ii view: Kainos shares slump as sales growth tipped to slow

Helping both the UK government and private companies enhance efficiency via technology. Buy, sell, or hold?

9th November 2026 12:25

by Keith Bowman from interactive investor

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First-half results to 30 September

Revenue up 37% to £269 million
Adjusted pre-tax profit up 30% to £41.7 million
Interim dividend up 6% to 10.4p per share
Cash held down 18% to £87 million

Guidance:

Expects full-year adjusted pre-tax profits to match current City forecasts

Chief executive Brendan Mooney said:

“This was an excellent six months for Kainos, building on our strong performance last year.

“Technology is central to the UK Government’s plans to transform public services and this is reflected in the outstanding growth in Digital Services, particularly across our public sector and healthcare clients.

“Industry data shows that we were one of the largest winners of Government digital contracts in the period, showing that we are one of the most-trusted suppliers to the UK Government and have a strong track record of delivering value. We look forward with confidence to the remainder of FY27.”

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ii round-up:

UK tech company Kainos Group (LSE:KNOS) said today it expected a slowdown in second-half revenue growth given tough comparatives, but maintained hopes for annual profits in line with current City forecasts.

Strong demand for corporate and public body demand to enhance efficiency via improved IT systems, including help with AI projects, pushed first-half adjusted profit up by almost a third to £41.7 million.

Against a backdrop of falls for US tech companies, Kainos shares fell 12% in UK trading having come into these latest results up by close to a quarter so far in 2026. Hardware seller Computacenter (LSE:CCC), supplying kit for new data centres, is up by just over a half during that time. The FTSE-All share index is up 8% year-to-date.

The Kainos digital services division offers help across numerous areas including digitalising written records for healthcare and public bodies like the NHS and UK Home Office. Its two other divisions both deploy the efficiency enhancing software of US company Workday as well as providing Kainos written complimentary software products.

Digital services revenues rose 57% to £163 million, aided by a new contract for the UK Home Office. Workday service and product revenues rose 22% and 9% respectively to a combined £106 million, helped by demand from North American customers.

The Belfast headquartered company’s contracted backlog rose 26% to £853 million, with Annual Recurring Revenues (ARR) for its own software products climbing 24% to £96 million. An ARR target of £100 million is expected to be achieved this current third quarter.

An interim dividend, payable to eligible shareholders on 11 December, is up 6% from a year ago. Group net cash held retreated £18% to £87 million as R&D investment rose by a third to £11.4 million.

A full-year trading update is scheduled for 19 April.

ii view:

Founded in 1986, Kainos employed almost 3,600 people at the end of September, up from 3,200 in late March. Digital services accounted for most revenues over its last financial year at 56%, followed by Workday services at 25% and Workday products 19%. Geographically, the UK and Ireland made most sales at 61%, with USA and Latin America 15% each, and the rest of the world the 9% balance.

For investors, the exact impact of AI on software providers such as Kainos remains difficult to predict. A forward price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap. Kainos' partnership with US company Workday remains of high importance, while corporate and government spending on IT in the past has proved volatile and tough to predict.

To the upside, Kainos' own ability to improve other organisation’s efficiency within the current tough economic environment remains of high importance. A diversity of underlying customer types and geographical locations exists, with efforts to increase geographical diversity ongoing. A target for ARR is soon to be achieved, while a forecast dividend yield of around 2.5% is not to be ignored.

On balance, and while risks clearly remain, exposure to corporate AI projects and the company’s broad push to increase efficiency for others will likely keep this UK tech firm on investor radars.

Positives:

Business and customer diversity
Assisting organisations with AI

Negatives:

Uncertain economic outlook
Currency moves can impact

The average rating of stock market analysts:

Buy

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