Softcat’s H1 FY2026: Big beat, bigger cash, and an upgraded outlook
Softcat has delivered a standout first half to 31 January 2026, comfortably ahead of expectations and strong enough to lift full-year guidance. The IT infrastructure specialist saw broad-based growth across hardware, software and services, with larger solutions projects and AI-related demand doing the heavy lifting. Cash generation was excellent, capital returns continued, and investment in systems and people remained front and centre.
Management now expects high single-digit growth in underlying operating profit for FY2026, up from low single-digit previously. There are some caveats – tougher comparatives and ongoing memory shortages – but momentum into H2 looks solid.
H1 FY2026 headline numbers investors should know
| Metric | H1 FY2026 | H1 FY2025 | Change |
|---|---|---|---|
| Gross invoiced income (GII) | £2,008.6m | £1,507.1m | +33.3% |
| Revenue | £837.5m | £545.6m | +53.5% |
| Gross profit | £269.9m | £220.2m | +22.6% |
| Gross profit margin (on GII) | 13.4% | 14.6% | (1.2) ppts |
| Underlying operating profit | £93.8m | £73.7m | +27.3% |
| Statutory operating profit | £85.2m | £73.7m | +15.6% |
| Underlying cash conversion | 147.6% | 110.9% | +36.7 ppts |
| Underlying basic EPS | 36.1p | 28.7p | +25.8% |
| Basic EPS | 32.8p | 28.7p | +14.3% |
| Net cash | £206.0m | £141.0m | n/a |
| Interim dividend | 9.9p | 8.9p | +11.2% |
What drove the beat: hardware strength, larger projects and AI readiness
Growth was broad based across customer segments and technologies, with an exceptional performance in the corporate segment. By product, all three engines – software, hardware and services – grew double digit in gross profit terms.
- Hardware was the standout in revenue, up 79.1%, reflecting strong datacentre, networking, server and compute demand, helped by larger solutions projects.
- Software revenue rose 25.6%, supported by security licensing and Microsoft CSP activity.
- Services revenue grew 6.9%, with a higher share of externally provided services in the mix.
AI is clearly moving from experimentation to enablement. That is boosting demand for storage, compute, networking, devices, data architecture and security – right in Softcat’s wheelhouse. The Oakland acquisition is helping the Group engage earlier in data, automation and AI consulting, which management flags as encouraging.
Two temporary factors also helped H1: larger solutions projects and a pull-forward of some orders due to industry-wide memory shortages. Both flattered growth in the period and create some uncertainty for H2 timing.
Margins, cash and capital returns: quality still showing through
Gross margin dipped to 13.4% from 14.6%, mainly because big-ticket solutions tend to be lower margin. Underlying operating margin on GII was 4.7% versus 4.9% last year. Despite that mix effect, operating leverage improved – underlying operating profit as a percentage of gross profit rose to 34.8% (H1 FY2025: 33.5%).
Cash generation was excellent. Underlying cash conversion hit 147.6%, aided by a £42.4m upfront customer payment. Excluding that, conversion was 102.4%, still above the 85%-95% target range. Net cash closed at £206.0m, even after paying £73.0m of final and special dividends in December and starting a £45m share buyback in January, which completed in February (3,352,161 shares repurchased at a 1,333p VWAP).
The Board declared a 9.9p interim dividend, consistent with the progressive policy, and added a new undrawn £50m revolving credit facility in March to provide extra flexibility.
Statutory operating profit includes £8.5m of non-underlying costs, mainly systems investment for new sales and HR platforms, which should support future scalability and data-led execution.
Customer momentum and operational progress
Customer metrics were strong. The base expanded 3.5% to 10.4k, with net new logos across all segments. Gross profit per customer rose 19.0% to £52.2k as Softcat sold more across its five technology towers and deeper into accounts. The more stable cohort of customers transacting over £1k of GP grew 5.7% to 8.5k, with average GP per customer of £64.0k, up 16.5%.
Internally, average headcount grew 10.5% to 2,863, focused on technical, specialist and sales support roles, with continued investment in data and digital tools. New capabilities include an internal assistant for sales navigation (“CatNav”) and deeper integrations in the eCAT procurement platform. Office upgrades continued across the UK and Ireland.
Guidance raised, but mind the comps and memory shortages
Softcat now guides to high single-digit underlying operating profit growth for FY2026, upgraded from low single digit. Management notes two watch-outs for H2: a tougher comparative because last year’s second half included chunky solutions projects, and uncertainty around the net impact of ongoing memory shortages on timing and pricing.
What to watch in H2
- Mix and margin: larger projects helped growth but diluted margin. Track gross profit margin versus GII as the year progresses.
- Working capital unwind: contract liabilities stood at £273.6m, including a £42.7m single customer advance and £151.5m for goods in transit. Expect releases as deliveries complete.
- Cash conversion normalisation: conversion should trend towards the target range without upfront receipts.
- AI-linked demand: continued strength across security, data centre and networking would confirm structural tailwinds.
Quick jargon check: GII and IFRS 15
- Gross invoiced income (GII) is the total billed to customers before IFRS 15 adjustments. It correlates closely with cash and gives a cleaner view of volume and working capital.
- IFRS 15 requires some transactions to be shown net when Softcat acts as an agent (not principal). Because peers apply these judgements differently, revenue comparisons can be noisy – hence the emphasis on GII and gross profit.
My take: a high-quality beat with balanced realism
This is a high-quality set of numbers. Double-digit gross profit growth, upgraded guidance, strong customer KPIs and standout cash generation all point to effective execution and a proposition aligned with where spend is heading – AI foundations, security and modern infrastructure.
The sensible bits: management is clear that H2 has tougher comps and that memory shortages could still shift order timing. Margins dipped on mix, and non-underlying systems spend is flowing through the P&L. None of that breaks the equity story, but it does set expectations sensibly for the second half.
Bottom line: Softcat looks to be gaining share in attractive parts of the market, funding its own transformation from a position of strength, and returning capital along the way. For investors, the upgraded outlook, resilient cash profile and broadened AI-led opportunity are the key positives – with margin mix and supply chain timing the main variables to track into year-end.
