H1 FY26: steady core growth, improving mix, AI-led expansion
Dotdigital’s interim results show a business leaning into higher-quality, recurring software revenue while continuing to invest behind AI and Shopify-led expansion. On a constant-currency basis, trading is in line with full-year expectations, with contracted ARR up double digits and the revenue mix tilting further toward subscriptions.
Margins dipped year-on-year against a particularly strong comparator and after go-to-market investment in Social Snowball, but profitability remains healthy and management expects margins to revert to market levels in H2.
Key numbers investors should know
| Metric | H1 FY26 | H1 FY25 | Comment |
|---|---|---|---|
| Forward-looking contracted ARR (core CXDP) | £75.4m | £67.0m | Up 13% (6% organic) |
| Recurring revenue – core CXDP | £37.3m | £33.6m | Up 11%; now 84% of Group revenue |
| Total Group revenue | £44.2m | £42.4m | Up 4% reported; +9% normalised |
| ARPC (ex Social Snowball) | £1,968/month | £1,830/month (normalised) | Up 7% on a normalised basis |
| Adjusted EBITDA | £13.6m (31% margin) | £13.8m (33%) | Strong, but slightly lower margin |
| Adjusted PBT | £8.9m (20% margin) | £10.0m (24%) | Comparator was unusually strong |
| Cash | £36.1m | £45.7m | Reflects $20m Social Snowball payment |
| Adjusted diluted EPS | 2.26p | 2.52p | Lower on investment and FX |
Notes: ARR is annual recurring revenue. “Normalised” excludes the previously exited, non-core low-margin CPaaS contract. Constant-currency growth in H1 ran about 1% higher than reported and management now expects a greater FX drag in H2.
Revenue mix: more subscription, less low-margin messaging
The strategic direction is clear: grow the core customer experience and data platform (CXDP) and reduce exposure to low-margin CPaaS (communications platform as a service). Recurring CXDP revenue rose 11% to £37.3m and now makes up 84% of Group revenue (80% a year ago). That’s exactly the sort of revenue quality most software investors want to see.
Forward-looking core ARR reached £75.4m, up 13% year-on-year. The moving parts were: £4.3m net growth in core CXDP, £4.1m ARR from acquired Social Snowball and £0.6m additional ARR growth at Social Snowball, partly offset by £0.8m of negative currency movements. ARPC climbed 7% to £1,968 per month on a normalised basis, helped by customers adopting higher tiers and using more functionality.
Profitability and cash: solid, with investment for growth
Adjusted EBITDA came in at £13.6m (31% margin) and adjusted PBT at £8.9m (20% margin). Both are down year-on-year due to a tough comparator – last year benefited from a final CPaaS contract and unusually high SMS volumes – and because Dotdigital accelerated go-to-market investment at Social Snowball. Management expects margins to return to market-expected levels in H2.
Cash stood at £36.1m at 31 December 2025, after paying $20m consideration for Social Snowball. The company is also running a £3m share buyback – £1.2m completed in the period with the balance shortly after – and paid the FY25 final dividend of £3.69m (1.21p per share) on 30 January 2026. Post period, Dotdigital agreed to acquire Alia for $30m initial cash (up to $60m subject to performance), so expect year-end cash to step down accordingly. A modest overdraft facility is being set up for working capital flexibility.
AI product momentum: WinstonAI, WhatsApp and loyalty pilots
Product delivery remained busy. WinstonAI – Dotdigital’s embedded AI assistant – continues to expand across analytics, segmentation and campaign creation, with premium features unlocked at higher tiers. That model supports both performance and monetisation.
- WhatsApp usage is taking off, with message volumes up 2.3x versus H2 FY25 and the biggest ever month during November’s peak trading.
- Loyalty is in production with early adopters and showing positive results, with general availability targeted for July.
- Functionality recurring revenues grew 20% year-on-year, or 9% on an organic basis.
Acquisitions: Social Snowball delivering; Alia extends the funnel
Social Snowball on track
Since the June 2025 acquisition, Social Snowball’s ARR is up roughly 30% on an annualised basis. Monthly ARPC rose from US$319 at acquisition to US$348 in December, and it contributed £2.3m of recurring revenue in H1 (about double the same period pre-acquisition). Dotdigital leaned into go-to-market hiring here in H1, and early H2 gives management confidence growth will accelerate.
Alia expands zero-party data capture
Post period, Dotdigital agreed to acquire Alia, an AI-powered pop-up and email/SMS list-growth tool for Shopify merchants. Alia reported FY25 revenue of $4m, ARR over $8m at year-end, cash EBITDA above $1m and serves 2,700+ customers with a 4.7/5 Shopify App Store rating. The deal is all-cash: $30m upfront, up to $60m total based on performance, and is expected to be earnings-enhancing in the first 12 months. If targets are hit, the maximum consideration would equate to two times ARR.
Strategically this matters because Alia strengthens Dotdigital at the very top of the funnel – turning anonymous traffic into known, consented contacts and enriching first- and zero-party data. Bigger lists and better data feed directly into Dotdigital’s automation, personalisation and messaging engines, potentially lifting ARPC and retention over time. It also deepens the company’s Shopify ecosystem presence and adds distribution via the Shopify App Store.
Partner ecosystem and regions: Shopify surges; the US scales
Integration-connected revenue rose 5% year-on-year, with standout organic growth from Shopify at 44% – or 118% when including Social Snowball. Shopify is now 35% of connected partner revenues, second only to Adobe/Magento. Microsoft Dynamics and NetSuite connections both grew 5%.
Regionally in H1: EMEA delivered £31.3m revenue, the US £8.7m and APAC £4.2m. The broader narrative is a successful internationalisation: since FY23, US-originated ARR has doubled to more than 30% of the total, and ARR generated outside the UK now approximates 40% of the Group. A Chief Revenue Officer hire is pending to align go-to-market execution across regions.
What’s positive, what’s not, and what to watch
Positives
- Quality improving: 84% of revenue now recurring CXDP; ARPC up 7% on a normalised basis.
- Core growth resilient: core ARR up 13% despite FX headwinds and cautious customers.
- Clear product cadence: WinstonAI, WhatsApp traction, loyalty nearing GA, and functionality revenue growth.
- M&A delivering: Social Snowball accelerating; Alia adds a strategic on-site conversion and data capture layer and is expected to be earnings-enhancing.
- Balance sheet still strong, even after investment and buybacks.
Watch-outs
- FX headwinds likely heavier in H2; H1 constant-currency growth was about 1% higher than reported.
- Sales cycles remain longer as deals skew larger with more stakeholders.
- CPaaS unwind flatters “normalised” growth but dampens reported Group growth and prior-year comparisons were unusually strong.
Bottom line: steady execution with upside from AI and Shopify
This is a steady, strategy-confirming update. The business mix keeps improving, the AI roadmap is tangible, and acquisitions are joined up with the product vision. With consensus pointing to FY26 revenue of £91.9m, adjusted EBITDA of £29.1m and adjusted PBT of £20.0m (constant currency), the Board is confident of delivering in line. Near term, watch for Alia integration milestones, Social Snowball’s step-up in H2, loyalty’s general availability in July and any colour on FX impacts.
Longer term, Dotdigital’s combination of consented data capture, orchestration, AI and owned deliverability gives it a credible edge as marketing teams consolidate onto fewer, more effective platforms. Sensible execution from here should continue to nudge ARPC, retention and cash generation in the right direction.
