The tech industry “is set to become much larger”, Datatec’s CEO asserted this morning as the Westcon-Comstor and Logicalis owner reported an 18%, AI infrastructure-fuelled interim sales rise.
The Johannesburg group’s gross invoice income (GII) hit $4.83bn in its fiscal first half to 31 August, with Westcon-Comstor and Logicalis International’s respective contributions rising by 21% to $3.37bn and by 18% to $1.23bn.
Adjusted EBITDA rose 17% to $150.7m, roughly equal to its full-year 2022 tally.
“The install base of IT assets have gone up and will stay up”
On the earnings call, Datatec CEO Jens Montanana said the AI world is “moving rapidly to the edge where enterprises and commercial users operate”, driving a “step change” in Westcon and Logicalis’ addressable market.
“We do not think this is a one-off moment,” he said on the call, a transcript of which can be found here.
“Once AI infrastructure upgrades happen, there will be permanent greater demand for more compute and network resources and a much expanded cybersecurity surface. Our industry is set to become much larger with the potential to underpin more rapid growth for many years to come.”
Repeating a phrase recently employed by the CEO of arguably Datatec’s largest vendor partner, Cisco, Montanana claimed the tech market has entered a new “super cycle”.
Although the datacentre “binge” will peak at some point, the install base of IT assets has “gone up and will stay up”, Montanana claimed as he was pressed on the call about the durability of the AI-driven hardware cycle.
“In other words, there is much more out there, and that is a step change in the amount of IT infrastructure required, and it is not going to go back down,” he said.
“Strong” Westcon, “exceptional” Logicalis
Montanana branded Westcon-Comstor and Logicalis’ respective performances “strong” and “exceptional”.
Cyber, networking and cloud distribution arm Westcon-Comstor, in which Datatec sold a 5% stake in June, generated 58% of its $3.37bn GII from Europe, with 30% and 12% coming from AsiaPacific and MEA, respectively.
Some of Westcon-Comstor’s growth came at the expense of lower margins amid a rise in large, volume deals, Montanana acknowledged.
In a separately issued statement, Westcon-Comstor revealed that its recurring gross sales grew 20% year-on-year to $2.2bn, accounting for 67% of the total during the period.
“AI is driving demand for the technologies at the heart of our business, but capturing that opportunity requires more than products alone,” Westcon-Comstor CEO David Grant stated.
“Our first-half performance reflects the strength of our specialist model and the role we play in helping partners build capability, develop repeatable revenue streams and deliver greater value throughout the customer lifecycle.”
Integrator arm Logicalis International generated 43% of its $1.23bn GII from North America, with EMEA and AsiaPac chipping in 34% and 23%, respectively.
Although AI-driven demand is “more apparent in the US right now”, it will “ripple to everywhere else later”, Montanana claimed.
Datatec’s ailing South American arm, Logicalis Latin America, saw GII fall 1% $524.9m.
Asked on the call about the ongoing memory cruch created by the AI datacentre build out, Montanana said Datatec had seen it playing out mainly around Cisco’s high-performance routers and switches.
It is “not as acute” as the shortages the industry saw during Covid, he added, however.
