Small Caps | Sep 05 2025
Interim results and 2025 guidance for Dicker Data pleased. A recovery in SMB business spending could present upside risk for margins.
-Dicker Data’s interim results and FY25 guidance beat expectations
-Strengthening profit margin supports guidance for further margin increase
-Outlook centres around early-stage Asian expansion, cybersecurity growth, and AI PCs
-Macquarie notes rising mid-market competition
By Mark Woodruff
Interim results for specialist hardware distributor and SME services provider Dicker Data ((DDR)) exceeded market expectations, while the 2025 guidance range for profit before tax came in ahead of consensus.
Pleasingly, the profit before tax (PBT) margin improved to 3.3% in May/June, up from 2.9% in the first four months, giving credibility to the initial 2025 guidance of 3.2-3.4%, suggests Morgan Stanley.
Dicker Data offers a broad range of hardware, software, cloud services, cybersecurity, and emerging technology products on behalf of over 70 global and local vendors. The company sells exclusively to a network of thousands of IT resellers and integrators (over 10,000 active partners across Australia and New Zealand) rather than to end-users.
Key vendor partnerships include many of the world’s leading technology brands. Well-known brand names such as Microsoft, HP, Cisco, Lenovo, and Dell are consistently among Dicker Data’s top five vendors by sales.
This channel-focused model, combined with value-added services (like pre-sales engineering and training), has positioned Dicker Data as a leading value-added distributor in the A&NZ Information Technology markets.
Interim gross revenue increased by 15.7% to $1,840.50m driven by an accelerated PC refresh, supported by Windows 10 end of support, explained management, and meaningful large-scale AI-related transactions invoiced during the period.
The Windows 10 operating system will end from October, and AI-enabled devices are steadily emerging as the next essential upgrade for consumers and businesses alike.
In the first half, Dicker Data was selected (in partnership with Dell Technologies) to supply the technology for Australia’s first sovereign AI compute facility, known as the A1-F1 “AI factory” in Melbourne.
The first stage of this AI datacentre project was delivered during the period and made a significant contribution to revenue.
AI demand, driven primarily by data centres rather than end-user devices, represents incremental growth on top of existing infrastructure needs, explains Wilsons.
The broker adds the scale of hardware required is vastly larger than today’s data centres and it involves high-end, premium-priced equipment that directly benefits Dicker Data.
In other words, enterprises and cloud providers still need the usual servers, networking, and storage, but AI adds an entirely new layer of requirements.
The key caveat is timing, note the analysts, meaningful orders will only flow once new data centres are constructed and operational.
According to data from Microsoft, Dicker Data continued to lead the Australian device market in the first half of 2025, with June marking the tenth consecutive month of growth in device sales.
Margins to turnaround?
Unfortunately, small to medium-sized business (SMB) device sales have remained soft. This previously prompted a strategic switch by management to focus on lower-margin enterprise customers.
As noted above and previously explained at https://fnarena.com/index.php/2025/07/02/rudis-view-dicker-data-stock-in-focus/ Dicker Data is formally known as a specialist IT hardware distributor, but its offering extends well beyond hardware.
By working through resellers, the company has traditionally focused on small to mid-sized enterprises, providing tailored support rather than chasing large-volume retail contracts.
While global distributors like Ingram Micro compete for bulk deals with Harvey Norman ((HVN)) and JB Hi-Fi ((JBH)), Dicker Data aims to help smaller businesses migrate to the cloud, strengthen their cybersecurity, and access a broader suite of IT solutions.
In early 2025, the company inked a new distribution agreement with CrowdStrike, a global cybersecurity leader, giving Dicker Data’s partners access to CrowdStrike’s Falcon endpoint security platform.
According to UBS, cyber software is “booming” with CrowdStrike still ramping-up, helping underpin the broker’s “solid outlook” for Dicker Data.
Other vendors added by Dicker Data in the past year include BMC Software (enterprise IT software solutions) and VAST Data (data storage technology) to bolster the Advanced Solutions lineup. In the Consumer and Retail Technology segment, Dicker Data also brought audio and gaming brands like Urbanista and Glorious Gaming.
These additional services are key to the higher margin the company enjoys.
As a result of ongoing soft conditions for smaller-sized businesses, the interim gross revenue margin of 9.1% was weaker than the 9.85% in FY24, attributed to a larger proportion of sales into enterprise customers with lower margins.
Notably, enterprise hardware deals (including AI-focused infrastructure sales) boosted revenue but carry thinner margins than your typical SMB transaction.
UBS estimates the company’s sales mix is now roughly 10% small business, 70% mid-market and 20% enterprise, compared with 20% small business and 10% enterprise previously. This shift implies to the broker around -$300m in lost small business sales.
Investors will be pleased to hear management is focused on optimising product mix and cost efficiencies to protect margin.
Jarden sees a recovery of SMB business presenting upside risk to its forecasts through gross margin improvement. Interest deleverage is also likely to drive margin increase, suggest the analysts.
The company’s provision of credit services results in a sizeable debt burden, making its earnings highly sensitive to interest rate movements, which directly affect the cost of carrying that debt.
Jarden also expects a New Zealand economic recovery to provide positive leverage and support margin improvement.
The board declared a quarterly dividend of 11 cents, taking the total dividend for the first half to 22 cents.
Dicker Data is fairly unique in that it distributes 100% of its earnings or free cash flow to shareholders, paid quarterly and fully franked.
More on FY25 results
Earnings (EBITDA) and net profit before tax (PBT) rose by 9.4% and 11.4%, respectively, to $75.4m and $56.6m.
FY25 guidance is for gross revenue of between $3.7-3.8bn (a 10-13% increase on FY24) and a net pre-tax profit number in the range of $120-124m.
According to Executive Chair Fiona Brown “execution across all segments was pleasing, with each key product category growing in the first half”.
By country, the Australian and New Zealand businesses delivered respective gross revenue increases of 18% and 4.9% to $1,548.90m and $291.7m.
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