near term, this environment may provide a tailwind for the company as customers bring forward orders in anticipation of tighter supply.
Cisco also recently updated its 360 Partner Program, which redeploys incentives to preferred partners across its networking, security, services, collaboration, cloud and AI solutions, and aligns with Data#3’s ongoing focus on driving greater value across the customer lifecycle. The company doesn’t currently expect these changes to have a material impact on the group’s FY26 financial performance.
Data#3 MD and CEO Brad Colledge said the company had successfully implemented a range of strategic initiatives to mitigate the impact of the Microsoft incentive program changes on the Software Solutions business, with 1H FY26 the most impacted period.
"We expect the Software business to return to gross profit growth in 2H FY26, resulting in a full year contribution to gross profit for Software consistent with FY25," he said.
“Within Services, Managed Services is expected to continue performing well, supported by a solid pipeline across both Enterprise and Onsite offerings. Maintenance Services is expected to improve in the second half and Consulting is gaining momentum through opportunities in Cyber Security and Analytics.
"Project Services and People Solutions are expected to remain challenged in the near term, as customers continue to delay larger projects and reduce contractor numbers in response to softer labour market conditions and economic sentiment.”
Customer relationships and diverse offerings providing resilience
Colledge said the growth in net profit demonstrates the company's ongoing focus on effective cost management and the internal operating efficiencies gained from various automation and restructuring initiatives implemented in recent years.
“The resilience of our business continues to be driven by the strength of our customer relationships and our diverse offerings across Infrastructure, Software and Services," he said.
"The strong performance in our Infrastructure business and continued topline growth in Software Solutions has offset more challenging conditions in parts of our Services business.
"“We expect our Infrastructure Solutions business to continue to perform strongly, capitalising on the Windows 11 refresh cycle and increasing adoption of AI-enabled devices, while growing demand for multi-cloud and AI solutions is in turn driving demand for data centre and network capabilities."
_(21).jpg&h=142&w=230&c=1&s=1)
.png&h=142&w=230&c=1&s=1)
_(27).jpg&h=142&w=230&c=1&s=1)
.jpg&w=100&c=1&s=0)
