Small Caps | Mar 09 2026
FY25 results for Dicker Data slightly disappointed investors, mainly due to a new dividend payout strategy, but management anticipates significant AI-related growth opportunities.
- Dicker Data’s FY25 results slightly missed expectations on a cut in dividend and lower-margin outlook
- Dividend payout policy reduced to create more flexibility to fund growth opportunities
- Anticipated recovery in spending by small and medium-sized businesses (SMB) central in company's outlook
- Management has identified AI factories and data centre infrastructure as future growth drivers
By Mark Woodruff
After reviewing a “robust” FY25 result, UBS believes specialist hardware distributor and small and medium-sized enterprise services provider Dicker Data ((DDR)) is entering the early stages of a multi-year growth story driven by data centre upgrades and AI-related deals.
The company has partnered with several NeoCloud vendors, including SharonAI, Firmus and ResetData, to scale its AI infrastructure segment, but UBS suggests it is still too early to fully price in the longer-term benefits for Dicker Data.
Even so, the broker believes these tie-ups position the company favourably in the AI landscape.
"AI factories and data centre infrastructure on the AI platforms is going to be one of the biggest growth opportunities" for the company in 2026, management noted.
From the analysts’ earnings call following the FY25 results presentation, Macquarie highlights management’s aim to sacrifice margin in the near term to strategically position the company for AI leadership in its market segment, to drive a long-term upgrade cycle.
UBS also garners from management commentary the software business remains well protected from potential long-term AI-driven shifts in the software-as-a-service (SaaS) landscape, with most spending non-discretionary and enterprise customers deeply embedded.
In the near term, it’s noted investors remain focused on the impact of higher memory pricing, which could create a volume headwind if supply chain constraints are exacerbated.
In line with expectation, earnings rose by 6% on the prior year to $159.4m, while pre-tax profit (PBT) of $124.7m increased by 10.2% and came in above prior guidance of $120-124m.
Revenue also exceeded the top end of prior guidance, supported by PC refresh tailwinds as customers moved to Windows 11 from 10, along with solid execution across the business, Morgan Stanley comments.
Jarden believes we are still only 60-70% of the way through the PC refresh.
Management pointed to mid-high single-digit revenue growth into 2026 (helped in part by price, observes Morgan Stanley) despite having to cycle strong PC refresh headwinds.
As per usual practice, no specific 2026 guidance was provided. Management did, however, emphasise ongoing momentum as AI, data infrastructure, cybersecurity and software spending accelerates, alongside expectations for a small and medium-sized businesses (SMB) spending recovery.
Formally known as a specialist IT hardware distributor, Dicker Data’s modern day offering extends well beyond hardware.
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.
By working through resellers, the company has traditionally focused on small to mid-sized (SMB) segment enterprises, providing tailored support rather than chasing large-volume retail contracts.
Margins
Balancing subdued SME spending against growing enterprise demand for AI PCs, Macquarie retains a Neutral rating for Dicker Data. While enterprise deals are typically lower margin and may weigh on margins, the associated increase in gross profit from larger contracts is expected to support earnings growth into FY26.
Morgan Stanley also describes a “solid” FY25 result, beating the top end of guidance and displaying solid momentum into 2026, yet this analyst cautions Dicker Data remains exposed to pressure and uncertainty stemming from the consumer macro environment.
Such consumer caution is reflected in a gross profit margin of 13.5% (calculated as a percentage of statutory revenue), around -20bps below the consensus forecast.
Management attributed the gross margin decline to 9.0% (calculated as a percentage of gross revenue) from 9.6% primarily to a customer mix shift toward higher-value, lower-margin enterprise transactions amid ongoing softness and competitive intensity in the Australian SMB segment.
Segment reporting
Growth accelerated in the Advanced Solutions segment and in Software. The latter accounts for circa 30% of group revenue and continues to benefit from structural tailwinds, explains Morgan Stanley.
Macquarie also highlights strength in the Infrastructure segment, within Advanced Solutions, helping statutory revenue of $2,569.1m exceed the consensus expectation by 2%. Data Centre, Storage and Networking are also within Advanced Solutions.
Other segments are Access & Surveillance, Audio Visual, Retail/Consumer technology, and Services.
Dicker Data achieved a strong result in New Zealand despite softer top-line growth from consumer segment rebalancing, Macquarie comments.
This analyst also notes New Zealand profit rose 37.2% year-on-year supported by disciplined cost management and lower interest expenses, compared to the 8.2% uplift in Australia. Gross revenue grew by 3.6% y/y, with the 8.5% gross margin flat versus the prior year.
Across Australia and New Zealand 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) rather than to end-users.
Growth opportunities
UBS observes global research and advisory firm Gartner’s 2026 market data forecasts Australian IT spending to reach $172bn, a rise of 8.9% year-on-year, with data centre systems spending expected to grow 22.5% and software spending to increase 13.6%.
In New Zealand, total IT spending for 2026 is projected to jump by 10.4% to $25.6bn.
As a potential offset, Macquarie notes Gartner’s forecasts were set in early September 2025 following rate cuts and may prove difficult to achieve if SME spending remains subdued. Jarden estimates a small business recovery is a greater than $35m annual gross profit opportunity over time.
Management is also focused on establishing a longer-term presence in the ASEAN market. If successful, this could provide not only a new source of revenue, but also upside to longer-term gross margins, UBS explains, given the company already holds around a 70% market share in the higher-margin SMB IT segment in Australia.
Balance Sheet
Balance sheet indicators improved modestly despite higher absolute working capital. Cash ended FY25 at $66.4m (FY24: $45.8m), inventory at $312.4m with inventory days improving to 32 from 34, and net debt reduced to $293m.
Capital management disappointed investors. Management will transition to a new dividend payout framework of 80%-100% (from 100%) of net profit ffrom FY26, retaining quarterly dividends but adding flexibility to retain capital.
The board declared an 11-cent dividend for the fourth quarter, bringing the 2025 dividend to 44c, a -9% decline compared to 2024.
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