Softcat’s (LON:SCT) latest results underline why the UK IT infrastructure reseller has become an increasingly important ‘picks and shovels’ play on the AI boom. But with the shares already having recovered strongly from their September lows, investors appear to be demanding more than another set of strong numbers.
| Softcat (LON:SCT) | Price: £17.90 (-7%) | Market cap: £3.86bn |
Strong FY2026 performance
For the year to 31 July 2026, Softcat reported:
| FY2026 | Result | YoY |
| Gross invoiced income | £4.72bn | +30.5% |
| Revenue | £1.98bn | +35.4% |
| Gross profit | £616.3m | +24.7% |
| Underlying operating profit | £215.1m | +19.4% |
| Underlying EPS | 83.2p | +19.7% |
| Full-year dividend | 31.5p | +7.5% |
| Closing net cash | £199.9m | vs £182.3m |
Underlying cash conversion was a healthy 93.6%, while customer numbers increased 3.4%. Particularly encouraging was gross profit per customer, which rose 20.6%, suggesting Softcat is selling substantially more technology to its existing customer base.
Why the shares are falling
The initial market reaction was surprisingly negative. Softcat shares were around £19.24 at Tuesday’s close but fell more than 7% in early trading on Wednesday, despite the strong results.
That looks less like a deterioration in the business and more like a ‘buy the rumour, sell the news’ reaction combined with high expectations.
Softcat had already raised FY2026 profit guidance to high-teens growth in September, while announcing its transformational $1.05bn (£785m) acquisition of US IT infrastructure specialist GDT.
Softcat’s $1.05bn GDT deal: a major US growth bet for UK investors
The bigger question is therefore not whether FY2026 was good – it clearly was – but whether growth can remain sufficiently high to justify the valuation after two exceptionally strong years.
Management remains bullish on AI
CEO Graham Charlton sees AI as a structural opportunity rather than a short-term sales boost.
Softcat says AI is increasing demand for compute, storage, networking, connectivity, cybersecurity and data architecture, while the market remains in the early stages of adoption.
Charlton said the memory and storage supply constraints created by AI infrastructure investment create an environment in which Softcat’s strengths ‘shine brightest’.
How to invest in technology stocks: A UK beginner’s guide 2026
The important point for investors is that Softcat doesn’t need to pick the winning AI chip. It sells the infrastructure required to deploy AI across organisations.
The GDT deal potentially takes this opportunity considerably further, giving Softcat greater US exposure and additional capabilities in networking, data centres, AI infrastructure and cybersecurity. Management says the transaction has been well received by customers, vendors and employees.
But FY2027 guidance is more measured
Excluding GDT, Softcat expects high-single-digit underlying operating-profit growth in FY2027. That represents a significant moderation from FY2026’s 19.4%.
This is the key number for investors.
The underlying market opportunity remains attractive, but Softcat is moving from a period of exceptional growth into one where organic growth, margins and the contribution from GDT will determine whether earnings can continue compounding at an attractive rate.
What analysts are saying
Broker sentiment is constructive but increasingly valuation-sensitive.
Berenberg had raised its target to £24.00, while its more recent update lifted its target from £19.00 to £19.50 following the latest trading update.
Deutsche Bank has taken a more cautious stance, cutting Softcat to Hold despite raising its target to £21.40, arguing that the share price had run ahead of fundamentals.
Meanwhile, JPMorgan has been considerably more positive on GDT, previously estimating the acquisition could provide around 10% EPS accretion, with potentially greater upside depending on execution.
Sharesify investor verdict
Softcat remains one of the more interesting UK-listed ways to gain exposure to the AI infrastructure spending cycle without betting on a single semiconductor winner.
The bull case is compelling: strong customer relationships, rising wallet share, excellent cash generation, AI-driven infrastructure demand and now a much larger US opportunity.
The bear case is that expectations have become demanding. FY2027 organic growth is expected to slow to high single digits, while GDT introduces acquisition, integration, financing and execution risk.
For long-term UK retail investors, the results therefore look fundamentally bullish but valuation-sensitive. The next catalyst is likely to be evidence that AI spending is translating into sustained customer demand and that GDT can accelerate Softcat’s earnings rather than simply increase its scale.
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