ii view: shares for UK tech company Kainos soar
Hindered by fears of the impact of AI on software providers and underperforming the gain in the FTSE 250 index year-to-date. Analyst Keith Bowman assesses prospects.
18th August 2026 12:09
by Keith Bowman from interactive investor
Early year trading update to mid-August
- Now expects full-year profits to be comfortably above current City estimates
ii round-up:
UK tech company Kainos Group (LSE:KNOS) today upped full-year profit hopes given ongoing strong demand from corporates and public bodies for assistance with AI-related projects.
The Belfast-headquartered company now expects revenues and profits for the full year to late March 2027 to be comfortably ahead of current City estimates of £509 million and £77 million respectively.
Shares in the FTSE 250 company soared by close to a fifth in UK trading having come into this latest news down by around 3% so far in 2026. That’s similar to accounting software provider Sage Group (The) (LSE:SGE). Shares in hardware seller Computacenter (LSE:CCC) are up by over two-thirds during that time, while the FTSE 250 index has risen by close to a tenth year-to-date.
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The Kainos digital services division offers help across varying areas including digitalising written records for healthcare and public bodies such as the NHS and UK Home Office. The group’s other two divisions both deploy the efficiency-enhancing software of US company Workday, as well as providing Kainos’ complementary software products.
Kainos reported both double-digit percentage revenue growth during its last financial year to late March 2026, as well as achieving record backlog customer orders.
Digital Services had continued to grow very strongly, supported by several significant contracts secured in both the second half of 2026 and more recently.
Trading for both Workday Services and Workday Products had also remained robust, with both divisions enjoying double-digit revenue increases compared to the same period last year.
Accompanying management outlook comments stressed continuing confidence, supported by a robust pipeline and a significant multi-year contracted backlog. While acknowledging the volatile macroeconomic environment, it flagged the clear structural trends driving customer demand.
Broker Stifel reiterated its ‘buy’ stance on the shares post the results, upping its estimated price target to 1395p per share from a previous 1282p.
First-half results to late September are scheduled for 9 November.
ii view:
Started in 1986, Kainos today employs over 3,000 people. Commercial or corporate customers accounted for most revenues over its last financial year at 47%. That was followed by public sector bodies at 35% and healthcare customers the balance of 18%.
For investors, the full impact of AI on software providers going forward remains difficult to predict. Often volatile, corporate and government IT spending now faces elevated energy prices given the war in the Middle East overshadowing inflation prospects and resulting interest rate policy. Kainos’ partnership with US company Workday remains of critical importance, while an estimated future price/earnings (PE) ratio matching the three-year average may suggest the shares are not obviously cheap.
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On the upside, demand for AI-related services clearly remains robust. Kainos’ ability to improve the efficiency of other organisations via Workday HR and finance software within the current tough economic environment remains important. The firm has a diversity of customer types and geographical locations, with around two-fifths of all sales generated overseas, while an estimated future dividend yield of around 3% is not to be ignored.
In all, and despite continuing risks, ongoing robust demand for the group’s varying IT services and products will likely keep fans of this UK tech company long-term optimistic.
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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