Data#3 Ltd (DTL)
Hi, May I have your thoughts on DTL please
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Answer
Hi Peter,
DTL is a leading Australian IT services and solutions provider focused on powering enterprise digital transformation through cloud services, cybersecurity, software licensing and managed IT support, with a growing emphasis on recurring revenue and technology enablement – putting it in the eye of the “AI Disruption” storm.
DTL has been hammered ~20% this week after project services missed expectations due to customer delays resulting from macro factors and rising hardware costs. However, the core numbers came out largely in line with expectations:
- Revenue $423.1mn, +8.1% YoY.
- Gross sales $1.55bn, +9.1% YoY.
- Net Income $23.2mn, +3.7% YoY.
The weak spot issue was gross margin pressure primarily due to changes in Microsoft channel incentives which weighed on investor sentiment despite overall growth – although not officially stated analysts regard Microsoft-related licensing and incentive revenue likely accounts for somewhere in the 20-30 % range of total revenue.
At first glance, the sell-off looks like an overreaction given the solid 1H26 result. However, the key concerns are material: pressure on gross profit margins driven by changes to Microsoft incentives, emerging headwinds in DTL’s services business that are likely to persist into 2H26, and the risk that higher memory prices could weigh on hardware sales momentum into 1H27.
- We can see DTL testing $6 through 2026 leaving us on the sidelines at present.
