First FY2026 Quarter

First FY2026 Quarter

MSTI's first FY2026 quarter is the first forward test of the valuation case, and it cuts both ways. After crediting ~Rp1.5T of net cash (about 36% of market value), MSTI's operating business trades at only ~4.9x FY2025 earnings and ~4.1x operating profit — but that trailing base is already contracting, with Q1 FY2026 net sales down 8.0% to Rp1,096.0bn and net profit down 7.5% to Rp106.6bn. [1][2]

The forward arithmetic is what the price turns on: a ~4.9x/4.1x multiple struck on a base falling ~8% carries a higher forward multiple than the trailing snapshot implies, and consensus FY2026 revenue of ~Rp5.70 trillion (+4.5%) now needs Q2–Q4 to grow ~8% to reach it — about a sixteen-point swing from the pace just set. The counter runs through the same numbers: hardware's fall is the continued unwind of the one-off FY2024 AI Factory boom — still above Q1 FY2023's Rp333.6bn — software's compounding is uninterrupted, and margins held, which reads as cyclical normalisation rather than a proven ceiling. The valuation stake this quarter sets is carried in What the Price Implies.

Sources: Q1 FY2026 net sales and gross profit [3][4]; net cash derived from cash of Rp1,499.2bn less Rp91.9bn total borrowings [5].

The stall deepened into a decline

The quarter sits against the trajectory earlier chapters established. Revenue grew 27.6% in FY2024 on a hardware surge, then decelerated to 1.7% in FY2025 as that surge unwound (Financials and Estimates). The FY2025 total was Rp5,454.7 billion, split Rp2,711.1bn hardware, Rp1,696.4bn software, Rp792.1bn maintenance and Rp255.2bn installation [6]. Q1 FY2026 is the first period that moved the run-rate below the prior year outright: Rp1,096.0bn against Rp1,191.7bn a year earlier [7].

Source: FY2024/FY2025 from the annual net sales note [8]; Q1 FY2026 from the interim net sales note [9]. Annual and quarterly growth rates shown together; the last bar is a single quarter.

One quarter is a partial read, and this is a project-weighted business where large orders land unevenly through the year, so a single soft quarter is not the year. But the direction is the point: three data points now run 27.6%, then 1.7%, then –8.0%, and the newest is the weakest.

Hardware unwinds, software compounds

The composition tells the more useful story. Hardware — the line that drove the FY2024 boom — fell 21.0% in the quarter, to Rp466.3bn from Rp590.2bn, its second consecutive Q1 decline of roughly a fifth from the FY2024 peak of Rp747.0bn [10]. Software grew 26.8%, to Rp423.0bn from Rp333.5bn, and now sits within Rp43bn of hardware — 38.6% of net sales against 28.0% a year earlier [11]. Maintenance fell 16.3% and installation fell 38.8% [12]. Software was the only line that grew; it could not offset the rest.

Source: interim net sales notes, Q1 FY2024–Q1 FY2026 filings; the FY2024 figures also appear as the prior-year comparative in the Q1 FY2025 note [13].

Read across four years, the two lines are moving in opposite directions. Hardware jumped to Rp747.0bn in Q1 FY2024 — the "AI Factory" cycle described in Financials and Estimates — and has retraced two years running to Rp466.3bn, still above its Q1 FY2023 level of Rp333.6bn. That shape is consistent with the unwind of an abnormal one-off order rather than a collapse in underlying demand. Software, by contrast, has risen every year, from Rp150.8bn in Q1 FY2023 to Rp423.0bn, roughly a tripling. The structural shift the company has narrated is visible in the numbers; what it has not yet done is carry the total.

Mix richer in software, not in margin

The mix shift toward software does not lift profitability. MSTI's growth is concentrated in its lowest-margin line: software license resale at ~8% gross margin rose 39% in FY2025 and 26.8% in Q1 FY2026 — climbing from 22.8% to 38.6% of sales — as hardware fell 14% then 21%, so the surge added almost nothing to profit (blended gross profit +2.0%, gross margin flat ~18%). Inside the quarter the same mechanism holds: gross profit was Rp204.1bn on Rp1,096.0bn of sales — an 18.6% gross margin, down slightly from 19.1% a year earlier [14]. Within the quarter, hardware carried a gross margin near 16.2% and software near 9.8%, computed from the net sales and cost-of-sales notes [15]. So each point of mix that moves from hardware to software trims the blended rate — the same dynamic Moat and Market identified, now confirmed in FY2026 actuals.

Source: software share derived from the net sales notes — FY2024/FY2025 annual [16], Q1 FY2026 interim [17].

Net profit held its shape better than revenue: down 7.5%, roughly in line with sales, leaving the net margin at 9.7% versus 9.7% a year earlier [18]. Operating costs fell with the top line — general and administrative salaries and long-term employee benefits both declined year on year [19]. The business is defending its margin on the way down, but it is defending a smaller base.

The balance sheet held

Nothing in the quarter touches the report's margin-of-safety anchor. Equity rose to Rp2,402.0bn, and the company carried Rp1,499.2bn of cash against Rp91.9bn of total borrowings including leases — net cash of about Rp1.4 trillion, still roughly a third of the market value [20][21]. Cash fell Rp134.2bn over the quarter, in line with the Rp16/share interim dividend paid in December carrying into the period and a seasonal working-capital build [22].

Two working-capital details are worth flagging. Trade receivables rose again, to Rp892.8bn from Rp788.2bn at year-end — up 13.3% in a quarter while sales fell — extending the receivables build Cash Conversion traced through FY2025 [23]. And no single customer exceeded 10% of sales this quarter, where PT Telekomunikasi Selular had been 11.6% (Rp138.4bn) a year earlier [24]. A large telco order rolling off is part of why the quarter is soft — a reminder that in a project business, one account swings a quarter.

Cyclical unwind or a lower run-rate

The first FY2026 quarter tilts the cyclical-versus-ceiling read, without settling it. On the ceiling side: the top line has now printed below the prior year, maintenance and installation joined hardware in decline, and the one growing line earns half the margin of the one shrinking. On the cyclical side: hardware's fall is the continued unwind of a known one-off boom, not a demand cliff; software's climb is real and uninterrupted; and margins held. The evidence points to a top line that is still contracting as the FY2024 hardware cycle washes out — but the composition keeps the structural question open rather than closing it against the business.

The near-term arithmetic, laid out at the top of this chapter, leaves the remaining three quarters needing roughly 8% growth to hit the consensus Rp5.70 trillion — a wide gap to the pace just set. The next hard read is close: the H1 FY2026 statements are due 29 July 2026, one week out. Hardware stabilising and the blended gross margin turning up from 18.6% would support the cyclical case; a second quarter tracking Q1, with software still diluting margin, would move the read toward a lower structural run-rate — the outcome that most matters for the operating multiple in What the Price Implies.