DXN targets revenue rebound with $14.5 million backlog weighted to second half
DXN Limited has released its 1H FY26 presentation outlining DXN modular data centre growth following a challenging first half in which project delays impacted revenue. The company reported a $14.5 million backlog, with 65% expected to be delivered in 2H FY26. Project activity has resumed on two of three delayed contracts, positioning the business for a stronger second half.
First-half revenue came in at $2.676 million, down from $7.758 million in the prior corresponding period. Management attributed the decline to delays in progress on existing contracts rather than weakening demand. The FY26 backlog comprises $10.1 million in modular division contracts, with a pipeline of 80 identified projects as at 27 January 2026.
The backlog weighting suggests revenue recognition is deferred rather than lost. Management expects milestone-based payments to be received in 2H FY26 as deferred work is delivered.
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What is a modular data centre and why demand is accelerating
A modular data centre is a prefabricated infrastructure solution designed, manufactured, and deployed in standardised units. Unlike traditional brick-and-mortar data centre builds, modular facilities offer faster deployment, lower cost, scalability, and flexibility. DXN operates a vertically integrated model, managing the entire lifecycle from design and engineering through to deployment, operation, and maintenance.
The company has delivered nearly 100 modular data centres to date, maintaining an approximate 95% on-time delivery rate. Its 4,200m² manufacturing facility operated at approximately 80% capacity utilisation in FY25, supporting demand across multiple high-growth sectors including AI, IoT, and cloud expansion.
DXN’s end-to-end capability positions it to capture demand without relying on third-party suppliers. Key advantages of modular data centres include:
- Faster build times compared to traditional construction
- Lower capital expenditure for end customers
- Scalability to meet evolving capacity requirements
- Reduced strain on grid infrastructure through distributed deployment
Industry tailwinds continue to drive demand for distributed, low-latency infrastructure as businesses expand digital operations and deploy AI-enabled workloads.
Pipeline diversity spans edge computing to hyperscale infrastructure
DXN operates across six market segments: cable and satellite landing stations, mining modules, edge data centres, defence and government portable units, hyperscale data hall super-structures (StructCoreHAC), and critical support infrastructure. This diversification reduces concentration risk and provides exposure to multiple growth vectors.
The company’s identified pipeline comprises 80 projects across various stages of development. Approximately 80% of FY25 modular revenue came from export markets, reflecting the company’s global reach.
Pipeline maturity is distributed as follows: 34% identified, 35% qualified, 22% at proposal or RFP submission stage, 5% in final negotiations, and 4% at verbal win or contracting stage. The mix includes increasing opportunities in DCaaS, StructCore, hyperscale, and satellite gateway projects.
The pipeline composition indicates DXN is not dependent on a single customer type or geography. Hyperscale infrastructure represents a high-volume growth opportunity as global internet companies expand data centre capacity.
| Stage | Percentage | Number of Projects | Status Description | Implication |
|---|---|---|---|---|
| Identified | 34% | 27 | Early qualification phase | Building visibility for future quarters |
| Qualified | 35% | 28 | Active engagement | Progressing toward proposal stage |
| Proposal/RFP Submitted | 22% | 18 | Formal bid submitted | Near-term conversion potential |
| Final Negotiations | 5% | 4 | Commercial terms under discussion | High probability of contract award |
| Verbal Win/Contracting | 4% | 3 | Verbal commitment, finalising documentation | Backlog addition imminent |
Indonesia joint venture opens Southeast Asian expansion pathway
DXN has signed a non-binding memorandum of understanding with Super Sistem Indonesia (SSI) to establish a Singapore-based joint venture with equal ownership. The partnership will handle future modular data centre purchase orders from SSI, produced in a jointly owned factory in Jakarta.
The agreement represents a capital-efficient market entry strategy. Import tariffs on data centre products in Indonesia typically range from 20% to 40%, which the Jakarta manufacturing facility will avoid through localised production. The partnership positions DXN to access Indonesia’s growing digital infrastructure market while complying with domestic regulations.
Management expects the partnership to deliver approximately US$7 million in revenue over the next three years, with the bulk weighted toward years two and three. The Jakarta facility supports DXN’s regional growth strategy, enabling cost-effective production for Southeast Asia.
In FY25, approximately 80% of DXN’s modular revenue came from export markets, demonstrating the company’s established international presence. The Indonesia partnership extends this reach while leveraging local production advantages.
DCaaS model builds recurring revenue base
DXN established its Data Centre as a Service (DCaaS) segment in Q4 FY25, contributing approximately 3% of FY25 revenue. The capital-light, subscription-based model includes design, engineering, deployment, civil construction, facility management, and maintenance services.
DCaaS represents a strategic shift toward recurring revenue streams, contrasting with the project-based lumpiness of traditional modular builds. The segment was formed by combining elements of the Modular Division with Data Centre Operations, creating a fully managed service offering.
Customers include government agencies, cable landing station operators, and satellite ground segment operators. As the segment scales, it is expected to provide more predictable cash flows and improve DXN’s revenue profile.
Management has identified DCaaS expansion as a strategic priority for FY26, with the aim of broadening the offering and increasing the recurring revenue component.
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Financial position and path to stronger second half
DXN’s first-half financial performance reflected the impact of project delays. Revenue declined 65.5% to $2.676 million, while gross margin compressed to 18% from 30% in the prior corresponding period. Underlying EBITDA came in at negative $2.165 million, compared to positive $0.211 million in 1H FY25.
Cash receipts for the half totalled $2.2 million, with the company holding $1.728 million in cash as at 31 December 2025. Working capital moved to a deficit of $5.519 million, driven by milestone-based payment structures that cause cash receipts to lag project progress.
The timing mismatch does not reflect demand destruction. Management expects milestone payments to be received in 2H FY26 as deferred work is delivered and the backlog converts to revenue.
| Metric | 1H FY26 | 1H FY25 | Change | Commentary |
|---|---|---|---|---|
| Revenue | $2.676 million | $7.758 million | -65.5% | Project delays deferred revenue recognition |
| Gross Margin | 18% | 30% | -12 ppts | Lower utilisation compressed margin |
| Underlying EBITDA | $(2.165) million | $0.211 million | -$2.376 million | Fixed cost absorption on lower revenue base |
| Cash Position | $1.728 million | $5.096 million | -66.1% | Milestone receipts deferred to 2H FY26 |
| Working Capital | $(5.519) million | $3.043 million (30 Jun 25) | -$8.562 million | Payment timing mismatch, expected to normalise |
The financial deterioration reflects timing rather than structural issues. The $14.5 million backlog provides visibility on revenue recovery, with 65% weighted to 2H FY26. Investors should monitor second-half execution closely to assess whether the company delivers on management’s expectations.
FY26 outlook and strategic priorities
Management outlined four strategic priorities for FY26:
- Targeting revenue growth weighted toward 2H FY26, supported by the $14.5 million backlog
- Broadening the DCaaS offering to improve revenue profile and establish a recurring revenue component
- Leveraging the Southeast Asia expansion via the MOU with Super Sistem Indonesia
- Scaling StructCore and developing AI-enabled products for hyperscale applications
The company is actively pursuing opportunities in core segments and newly entered high-growth areas. Management’s focus on recurring revenue through DCaaS and high-growth vectors such as hyperscale and AI suggests a deliberate shift toward more scalable revenue streams.
With 65% of the FY26 backlog expected to convert in the second half, execution on delayed contracts will determine whether DXN achieves its stated growth targets. The Indonesia partnership and DCaaS expansion represent medium-term growth initiatives that extend beyond the current financial year.
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