Pakistan’s IT sector profits jump 37% on robust export growth

KARACHI: Pakistan’s listed information technology services sector reported a 37% year-over-year rise in after-tax profits for the third quarter of fiscal year 2026, driven by strong export demand and higher revenue from software and support services, according to a sector review published by Sherman Securities.

Total net revenue for the sector rose 36% to 31.9 PKR billion, while profit after taxation reached PKR 4.2 billion, up from PKR 3.1 billion in the same period last year.

The IT sector accounts for about 1% of Pakistan’s gross domestic product but represents roughly 3.5% of the Pakistan Stock Exchange’s total market capitalization.

More significantly, the sector contributes 11% of the country’s total exports, with IT exports growing at a compound annual rate of 17% over the past five years, the report said.

System Ltd., or SYS, which makes up 76% of the listed IT services sector’s revenue, posted a 33% revenue increase to 24 billion rupees. The company derives 58% of its sales from the Middle East, where revenue grew 36% year over year.

Among mid-tier firms, AVN and NETSOL each reported 49% revenue growth, reaching PKR 3.8 billion and PKR 3.5 billion, respectively. NETSOL’s performance was supported by a 14.3% increase in subscription and support revenue as more customers entered maintenance phases, even as its services revenue declined 47%.

Smaller companies Octopus and ITANZ recorded revenue growth of 31% and 49%, respectively, while SYM saw revenue fall 43% due to project phasing.

Gross margins varied sharply. ITANZ led with a 50-percentage-point expansion to 77%, followed by NETSOL with a 21-point gain to 59%. AVN was the only company to report margin contraction, falling 15 points to 24%, reflecting cost pressures from its project-heavy revenue base.

At the net margin level, ITANZ posted a 45-point improvement to 67%, the highest in the sector. NETSOL’s net margin rose 18 points to 27%, while AVN’s net margin collapsed 9 points to just 2%.

ITANZ reported earnings per share of PKR 1.1, a 348% increase year over year. NETSOL delivered EPS of PKR 10.6, a 341% surge. SYS, the sector heavyweight, posted more modest EPS growth of 21% to PKR 2.1. In contrast, AVN’s EPS fell 78% to PKR 0.14, while SYM’s EPS halved to PKR 0.03, and Octopus’ EPS declined 33% to PKR 0.08.

The report listed key risks to IT sector valuations, including a global recession, political instability, exchange rate fluctuations and higher-than-expected interest rates.