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Finance

UK's Bytes Tech plunges 27% after profit warning

Published by Global Banking and Finance Review

Posted on July 2, 2025

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(Corrects to say delayed customer decisions, not 'delayed customer payments', in paragraph 1)

(Reuters) -Shares of UK's Bytes Technology plunged over 27% on Wednesday after the IT firm said its operating profit for the first half of fiscal 2026 would be marginally lower due to delayed customer decisions and longer-than-expected readjustments from internal restructuring.

Trading in the first few months of the year was hurt by macroeconomic pressures, leading to deferred customer decisions, particularly among corporates, the firm said in an update to the exchanges ahead of its annual general meeting.

The stock fell as much as 27.43% to 369 pence, the lowest since April 2023, before paring some losses to trade down 23% at 391.4 pence by 08:00 GMT.

Bytes, which provides software, cloud, and AI services, is moving from a generalist sales model to specialised, customer segment-focused teams - a shift that has taken longer than expected, it said.

Also weighing on its performance in the first half are changes to Microsoft's enterprise agreement program, which the company had disclosed earlier, where certain transactional incentives have been reduced.

The impact of the changes are weighted more to the first half due to high levels of renewals in March and April, Bytes said.

The firm posted an operating profit of 35.6 million pounds ($48.8 million) for the first half of fiscal 2025. On Wednesday, it said it expects gross profit for the first half of fiscal 2026 to be flat.

In May, it had said it was "well positioned" to deliver another year of double-digit gross profit growth and high single-digit operating profit growth in financial year 2025-26.

"Investors will be slightly taken aback by the more cautious AGM statement, which now flags flat year over year trends versus May guidance for double-digit gross profit growth," Jefferies analysts said in a note.

($1 = 0.7298 pounds)

(Reporting by Judes Joseph in Bengaluru; Editing by Sonia Cheema)