“This has been one of the most challenging periods I’ve seen for the technology sector, and uncertainty remains high,” Datacom chief executive Greg Davidson told the Herald as the company delivered its annual result.
New Zealand’s largest homegrown IT services firm narrowed its profit in the year to March and sees customers being cautious in the current one.
Datacom - 55% owned by the rich-list Holdsworth family and 45% by the NZ Super Fund - said its FY2026 revenue grew 7% from $1.48 billion to $1.58b – putting it toe-to-toe with the likes of Fisher & Paykel Healthcare, Xero and Rocket Lab at the top of the TIN200 list of the country’s largest tech firms by turnover.
However, net profit fell to $20 million from the year-ago $37m, the company said, while earnings before interest, tax, depreciation and amortisation (ebitda) fell to $133m from FY2025’s $147m.
Free cashflow was $75m from the year-ago $164m.
Term debt rose from to $105m from $90m.
Its total headcount, across its main markets of New Zealand and Australia, plus Southeast Asia outposts, dipped slightly to 5935 from the year-ago 6025*.
‘The market remains under pressure’
How does Davidson see the year ahead?
“I think we’re likely to see another year where organisations remain cautious,” he told the Herald.
“The encouraging sign is that businesses are becoming more deliberate about where they invest.
“The focus is shifting from growth at any cost to productivity, resilience and long-term capability. Those are the investments that will matter most over the next few years.”
Davidson added, “The market remains under pressure from changing customer spending patterns, supply chain disruption and the pace of technological change. At the same time, customers are reassessing what they need from technology partners.”
AI: Focus on a small number of high-value use-cases
“AI is a good example. Many organisations have invested in AI tools, but the way they’ve been deployed hasn’t always delivered the benefits people expected.
“The organisations making the most progress are focusing on a small number of high-value use cases, building the right engineering and governance around them, and then scaling from proven outcomes.”
Australia v New Zealand
What’s Davidson’s perspective as the head of a company that draws roughly half its revenue from each side of the Tasman?
“Australia has scale and, in general, has continued to invest earlier and more aggressively through this cycle,” Davidson said.
“New Zealand has felt the effects of the downturn more acutely and has been understandably cautious.
“The themes are similar across both markets – AI, resilience, cost and productivity – but New Zealand’s challenge is to stay ambitious while being selective about where it places its bets."
Call for more support for local services
What does he want to see from the major parties as we head into the election?
“I’d like to see continued focus on strengthening New Zealand’s digital foundations. In a world of growing geopolitical uncertainty and cyber risk, New Zealand’s opportunity is to build greater digital resilience while retaining more value in the domestic economy,” Davidson said.
“That means supporting investment in AI-ready infrastructure, renewable energy, in-country data processing and the local capability needed to operate critical services.
“This isn’t about excluding global providers – we benefit enormously from them. It’s about striking the right balance so New Zealand maintains meaningful capability, choice and control in the areas that matter most."
Pushing data sovereignty
In April, after its financial year closed, Datacom revealed it had bought the ex-IBM 5000sq m data centre in East Tāmaki, for an undisclosed sum (it was built in 2011 for $80m or $114m in today’s money). The move was framed as providing more local AI processing capability. The facility is being upgraded.
The acquisition means Datacom now runs five data centres (it also supports the hyperscalers and on-premise solutions, depending on customer preference). The firm’s accounts said $179m was spent on data centres overall in FY206.
“The need to build in-country capability and ensure our local organisations are digitally resilient is a conversation we are having with many customers across Australia and New Zealand,” Davidson said.
“Relying solely on global providers and offshore data storage creates dependencies you don’t control.
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“If a cable is cut, a region goes offline or borders tighten, how will you keep essential services running?
“Do your critical systems have onshore back-up and recovery, and can you fail over locally without waiting on a global fix? That’s what resilience looks like.”
*This time last year, Datacom said it finished FY2025 with 5375 staff, a 12% or 756 reduction on its 6131 headcount last year. A spokeswoman said, “From FY2026 onwards, Datacom is reporting headcount based on total number of people employed across the group, which includes employees with formal employment agreements – including fulltime, part-time, casual and fixed-term staff – and excludes independent contractors, agency staff and short-term work experience placements."
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.