Iress Is Cutting Costs Faster Than It Is Growing Revenue, and Managers Are Divided on What That Means

A new chief executive, a completed simplification program and reported private equity interest have drawn fresh buyers, while flat revenue has convinced others the catalysts are spent.

· 4 min read

Cheap, simpler and still contested

Iress enters the final months of 2026 as one of the more polarising turnaround stories among Australian technology names. After August results that lifted EBITDA guidance but lowered revenue guidance, new buyers have arrived on valuation grounds while others have concluded the easy gains are behind it. NGE Capital initiated a position in September, describing a business trading on about 9 times FY26 EV to cash EBITDA, around 12 times earnings and a dividend yield of about 4.9 per cent, with a simplification program just completed and a balance sheet approaching net cash. Investors Mutual Limited also opened a new position following the sell-off.

Akambo moved the other way, lightening its position after the result. “Whilst cheap, their catalysts are likely exhausted,” Akambo said.

The efficiency engine

The cost story is the clearest part of the thesis. Spheria Asset Management noted in December 2025 that Iress set a target for a sustainable cash EBITDA margin of about 25 per cent by the end of FY26, up from an expected 19 per cent in FY25, supported by a business efficiency program built on structural cost reductions and greater offshoring. In August, Ellerston Capital said the half-year result showed strong momentum on that program, with cash EBITDA ahead of consensus and an upgraded outlook. Perpetual Asset Management noted EBITDA guidance was lifted on stronger-than-expected cost-out despite negative currency effects.

Managers also credit leadership. Andrew Russell became chief executive in November 2025, and Spheria cited his record at Class and Bravura Solutions in restoring profitability and driving growth. Bell Asset Management said in July that under Russell, Iress can refocus on its core business after years of using its balance sheet to enter adjacent areas, adding: “we believe Iress is one of the cheapest earnings compounders in the market.”

We believe Iress is one of the cheapest earnings compounders in the market.

— Bell Asset Management, Monthly Report, July 2026

The revenue question

Revenue is where the debate sits. Perpetual said management lowered CY26 revenue guidance after having already guided to the low end at its May AGM, and Ellerston attributed slower growth to delays in client projects. Ellerston argued the share price reaction was overstated, saying the company inadequately explained its normalised cost performance and that the market may now be double counting opex and capex while missing some one-off accelerated depreciation and amortisation. Bell said its thesis remains intact and that it supports the new executive team's turnaround strategy.

A moat built on complexity

Supporters argue the competitive position is underappreciated, particularly amid AI disruption fears across software. Perpetual said Iress holds significant market share across APAC financial advice and trading and market data, with complex products and high switching costs, and expects the company to “use efficiency gains from AI to invest in product and improve margins, supporting solid earnings growth ahead.” NGE noted that the flagship Xplan wealth software has more than 35,000 users and about 60 per cent market share in Australia, and said: “We believe the customer base is stickier than the market is giving the company credit for”. NGE acknowledged the software needs modernising after years of under-investment, but believes AI tools can help.

We believe the customer base is stickier than the market is giving the company credit for.

— NGE Capital, Monthly Report, September 2026

Takeover optionality

Corporate interest is a recurring theme. NGE reported that Iress received interest from private equity firms Blackstone and Thoma Bravo late last year, with offers reportedly discussed around $10.50 per share, and that insiders have bought shares at higher prices. Pendal Group named Iress as an obvious candidate for future M&A in September, having been approached before without a deal, but stressed the investment case does not rely on a takeover and views it purely as upside optionality. Endeavor Asset Management had flagged the possibility of renewed private equity interest as early as December 2025.

What managers are watching next

The near-term markers are whether Iress exits FY26 at its targeted 25 per cent cash EBITDA margin, whether delayed client projects convert into revenue, and how the company invests in modernising its software. Lennox Capital Partners has said its case rests on Iress's entrenched market position and the earnings improvement it expects as the simplification program matures. Whether that earnings improvement arrives before any bidder does remains the open question.